**Exhibit 10.3**

 

LOANAGREEMENT

 

THISLOAN AGREEMENT (this “Agreement”), is entered into as of June 22, 2010, byand between American Wagering, Inc., a Nevada corporation (“Borrower”),and Alpine Advisors LLC (“Lender”).

 

RECITALS

 

WHEREAS,Borrower has borrowed the sum of $195,000 (the “Existing Loan”) from Lenderevidenced by a Secured Promissory Noted dated June 11, 2010 (the “ExistingNote”) and has requested a loan facility from Lender in the principal amount ofup to $500,000.00 to refinance the Existing Loan and for the other uses setforth herein; and

 

WHEREAS,Lender is willing, in its sole discretion, to fund the loan facility upon theterms and subject to the conditions set forth in this Agreement.

 

NOWTHEREFORE, in consideration of the mutual covenants and agreements containedherein, Borrower and Lender hereby agree as follows:

 

1.             The Loan Facility.

 

(a)     Subject to the terms and conditions set forth herein,Lender may make available to Borrower up to a $500,000 loan facility (the “LoanFacility”)  for Borrower’s use from timeto time during the term of this Agreement. Lender may, in its sole discretion, and upon Borrower’s request fromtime to time during the period from the date hereof through July 30, 2010(the “Availability Period”), make loans (the “Loans”) to Borrower in anaggregate principal amount up to the amount of the Loan Facility.  Borrower may request that Lender make a Loanby giving a written request therefor (each such request, a “Borrowing Request”);provided that (i) such Borrowing Request must specify the date and amountof such proposed borrowing and must be received by Lender no later than 11:00 a.m.7 days (or such lesser number of days as is acceptable to Lender) prior to thedate of such proposed borrowing; (ii) the date of the proposed borrowingshall be Business Day (as hereinafter defined) during the Availability Period; (iii) eachborrowing of a Loan shall be in a principal amount of $100,000 or a wholemultiple of $100,000 in excess thereof; and (iv) such Borrowing Requestshall specify the account of Borrower to which Lender shall transfer theproceeds of the requested Loan.

 

(b)     Borrower hereby agrees to pay to Lender theoutstanding principal amount of the Loans, together with any accrued and unpaidinterest thereon at the rate set forth in Section 2 below, on June 10,2011 (the “Maturity Date”).  Borrowermay, upon notice to Lender, voluntarily prepay the outstanding Loans in wholeor in part; provided that (i) such notice of prepayment must specify thedate and amount of such prepayment and must be received by Lender no later than11:00 a.m. 10 days (or such lesser number of days as is acceptable toLender) prior to any date of prepayment; (ii) any prepayment shall be in aprincipal amount of $100,000 or a whole multiple of $100,000 in excess thereofor, if less, the entire principal amount 

 

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thereof then outstanding; and (iii) each suchprepayment shall be accompanied by payment of (X) the Repayment Fee setforth in Section 4 below and accrued and unpaid interest on the principalamount being prepaid at the rate set forth in Section 2 below.  Amounts prepaid may not be reborrowed.

 

(c)     Borrower may, upon notice to Lender, voluntarilyterminate the undrawn Loan Facility during the Availability Period; providedthat (i) such notice of termination must specify the date of suchtermination and must be received by Lender no later than 11:00 a.m. 10days (or such lesser number of days as is acceptable to Lender) prior to thedate of termination; and (ii) any termination made in conjunction with aprepayment of Loans then outstanding shall comply with the requirements forprepayment set forth in subsection (b) above.

 

(d)     On the requested date for borrowing of a Loan, if allconditions to the making of such Loan have been satisfied and Lender, in itssole discretion, has elected to make such Loan, Lender will deliver to Borrowerthe proceeds of the requested Loan in immediately available funds via wiretransfer to the account designated by Borrower in its written request for suchborrowing.

 

(e)     The Loans made by Lender shall be evidenced by one ormore accounts or records maintained by Lender in the ordinary course ofbusiness.  The accounts or recordsmaintained by Lender shall be conclusive absent manifest error of the amount ofthe Loans made by Lender to Borrower and the interest and paymentsthereon.  Any failure to so record or anyerror in doing so shall not, however, limit or otherwise affect the obligationof Borrower hereunder to pay any amount owing with respect to the Obligations(as hereinafter defined).  Lender willprovide to Borrower a monthly statement of Loans, payments, and othertransactions pursuant to this Agreement. Such statement shall be deemed correct, accurate, and binding onBorrower and as an account stated, unless Borrower notifies Lender in writingto the contrary within thirty (30) days after such statement is rendered.  In the event a timely written notice ofobjections is given by Borrower, only the items to which exception is expresslymade will be considered to be disputed by Borrower.  As used herein, the term “Obligations” shallmean all loans, advances, liabilities, obligations, covenants, duties, andindebtedness owing by Borrower or any other Grantor to Lender , whether or notarising under this Agreement or any other Loan Document, whether or notevidenced by any note or other instrument, agreement or document, whetherarising from an extension of credit, opening of a letter of credit, acceptance,loan, guaranty, indemnification, sale of goods, rendition of services, orotherwise, whether direct or indirect (including, without limitation, thoseacquired by assignment from others, and any participation by Lender in Borrower’sor any other Grantor’s debts owing to others, absolute or contingent, due or tobecome due, now existing or hereafter arising, primary or secondary, asprincipal or guarantor, and including, without limitation, all interest,charges, expenses, fees, attorneys’ fees, filing fees and any other sumschargeable to Borrower or any other Grantor hereunder, under any other LoanDocument, or under any other agreement or instrument with Lender.  The term includes, without limitation,(interest accruing during the 

 

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pendency of any bankruptcy, insolvency, receivershipor other similar proceeding, regardless of whether allowed or allowable in suchproceeding.

