EXECUTION COPY
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, ASSIGNED
OR TRANSFERRED EXCEPT (a) PURSUANT TO A REGISTRATION STATEMENT UNDER THE
ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE
SECURITIES, OR (b) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION
UNDER THE ACT CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS WELL
AS ANY APPLICABLE "BLUE SKY" OR SIMILAR STATE SECURITIES LAWS
GAMING & ENTERTAINMENT GROUP, INC.
SENIOR SECURED NOTE
Maturity Date: December 8, 2009
FOR VALUE RECEIVED, Gaming & Entertainment Group, Inc., a corporation
organized and existing under the laws of the State of Utah, (along with all of
its affiliates and subsidiaries collectively, the "Company"), promises to pay to
the order of Cantor G & W (Nevada), L.P., a Nevada limited partnership, or its
assignee or designee ("Investor"), the sum of TWO MILLION DOLLARS AND 00/100
($2,000,000) five (5) years from the date hereof (the "Maturity Date") unless
due earlier on the Final Payment Date (as defined in Section 5 hereof). All cash
payments hereunder shall be made in legal tender of the United States in
immediately available funds. This note is the Company's Senior Note (the "Note")
referred to in that certain Loan Facility and Investment Agreement dated as of
the date hereof by and among the Company and the Investor (as defined in Section
6 below) (the "Investment Agreement") up to the aggregate principal amount of
$2,000,000. All capitalized terms used in this Note and not otherwise
specifically defined herein shall have the same meaning as ascribed to them in
the Investment Agreement. Each Borrowing extended hereunder and all payments
hereunder shall be recorded by the Investor and endorsed on the grid attached
hereto, which shall be a part hereof; provided that the failure of the Investor
to make any such recordation or endorsement shall not affect the obligations of
the Company hereunder. This Note may be converted in whole or in part into
shares of Company Stock by the exercise of the Debt Warrant and the payment of a
portion of the exercise price with all or a portion of the amount outstanding
under this Note.
1. Interest. The outstanding principal amount of this Note shall
earn interest at the Federal Funds Rate, in effect from time to time (currently
2.0%), plus six percent (6%) per annum and shall be payable semi-annually, in
arrears, on December 1, 2004 and on each June 1 and December 1 thereafter (each,
an "Interest Payment Date"), at the option of the Investor (A) by the issuance
on such dates of an Interest Warrant; (B) payable in cash on maturity on the
fully accrued amount; or (C) by the issuance on any subsequent Interest Payment
Date of an Interest Warrant, on the then fully accrued amount. In the event that
there shall occur an Event of Default the interest rate shall be increased by
seven percent (7%) per annum.
2. Security. The indebtedness evidenced by this Note is secured by a
perfected first priority security interest in the Collateral (as defined in the
Security Agreement). The holder of this Note is entitled to all of the benefits
of the Investment Agreement and the Security Agreement.
3. No Subordination. The Company hereby expressly agrees, and it
shall be of the essence hereof, that the indebtedness represented hereby shall
not be subordinate to any other indebtedness of the Company, whether now
existing or hereafter arising, in any manner whatsoever, including but not
limited to its senior secured interest with respect to the Collateral and its
priority of payment over all other indebtedness of the Company; provided,
however, that the foregoing shall not prohibit the Company from granting a first
priority security interest in any gaming equipment of the Company to any third
party that provides the Company with financing to acquire such gaming equipment,
provided, further, that any such party first enters into a written subordination
agreement, in form and substance satisfactory to Investor, setting forth such
third party's subordination to Investor's priority of payment.
4. Redemption. Notwithstanding anything to the contrary contained
herein, upon occurrence of the consummation of a Change of Control with respect
to the Company (the date of such occurrence, the "Redemption Date"), Investor
shall have the right to require the Company to repay all outstanding principal
and accrued interest due hereunder.
5. Definitions. As used in this Note the following terms have the
meanings set forth below:
(a) "Business Day" means any day of the year on which banks are
required or permitted to be open for business in New York City.
(b) "Change of Control" means the occurrence of any of the
following: (a) the current Controlling Stockholders as a group and Investor, or
any affiliate, designee or successor of Investor, shall cease to have the power
to vote or direct the voting of securities having at least 51% of the voting
power for the election of directors of the Company, (b) any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) (excluding Investor or any affiliates, designees or
successors of Investor) shall become, or obtain rights (whether by means or
warrants, options or otherwise) to become, the "beneficial owner", directly or
indirectly, of the voting power to direct the voting of securities having at
least 51% of the voting power for the election of directors of Company, or (c)
the Company consolidates with or merges into another corporation or conveys,
transfers, or leases all or substantially all of its assets to any Person, or
any Person consolidates with or merges into the Company, in either event
pursuant to a transaction in which the outstanding voting shares of the Company
are changed into or exchanged for cash, securities or other property, or (d)
during any period of up to six (6) consecutive months, commencing after the date
of this Note, the current directors of the Company shall cease for any reason to
constitute a majority of the board of directors of the Company. As used herein,
the term "beneficial owner" shall have the meaning set forth in Rules 13(d)-3
and 13(d)-5 under the Securities Exchange Act of 1934, as amended.