 

2.             Interest.

 

(a)     Subject to the provisions of subsection(b) below, the outstanding principal amount of the Loans shall bear simpleinterest from the date hereof at the rate of 15.0% per annum.  Interest only shall be due and payablemonthly in arrears on the first day of each month for interest accrued duringthe previous month.

 

(b)     If any Event of Default (as hereinafter defined)occurs, then, from the date such Event of Default occurs until it is cured, oruntil all Obligations are paid and performed in full, as the case may be, theoutstanding principal amount of the Loans shall bear simple interest at therate of 22.0% per annum.  Such accruedand unpaid default interest shall be due and payable upon demand or, in theabsence of a demand, monthly in arrears on the first day of each month forinterest accrued during the previous month.

 

(c)     Interest charges shall be calculated on the basis of a360-day year prorated for the actual number of days elapsed.  Interest hereunder shall be due and payablein accordance with the terms hereof before and after judgment, and before andafter the commencement of any proceeding under any Debtor Relief Law.  As used herein, “Debtor Relief Law” means theBankruptcy Code of the United States, and all other liquidation,conservatorship, bankruptcy, assignment for the benefit of creditors,moratorium, rearrangement, receivership, insolvency, reorganization, or similardebtor relief laws of the United States or other applicable jurisdictions fromtime to time in effect and affecting the rights of creditors generally.

 

3.             Payment; Interest Reserve Fees.

 

(a)     Except as otherwise provided herein, the Loan Facilityand all accrued and unpaid interest thereon shall be due and payable in full onthe Maturity Date.  All payments inrespect hereof shall be made to Lender at its address set forth in Section [20]below or such other place as may be designated in writing by Lender for suchpurpose, and all payments shall be made in lawful currency of the United Statesin immediately available funds.  If anypayment due under this Agreement or the Note shall be due on a day that is nota Business Day, then such payment shall be made on the next succeeding BusinessDay.  For the purposes of this Agreement,“Business Day” means any day that is not a Saturday, Sunday or other day onwhich commercial banks in Las Vegas, Nevada are authorized or required by law toremain closed.

 

(b)     Interest Payment Reserve. Effective with the fundingof the initial Loan by Lender, Borrower shall pre-pay to Lender a sum equal totwo months’ interest on the maximum amount of the Loan Facility (the “InterestReserve”).  To effectuate and to accountfor such payment, Lender shall deduct the agreed upon sum from the amount ofthe initial Loan.  The Interest Reserveshall be held by Lender as security for the timely payment of interest on the 

 

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Loans when due and, without limitation of any otherremedy Lender may have upon default, may be applied by Lender to accruedinterest on the Loans that is past due. If Lender applies any amount of the Interest Reserve to accruedinterest, Borrower shall, immediately upon receipt of notice to do so fromLender, replenish the Interest Reserve by paying to Lender an amount equal tothe amount of the Interest Reserve applied by Lender or such greater amount asLender may require.

 

(c)     Origination Fee.  The partiesagree that, solely for this specific loan transaction, neither Lender nor itsprincipals shall receive an origination fee pursuant to that certain EngagementAgreement dated March 12, 2010, as amended.

 

4.             Repayment Fee5. In connection with each repayment or prepayment of a Loan (but in anyevent subject to the last two sentences of this section), Borrower shall pay toLender a fee (the “Repayment Fee”) in the amount of (i) $65,000 if, within60 days after the date hereof (the “Target Date”), all Loans then outstandingshall have been irrevocably paid in full, all other Obligations have beenirrevocably paid and performed in full and either the Availability Period hasexpired or Borrower has voluntarily terminated the undrawn Loan Facility duringthe Availability Period pursuant to Section 1(c) above; and (ii) $100,000thereafter or in connection with any other repayment or prepayment.  The first repayment or prepayment of a Loanshall be accompanied by payment of Repayment Fee in the full amount set forthin clause (i) or (ii) above as then applicable.  Each subsequent repayment or prepayment of aLoan shall be accompanied by payment of Repayment Fee in an amount equal to (X) thedifference between the full amount set forth in clause (i) or (ii) aboveas then applicable minus (Y) the aggregate amount of all Repayment Fee, ifany, paid prior to the date of such repayment or prepayment.

 

5.             Conditions Precedent. Lender will not entertain any request for Loans unless the followingconditions precedent have been satisfied as determined by Lender:

 

(a)     Conditions Precedent to Initial Loan.  The making of the initial Loan shall besubject to the satisfaction, as determined by Lender, of the followingconditions:

 

(i)            Lender’s receipt of the following, each inform and substance satisfactory to Lender:

 

(1)           an executed counterpart of this Agreement;

 

(2)           an executed counterpart of the Pledge Agreementbetween Borrower and Lender, dated as of the date hereof, in the form attachedhereto as Exhibit A (the “Borrower Pledge Agreement”);

 

(3)           an executed counterpart of the Security Agreementbetween Computerized Bookmaking Systems, Inc., a Nevada corporation andwholly-owned subsidiary of Borrower (“CBS” ; Borrower and CBS being sometimeshereinafter referred to individually as a “Grantor” and, collectively, as the “Grantors”),and Lender, dated as of the 

 

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date hereof, in the form attached hereto as Exhibit B(the “CBS Security Agreement”; this Agreement, the Borrower Pledge Agreement,the CBS Security Agreement and all other agreements, instruments, and documentsheretofore, now or hereafter evidencing, securing, guaranteeing or otherwiserelating to the Obligations, the Collateral (as defined in the Borrower PledgeAgreement or the CBS Security Agreement, or any other aspect of thetransactions contemplated by this Agreement) are hereinafter sometimes referredto, individually, as a “Loan Document” and, collectively, as the “LoanDocuments”);

 

(4)           an executed written direction from Borrower to Lenderthat, from the proceeds of the initial Loan, an amount equal to the principaland accrued interest outstanding under the Existing Loan be retained by Lenderand applied in satisfaction of the Existing Loan;

 

(5)           such certificates of resolutions or other action,incumbency certificates and/or other certificates of officers of each Grantoras Lender may require evidencing the identity, authority and capacity of eachofficer thereof authorized to act in connection with this Agreement and theother Loan Documents to which such Grantor is a party;

 

(6)           an executed counterpart of an amendment to the Warrantto Purchase Shares of Common Stock issued on June 11, 2010, by Borrower toLender (the “Warrant”) amending the Warrant (a) to require Borrower toprovide Lender, in its capacity as warrantholder, with the written notice toattend and the opportunity to be present and observe all regular and specialmeetings of directors of each Grantor deliver to Lender, and (b) to grantto Lender, in its capacity as warrantholder, at its sole discretion, upon theoccurrence of any Event of Default the right to (i) provide Borrower withwritten notice demanding that Borrower increase number of members of the Boardof Directors of Borrower by 2 persons and (ii) fill the 2 vacancies withpersons designated by Lender until such time as they may be elected to theBoard of Directors by the shareholders at the Borrower’s next annualshareholder’s meeting;

 

(7)           such documents and certifications as Lender mayrequire to evidence that each Grantor is duly organized or formed, and thateach Grantor is validly existing, in good standing and qualified to engage inbusiness in the State of Nevada;

 

(8)           a current receivables ageing, prepared in the formrequired by the CBS Security Agreement;

 

(9)           a lockbox agreement, executed by all parties thereto,regarding collection of the proceeds of Collateral granted pursuant to the CBSSecurity Agreement; and

 

(10)         such other assurances, certificates or documents asLender may require.

 

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(ii)           All liens and security interests granted pursuant tothe Loan Documents shall have been perfected and shall be subject to no otherliens or security interests (whether junior, equal or senior in priority), andLender shall have received evidence satisfactory to Lender to that effect(including, without limitation, evidence of the filing in the Office of theSecretary of State of the State of Nevada by Borrower of a UCC-1 FinancingStatement showing CBS as debtor and Lender as secured party perfecting theCollateral granted pursuant to the CBS Security Agreement).

 

(iii)          Borrower shall have paid all fees andexpenses (including the fees and disbursements of counsel) incurred by Lenderin connection with any of the Loan Documents and the transactions contemplatedthereby.

 

(b)     The making of each Loan shall be subject to thesatisfaction, as determined by Lender, of the following conditions:

 

(i)            Lender’s receipt of the following, each inform and substance satisfactory to Lender:

 

(1)           a Borrowing Request, duly executed and completed incompliance with Section 1(b) above; and

 

(2)           a proposed spending budget (each, a “Proceeds Budget”)relating to the proceeds of the Loan being requested;

 

(ii)           The representations and warranties of each Grantorcontained in each Loan Document, or which are contained in any documentfurnished at any time under or in connection herewith or therewith, shall betrue and correct on and as of the date of such Loan;

 

(iii)          (b)           No event or condition that constitutes anEvent of Default or that, with the giving of any notice, the passage of time,or both, would be an Event of Default (a “Default”) has occurred and iscontinuing, or would result from such proposed Loan or from the application ofthe proceeds thereof.

 

6.             [Reserved.]

 

7.             Representations and Warranties ofBorrower.  Borrower hereby represents andwarrants to Lender (all of which representations and warranties shall survivethe execution and delivery of this Agreement and the consummation of thetransactions contemplated hereby) that:

 

(a)     Borrower has full right, power, and authority to enterinto this Agreement and the other Loan Documents to which it is a party,without the consent, approval, authorization of, or notice to, any other personor entity, including any governmental entity or regulatory authority;

 

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(b)     Borrower is duly organized and validly existing ascorporations under the laws of the State of Nevada, and is in good standing ascorporations and qualified to do business in each state in which the nature ofits business or property so requires;

 

(c)     The execution, delivery, and performance of thisAgreement and compliance with the terms, conditions and provisions hereof andthe other Loan Documents to which it is a party are not prohibited orrestricted under Borrower’s articles of incorporation or bylaws.  The execution, delivery, and performance ofthis Agreement and the other Loan Documents to which it is a party and thetransactions contemplated hereby and thereby (i) do not conflict with orresult in any breach or contravention of any applicable law, regulation,judicial order, or decree (each, a “Requirement of Law”) to which Borrower issubject and (ii) do not violate, conflict with, constitute a default orevent of default under, or result in any rights to accelerate or modify anyobligations under any agreement, instrument, lease, mortgage, or indenture towhich Borrower is a party or subject, or to which any of its assets aresubject;