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(c) "Controlling Stockholders" means Xxxxx X. Xxxxxx, Vertes Family
Trust, Robit Nominees Pty Ltd., Xxxxxxx X. Xxxxxx, the Xxxxxx Family Trust, the
Xxxxxx Family Limited Partnership, and Xxxxx Xxxxxx.
(d) "Final Payment Date" as to any Note means the earliest to occur
of the Maturity Date, the Redemption Date or the date following an Event of
Default when all amounts payable under this Note become due and payable.
6. Investment Purpose. The holder of this Note agrees, by his
acceptance hereof, that it is taking this Note for investment purposes only and
not with a view towards, or in connection with, any resale or distribution
thereof.
7. Costs. Company hereby promises to pay to Investor, immediately
upon demand, all costs and expenses (including, without limitation, all
reasonable fees and expenses of counsel) incurred by Investor in connection with
the enforcement of Investor's rights, and the collection of all amounts due
hereunder.
8. Prepayment. No principal amount of this Note may be prepaid, in
whole or in part, without the express prior written approval of Investor, which
approval may be withheld by Investor in its sole and absolute discretion.
9. Setoff. Any payment required to be made by Company under this
Note will be made without setoff, counterclaim or other defense.
10. Usury Savings. This Note is subject to the express condition
that at no time shall interest be payable (as the case may be) on this Note at a
rate in excess of the maximum permitted by law, and Company shall not be
obligated or required to pay, nor shall Investor be permitted to charge or
collect, interest at a rate in excess of such maximum rate. If by the terms of
this Note, Company is required to pay interest at a rate in excess of such
maximum rate, the rate of interest hereunder shall be deemed to be reduced
immediately and automatically to such maximum rate, and any such excess payment
previously made shall be immediately and automatically applied to the unpaid
balance of the principal sum of this Note and not to the payment of interest.
11. Amendment. Neither this Note nor any provision hereof may be
waived, changed, modified or discharged orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
12. Choice of Law. This Note shall be construed and enforceable in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
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13. Successors. As used herein, the terms "Company" and "Investor"
shall be deemed to include their respective heirs, successors, legal
representatives and permitted assigns whether by voluntary action of the parties
or by operation of law.
14. Presentment/Notice. Presentment for payment, diligence, notice
of dishonor, protest and notice of protest are hereby waived by Company.
15. Invalidity. In case any one or more of the provisions contained
in this Note shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof, but this Note shall be construed
as if such invalid, illegal or unenforceable provisions had never been included.
16. Notices. All notices, statements, instructions or other
documents required to be given hereunder, shall be in writing and shall be given
either by hand delivery, by private overnight mail service (e.g., FedEx or an
equivalent service), by U.S. next day express mail service, by facsimile
transmission or by mailing the same in a sealed envelope, first-class mail,
postage prepaid and either certified or registered, return receipt requested,
addressed as follows:
if to Investor, to:
Xxxxxx G & W (Nevada), L.P.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
General Counsel
with a copy simultaneously by like means to its counsel:
Xxxxxxxx Xxxx & Brandeis, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxxx X. Xxxxxxxx Esq.
if to the Company, to:
Gaming & Entertainment Group, Inc.
0000 Xxxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxx 00000
Facsimile: 000-000-0000
Attention: Chief Executive Officer
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Any person listed above, by written notice given to all other persons listed
above in accordance with this Section 16, may change the address or any other
contact information to which notices, statements, instruction or other documents
are to be sent to such party. Any notice given in accordance with the provisions
of this Section 16 shall be deemed to have been received (a) on the business day
actually received if given by hand or facsimile transmission with electronic
confirmation, (b) on the business day immediately subsequent to mailing, if sent
by U.S. next day express mail service or private overnight mail service, or (c)
three (3) business days following the mailing thereof, if mailed by certified or
registered mail, postage prepaid, return receipt requested.
17. Waiver. The failure on the part of Investor to exercise any
right hereunder shall not operate as a waiver thereof. The waiver of any
provisions herein by Investor or the consent to any departure from any such
provisions shall not be deemed a waiver of that or any other right subsequent
thereto, but shall be applicable only in the specific instance or for the
purpose for which such waiver or consent was given.
18. Jurisdiction; Venue.
(a) The Company hereby irrevocably and unconditionally submits, for
itself and its property, to the exclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Note, or for recognition or enforcement of any
judgment, and the Company hereby irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in any such New York State court or, to the fullest extent permitted by law, in
such Federal court. The Company agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Company hereby
irrevocably agrees to service of process by mail at the address first set forth
above.
(b) The Company irrevocably and unconditionally waives any objection
that it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Note to which it is a party in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
19. Waiver of Jury Trial. The Company irrevocably waives all right
to trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to this Note, or the
negotiation, administration, performance or enforcement thereof.
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IN WITNESS WHEREOF, Company has caused this Note to be signed in its name
by its Chief Executive Officer and its corporate seal to be affixed hereto and
attested by its Secretary this 8th day of December, 2004.
GAMING & ENTERTAINMENT GROUP, INC.
/s/ Xxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer
[Seal]
ATTEST:
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BORROWINGS
DATE AMOUNTS OF BORROWING NOTATION MADE BY
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