 

(d)     Borrower has the requisite power and authority and isduly authorized to execute and deliver this Agreement, the other Loan Documentsto which it is a party, and to perform the Obligations.  This Agreement and the other Loan Documentsto which it is a party have been duly executed and delivered by Borrower andconstitute a valid and legally binding obligation of Borrower, enforceable inaccordance with their respective terms, except as enforceability is limited bybankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, orother laws relating to or affecting generally the enforcement of creditors’rights and by equitable principles of general applicability (regardless ofwhether such enforceability is considered in a proceeding in equity or at law);

 

(e)     The liens and security interests granted in and to theCollateral pursuant to the Loan Documents constitute a present, valid, binding,and enforceable security interest as collateral security for the Obligationsand are subject to no other liens or security interests (whether junior, equalor senior in priority).

 

(f)      Borrower has made all filings required pursuant to theSecurities Exchange Act of 1934 with the Securities Exchange Commission and allrequired filings relating to its listing on the NASDAQ OTC Bulletin Board.  Each Grantor is in compliance in all materialrespects with all Requirements of Law applicable to such Grantor.

 

(g)     Each of Borrower and its subsidiaries has good recordand marketable title in fee simple to, or valid leasehold interests in, allmaterial property necessary or used in the ordinary conduct of itsbusiness.  The property of Borrower andGrantor is subject to no liens, security interests or other encumbrances, otherthan liens and security interests in favor of Lender.

 

(h)     Borrower and its subsidiaries own, or possess theright to use, all of the trademarks, service marks, trade names, copyrights,patents, patent rights, franchises, licenses and other intellectual propertyrights that are reasonably necessary for the operation of their 

 

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respective businesses, without conflict with therights of any other person or entity.  Tothe best knowledge of Borrower, no slogan or other advertising device, product,process, method, substance, part or other material now employed, or nowcontemplated to be employed, by Borrower or any of its subsidiaries infringesupon any rights held by any other person or entity.

 

(i)      The issued and outstanding capital stock of CBS is 100shares of common stock, represented by Certificate No. 1, all of whichhave been duly authorized and issued and are fully-paid and non-assessable, andnone of which constitutes Margin Stock (as defined in Regulation U of the Boardof Governors of the Federal Reserve System of the United States, as the same isfrom time to time in effect); and all of such shares are owned by Borrower freeand clear of any lien, security interest or other encumbrance other than thepledge and security interest in favor of Lender.

 

(j)      The properties of Borrower and its subsidiaries areinsured with financially sound and reputable insurance companies not affiliatesof Borrower, in such amounts, with such deductibles and covering such risks asare customarily carried by companies engaged in similar businesses and owningsimilar properties in localities where Borrower or the applicable subsidiaryoperates.

 

(k)     No approval, consent, exemption, authorization, orother action by, or notice to, or filing with, any governmental authority orany other person or entity is necessary or required in connection with theexecution, delivery or performance by, or enforcement against, any Grantor ofany Loan Document.

 

(l)      Except as disclosed to Lender prior to the datehereof, there are no actions, suits, proceedings, claims or disputes pendingor, to the knowledge of Borrower after due and diligent investigation,threatened or contemplated, at law, in equity, in arbitration or before anygovernmental authority, by or against Borrower or any of its subsidiaries oragainst any of their properties or revenues.

 

(m)    Neither Grantor is in default under or with respect toany material contractual obligation.  NoDefault or Event of Default has occurred and is continuing or would result fromthe consummation of the transactions contemplated by this Agreement or anyother Loan Document.

 

(n)     Borrower and its subsidiaries have filed all Federal,state and other material tax returns and reports required to be filed, and havepaid all Federal, state and other material taxes, assessments, fees and othergovernmental charges levied or imposed upon them or their properties, income orassets otherwise due and payable, except those which are being contested ingood faith by appropriate proceedings diligently conducted and for whichadequate reserves have been provided in accordance with generally acceptedaccounting principles (“GAAP”).  There isno proposed tax assessment against Borrower or any of its subsidiaries.  Neither Lender nor CBS is party to any taxsharing agreement.

 

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(o)     Borrower is not engaged and will not engage,principally or as one of its important activities, in the business of purchasingor carrying Margin Stock, or extending credit for the purpose of purchasing orcarrying margin stock.  Following theapplication of the proceeds of each Loan, not more than 25% of the value of theassets (either of Borrower only or of Borrower and its subsidiaries on aconsolidated basis) will be Margin Stock.

 

(p)     None of Borrower, any person controlling Borrower, orany subsidiary of Borrower is or is required to be registered as an “investmentcompany” under the Investment Company Act of 1940.

 

(q)     Borrower has disclosed to Lender all agreements,instruments and corporate or other restrictions to which it or any of itssubsidiaries is subject, and all other matters known to it, that, individuallyor in the aggregate, could reasonably be expected to have a material adverseeffect upon the business, operations, condition (financial or otherwise),properties or prospects of Borrower or it subsidiaries (a “Material AdverseEffect”).  No report, financialstatement, certificate or other information furnished (whether in writing ororally) by or on behalf of either Grantor to Lender in connection with thetransactions contemplated hereby and the negotiation of this Agreement ordelivered hereunder or under any other Loan Document contains any material misstatementof fact or omits to state any material fact necessary to make the statementstherein, in the light of the circumstances under which they were made, notmisleading; provided that, with respect to projected financial information,Borrower represents only that such information was prepared in good faith basedupon assumptions believed to be reasonable at the time.

 

8.             [Reserved.]

 

9.             Covenants of Borrower. For so long as any Obligations remain outstanding or unsatisfied, and solong as the Availability Period has not expired or been terminated, Borrowershall, and shall cause its subsidiaries to:

 

(a)     pay or cause to be paid promptly all taxes andassessments when due, except those which are being contested in good faith byappropriate proceedings diligently conducted and for which adequate reserveshave been provided in accordance with GAAP, and all lawful claims which, ifunpaid, would by law become a lien upon its property;

 

(b)     [reserved];

 

(c)     deliver to Lender:

 

(i)            Notice of the filing of any documentsfiled with the SEC, promptly, but in any event within 2 Business Days, afterthe filing thereof;

 

(ii)           promptly after the furnishing thereof, copies of anystatement or report furnished to any holder of debt or equity securities ofBorrower;

 

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(iii)          promptly, but in any event within 2Business Days, after learning thereof, notice of

 

(1)           any litigation commenced or claim asserted againstBorrower or any of its subsidiaries involving an amount in excess of $25,000;

 

(2)           the occurrence of any Default or Event of Default; and

 

(3)           any matter that has resulted or could reasonably beexpected to result in a Material Adverse Effect.

 

Each notice pursuant to this subsection shall be accompanied by a statementof an officer of Borrower setting forth details of the occurrence referred totherein and stating what action Borrower has taken and proposes to take withrespect thereto.  Each notice pursuant toclause (2) above shall describe with particularity any and all provisionsof this Agreement and any other Loan Document that have been breached.

 

(iv)          promptly, but in any event within 2 Business Days,such additional information regarding the business, financial or corporateaffairs of Borrower or any of its subsidiaries, or compliance with the terms ofthe Loan Documents, as Lender may from time to time reasonably request.

 

(d)     Preserve, renew and maintain in full force and effectits legal existence and good standing under the laws of the jurisdiction of itsorganization; take all reasonable action to maintain all rights, privileges,permits, licenses and franchises necessary or desirable in the normal conductof its business; and preserve or renew all of its registered patents,trademarks, trade names and service marks, the non-preservation of which couldreasonably be expected to have a Material Adverse Effect.

 

(e)     Maintain, preserve and protect all of its propertiesand equipment necessary in the operation of its business in good working orderand condition, ordinary wear and tear excepted, and make all necessary repairsthereto and renewals and replacements thereof, except in each case where thefailure to do so could not reasonably be expected to have a Material AdverseEffect.

 

(f)      Maintain with financially sound and reputableinsurance companies not affiliates of Borrower, insurance with respect to itsproperties and business against loss or damage of the kinds customarily insuredagainst by persons or entities engaged in the same or similar business, of suchtypes and in such amounts as are customarily carried under similarcircumstances by such other persons or entities.

 

(g)     Comply in all material respects with all Requirementsof Law and all orders, writs, injunctions and decrees applicable to it or to itsbusiness or property, except in such instances in which such requirement of Lawor order, writ, injunction or decree is being

 

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contested in good faith by appropriate proceedingsdiligently conducted; or the failure to comply therewith could not reasonablybe expected to have a Material Adverse Effect.

 

(h)     Maintain proper books of record and account, in whichfull, true and correct entries in conformity with GAAP consistently appliedshall be made of all financial transactions and matters involving the assetsand business of Borrower or such subsidiary, as the case may be; and maintainsuch books of record and account in material conformity with all applicablerequirements of any governmental authority having regulatory jurisdiction overBorrower or such subsidiary, as the case may be.

 

(i)      Permit representatives and independent contractors ofLender to visit and inspect any of its properties, to examine its corporate,financial and operating records, and make copies thereof or abstractstherefrom, and to discuss its affairs, finances and accounts with itsdirectors, officers, and independent public accountants, all at such reasonabletimes during normal business hours and as often as may be reasonably desired,upon reasonable advance notice to Borrower; provided, however, that when anEvent of Default exists Lender (or any of its representatives or independentcontractors) may do any of the foregoing at the expense of Borrower at any timeduring normal business hours and without advance notice.

 

(j)      Use the proceeds of each Loan solely to refinance theExisting Loan and for the purposes described in the Proceeds Budget deliveredto Lender in connection with such Loan, and in any event not in contraventionof any Requirement of Law or of any Loan Document.

 

(k)     Not create, incur, assume or suffer to exist any lien,security interest or other encumbrance upon any of its property, assets orrevenues, whether now owned or hereafter acquired, other than in favor ofLender, except for purchase money security interests granted by Sturgeons LLCto secure the payment of the outstanding indebtedness incurred by Sturgeons LLCfor the purchase by Sturgeons LLC of equipment provided that(i) such Liens do not at any time encumber any property other than theproperty financed by such indebtedness and (ii) the Indebtedness securedthereby does not exceed the cost or fair market value, whichever is lower, ofthe property being acquired on the date of acquisition.

 

(l)      Not merge or consolidate with or into another personor entity, or liquidate or dissolve, or sell or otherwise dispose of (whetherin one transaction or in a series of transactions) any Collateral or all orsubstantially all of its other assets (whether now owned or hereafter acquired)to or in favor of any person or entity, other than sales of inventory in theordinary course of business.

 

(m)    Not declare or make, directly or indirectly, anyRestricted Payment, or incur any obligation (contingent or otherwise) to do so,except that (i) any subsidiary of Borrower other than CBS may make aRestricted Payment to Borrower and (ii) so long as no default or Event ofDefault exists, Borrower may declare and pay cash dividends on its outstandingpreferred stock in aggregate amounts and at intervals consistent with pastpractice.  As used 

 

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herein, “Restricted Payment” means a dividend or otherdistribution (whether in cash, securities or other property) with respect toany capital stock or other equity interest of Borrower or any of itssubsidiaries, or any payment (whether in cash, securities or other property),including any sinking fund or similar deposit, on account of the purchase,redemption, retirement, acquisition, cancellation or termination of any suchcapital stock or other equity interest, or on account of any return of capitalto Borrower’s stockholders, partners or members (or the equivalent person orentity thereof).

 

(n)     Not engage in any material line of businesssubstantially different from those lines of business conducted by Borrower andits subsidiaries on the date hereof or any business substantially related orincidental thereto.

 

(o)     Not enter into any transaction of any kind with anyaffiliate of Borrower, whether or not in the ordinary course of business, otherthan on fair and reasonable terms substantially as favorable to Borrower orsuch subsidiary as would be obtainable by Borrower or such Subsidiary at thetime in a comparable arm’s length transaction with a person or entity otherthan an Affiliate.

 

(p)     Not enter into any contractual obligation (other thanthis Agreement or any other Loan Document) that (i) limits the ability (1) ofany subsidiary of Borrower to make Restricted Payments to Borrower or any othersubsidiary or to otherwise transfer property to Borrower or any othersubsidiary, (2) of any subsidiary of Borrower to guarantee theindebtedness of Borrower to Lender or (3) of Borrower or any subsidiary ofBorrower to create, incur, assume or suffer to exist liens on property of suchperson or entity in favor of Lender.

 

(q)     Not use the proceeds of any Loan, whether directly orindirectly, and whether immediately, incidentally or ultimately, to purchase orcarry Margin Stock or to extend credit to others for the purpose of purchasingor carrying margin stock or to refund indebtedness originally incurred for suchpurpose.

 

(r)      At Borrower’s expense, execute and deliver, or causeto be executed and delivered, to Lender such documents and agreements, andshall take or cause to be taken such actions, as Lender may, from time to time,require to carry out the terms and conditions of this Agreement and the otherLoan Documents.

 

10.           Indemnification; Borrower to ReimburseLender’s Expenses.

 

(a)     [Reserved]

 

(b)     Borrower shall indemnify and hold harmless Lender andits members, directors, officers, employees, agents and advisors (each of theforegoing being called an “Indemnitee”) from and against, and hold eachIndemnitee harmless from,  any and allloss, damage, liability, or expense, including reasonable fees anddisbursements of counsel for any Indemnitee, incurred by any Indemnitee or assertedagainst any Indemnitee by any third party 

 

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or by Borrower or CBS arising out of, in connectionwith, or as a result of (i) the execution or delivery of this Agreement,any other Loan Document or any agreement or instrument contemplated hereby orthereby, the performance by the parties hereto and thereto of their respectiveobligations hereunder or thereunder, the consummation of the transactionscontemplated hereby or thereby, or the administration of this Agreement and theother Loan Documents, (ii) any Loan or the use or proposed use of theproceeds thereof, or (iii) any actual or prospective claim, litigation,investigation or proceeding relating to any of the foregoing, whether based oncontract, tort or any other theory, whether brought by a third party or byBorrower or CBS, and regardless of whether any Indemnitee is a party thereto;provided that such indemnity shall not, as to any Indemnitee, be available tothe extent that such losses, claims, damages, liabilities or related expenses (x) aredetermined by a court of competent jurisdiction by final and nonappealablejudgment to have resulted from the gross negligence or willful misconduct ofsuch Indemnitee or (y) result from a claim brought by Borrower or CBSagainst an Indemnitee for breach in bad faith of such Indemnitee’s obligationshereunder or under any other Loan Document, if Borrower or CBS has obtained afinal and nonappealable judgment in its favor on such claim as determined by acourt of competent jurisdiction.

 

(c)     Borrower shall pay for or reimburse Lender for: (i) allreasonable out of pocket expenses incurred by Lender (including the fees anddisbursements of counsel), in connection with the preparation, negotiation,execution, delivery and administration of this Agreement and the other LoanDocuments or any amendments, modifications or waivers of the provisions hereofor thereof (whether or not the transactions contemplated hereby or therebyshall be consummated), (ii) the costs arising from or relating to anyregulatory or legal expense for Lender associated with this Agreement and/orany other Loan Document, and (iii) all out of pocket expenses incurred byLender (including the fees and disbursements of counsel) in connection with theenforcement or protection of its rights (A) in connection with thisAgreement and the other Loan Documents, including its rights under thisSection, or (B) in connection with the Loans made hereunder, including allsuch out of pocket expenses incurred during any workout, restructuring ornegotiations in respect of such Loans.

 

11.           [Reserved.]

 

12.           Defaults.  The followingshall constitute events of defaults hereunder (“Event of Default”):

 

(a)     Borrower’s failure to pay, when and as required to bepaid herein or in any other Loan Document, any amount of principal, interest orfees or any other amount payable hereunder or under any other Loan Document; or

 

(b)     Any warranty or representation made by either Grantorin any Loan Document proves to have been false or misleading in any materialrespect when made or deemed made; or

 

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(c)     Either Grantor’s failure to perform, or breach of, anyother term, obligation or covenant set forth in this Agreement or any otherLoan Document; or

 

(d)     Borrower or any of its subsidiaries (i) fails tomake any payment when due (whether by scheduled maturity, required prepayment,acceleration, demand, or otherwise) in respect of any indebtedness (other thanindebtedness hereunder) having an aggregate principal amount of more than$100,000, or (ii) fails to observe or perform any other agreement orcondition relating to any such indebtedness or contained in any instrument oragreement evidencing, securing or relating thereto, or any other event occurs,the effect of which default or other event is to cause, or to permit the holderor holders of such indebtedness (or a trustee or agent on behalf of such holderor holders) to cause, with the giving of notice if required, such indebtednessto be demanded or terminated or to become due or to be repurchased, prepaid,defeased or redeemed (automatically or otherwise), or an offer to repurchase,prepay, defease or redeem such indebtedness to be made, prior to its statedmaturity, or cash collateral in respect thereof to be demanded; or

 

(e)     Borrower or any of its Subsidiaries institutes orconsents to the institution of any proceeding under any Debtor Relief Law, ormakes an assignment for the benefit of creditors; or applies for or consents tothe appointment of any receiver, trustee, custodian, conservator, liquidator,rehabilitator or similar officer for it or for all or any material part of itsproperty; or any receiver, trustee, custodian, conservator, liquidator,rehabilitator or similar officer is appointed without the application orconsent of such person or entity and the appointment continues undischarged orunstayed for 60 calendar days; or any proceeding under any Debtor Relief Lawrelating to any such person or entity or to all or any material part of its propertyis instituted without the consent of such person or entity and continuesundismissed or unstayed for 60 calendar days, or an order for relief is enteredin any such proceeding; or

 

(f)      (i) Borrower or any of its Subsidiaries becomesunable or admits in writing its inability or fails generally to pay its debtsas they become due, or (ii) any writ or warrant of attachment or executionor similar process is issued or levied against all or any material part of theproperty of any such Person and is not released, vacated or fully bonded within30 days after its issue or levy; or

 

(g)     There is entered against Borrower or any of itssubsidiaries (i) a final judgment or order for the payment of money in anaggregate amount exceeding $50,000, or (ii) any one or more non-monetaryfinal judgments that have, or could reasonably be expected to have,individually or in the aggregate, a Material Adverse Effect and, in eithercase, (A) enforcement proceedings are commenced by any creditor upon suchjudgment or order, or (B) there is a period of 10 consecutive days duringwhich a stay of enforcement of such judgment, by reason of a pending appeal orotherwise, is not in effect; or

 

(h)     Any Loan Document, at any time after its execution anddelivery and for any reason other than as expressly permitted hereunder orthereunder or satisfaction in full of 

 

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all the Obligations, ceases to be in full force andeffect; or any Grantor or any other person or entity contests in any manner thevalidity or enforceability of any Loan Document; or any Grantor denies that ithas any or further liability or obligation under any Loan Document, or purportsto revoke, terminate or rescind any Loan Document; or

 

(i)      Victor Salerno ceases for any reason to be or act asthe Chief Executive Officer of Borrower; or there occurs any change of controlof Borrower; or

 

(j)      Any lien or security interest purported to be createdunder any Loan Document shall cease to be, or shall be asserted by any Grantoror other person or entity not to be, a valid and perfected lien on or securityinterest in any Collateral, with the priority required by this Agreement.

 

13.           Rights and Remedies of Lender. Upon the occurrence of an Event of Default, Lender may exercise any oneor more of the following rights and remedies:

 

(a)     declare the Availability Period to be terminated,whereupon the Availability Period shall be terminated and no further Loansshall be made hereunder;

 

(b)     declare all or any portion of the unpaid principalamount of all outstanding Loans, all interest accrued and unpaid thereon, andall other amounts owing or payable hereunder or under any other Loan Documentto be immediately due and payable, without presentment, demand, protest orother notice of any kind, all of which are hereby expressly waived by Borrower;

 

(c)     Pursue and enforce all of the rights and remediesprovided to a secured party with respect to the Collateral under the NevadaUniform Commercial Code; or

 

(d)     Pursue any other rights or remedies available toLender at law or in equity including recovery of all costs of collectionincurred by Lender due to the Event of Default, including, without limitation,reasonable attorneys’ fees and expenses;

 

provided, however, that upon the occurrence of any event with respect toBorrower described in Section 12(e) above, the Availability Periodshall be automatically terminated and no further Loans shall be made hereunder,and the unpaid principal amount of all outstanding Loans and all interest andother amounts as aforesaid shall automatically become due and payable, in eachcase without further act of Lender.

 

14.           Waiver.  Borrower,except as otherwise specifically set forth herein, for itself and for itssuccessors, transferees, and assigns, hereby irrevocably waives diligence,presentment, and demand for payment, protest, notice, notice of protest andnonpayment, dishonor and notice of dishonor and all other demands or notices ofany and every kind whatsoever in connection with this Agreement, any other LoanDocument, and the Collateral and the benefit of all statutes, ordinances,judicial rulings, and other legal principles of any kind, now or hereafterenacted or in force, affording any right of redemption or cure or any right toa stay of 

 

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execution or extension of time for payment orexempting any property of such person from levy and sale upon execution of anyjudgment obtained by Lender or any successor or assignee of Lender in respect ofthis Agreement, any other Loan Document, and the Collateral.  Borrower hereby agrees that the Loans and anyor all payments coming due hereunder may be extended from time to time in thesole discretion of Lender without in any way affecting or diminishing Borrower’sliabilities hereunder or under any other Loan Document.

 

15.           Full Recourse. The liability of Borrower for the Obligation shall not be limited to theCollateral.  Borrower shall remain fullyliable for indefeasible repayment in full of the Obligations in cash and,specifically, any remaining Obligations in the event that sale or otherliquidation of the Collateral is deficient to satisfy the Obligations in full.

 

16.           Representation of Counsel. The parties acknowledge that they have consulted with or have had theopportunity to consult with their own legal counsel prior to executing thisAgreement.  This Agreement has beenfreely negotiated by the parties and any rule of construction to theeffect that any ambiguities are to be resolved against the drafting party shallnot be employed in the interpretation of this Agreement.

 

17.           Choice of Laws; Actions. This Agreement, the Note and the Warrant shall be construed inaccordance with the internal laws of the State of Nevada, without regard to thechoice of law principles thereof.  Theexclusive venue of any legal suit, action, or proceeding arising out of orrelating to the Agreement shall be state court in Clark County, Nevada.

 

18.           Successors and Assigns. Neither this Agreement nor any of the rights or obligations hereundershall be assignable or delegable by Borrower without the written consent ofLender or its assignee first obtained and any attempted assignment without suchwritten consent shall be void and confer no rights upon any third party.  This Agreement and the other Loan Documentsshall be freely assignable by Lender, subject to compliance with applicablelaw. Subject to the foregoing, this Agreement shall be binding upon and shallinure to the benefit of the parties hereto and their respectiverepresentatives, successors and permitted assigns.

 

19.           Notices.  All noticesunder this Agreement shall be in writing and shall be given by personaldelivery, or by registered or certified United States mail, postage prepaid,return receipt requested, to the addresses set forth below or to such otherperson or persons or to such other address or addresses as Lender and Borrowersor their respective successors or assigns may hereafter furnish to the otherparty by notice similarly given.  Notices,if personally delivered, shall be deemed to have been received on the date ofdelivery, and if given by registered or certified mail, shall be deemed to havebeen received on the third business day after mailing.

 

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If to Lender:

 

Alpine Advisors LLC

825 Lakeshore Blvd

Incline Village, NV 89451

 

If toBorrower:

 

AmericanWagering, Inc.

Attn:General Counsel

675 Grier Drive

Las Vegas, Nevada 89119

 

20.           Severability. In case any provision of this Agreement shall be invalid, illegal orunenforceable in any jurisdiction then, as to such jurisdiction only, suchprovision shall to the extent of such prohibition or unenforceability be deemedsevered from the remainder of such agreement and the validity, legality andenforceability of the remaining provisions shall not in any way be affected orimpaired thereby.

 

21.           Section Headings. The various headings used in this Agreement are inserted for convenienceof reference only and shall not affect the meaning or interpretation of thisAgreement or any provision hereof.

 

22.           Amendments.  No amendmentor modification of any provision of this Agreement shall be effective withoutthe written agreement of the parties, and no termination or waiver of anyprovision of this Agreement, or consent to any departure by Borrower therefromshall in any event be effective without the written concurrence of Lender,which concurrence Lender shall have the right to grant or withhold at its solediscretion.

 

23.           Counterparts. This Agreement may be executed in any number of counterparts, eachconstituting an original, but all together one and the same instrument.  Delivery of an executed counterpart of asignature page of this Agreement by telecopy shall be effective asdelivery of a manually executed counterpart of this Agreement

 

24.           Entire Agreement. This Agreement, together with the other Loan Documents, constitutes thesole and entire agreement of the parties with respect to the subject mattercontained herein, and supersedes all prior and contemporaneous understandingsand agreements, both written and oral, with respect to such subject matter.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of thedate first written above.

 

 
| BORROWER:                      |                | LENDER:                             |
|--------------------------------|---------------------|-------------------------------------|
| American  Wagering, Inc., |                | Alpine  Advisors LLC                |
| A Nevada  corporation          |                | A Nevada  Limited liability company |
|                           |                |                                |
|                           |                |                                |
| By:                            | /s/ Victor  Salerno |                                | By: | /s/ Don R.  Kornstein |
| Name: Victor  Salerno          |                | Name: Don R.  Kornstein             |
| Its: Chief  Executive Officer  |                | Its:  Managing Member               |
|                                |                     |                                     |  |  |

 

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EXHIBIT A

 

FORM OFBORROWER PLEDGE AGREEMENT

 

[SeeAttached]

 

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EXHIBIT B

 

FORM OFCBS SECURITY AGREEMENT

 

[SeeAttached]

 

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