LOAN AGREEMENT
This Loan Agreement (the "1998 Loan Agreement") is dated as of September
30, 1998, by and between NevStar Gaming & Entertainment Corporation, a Nevada
corporation formerly known as Mesquite Gaming Corp. (the "Borrower"), and
Xxxxxxx Xxx Xxxxxx, an individual ("Lender"), and Xx. Xxxxxxx Xxx ("Xx. Xxx")
with reference to the following facts:
R E C I T A L S
A. On or about April 18, 1996, Borrower executed an Amended and
Restated Convertible Loan Agreement in favor of Lender providing for the loan
of monies to the Borrower. Said Amended and Restated Convertible Loan
Agreement, as amended, is hereinafter referred to as the "Loan Agreement."
B. Xx. Xxx participated in the Loan Agreement with Lender.
C. On March 31, 1998, Lender and Xx. Xxx (hereinafter, collectively,
the "Lenders") executed a Financing Commitment agreeing, subject to the terms
and conditions therein, to lend the Borrower up to One Million Dollars
($1,000,000). Said Financing Commitment is hereinafter referred to as the
"March Commitment."
D. On or about June 4, 1998, the Lenders executed an Additional
Financing Commitment under which, subject to the terms and conditions set
forth therein, the Lenders and Xx. Xxx agreed to lend up to an additional One
Million Dollars ($1,000,000) to the Borrower. Such Additional Financing
Commitment is hereinafter referred to as the "June Commitment."
E. The March Commitment and the June Commitment provided that
Lender's obligations were conditioned upon the preparation, execution and
perfection of legal documents reasonably satisfactory to the parties and their
counsel, which documents were to contain customary representations, warranties
and conditions acceptable to the Lender.
F. The June Commitment provided that the One Million Dollar
($1,000,000) commitment amount would be reduced by the net sum received by
Borrower from the sale of shares of common stock pursuant to that certain
Placement Agent Agreement entered into between Borrower and Xxxxxxxxx
Securities, Inc. dated May 29, 1998. The net sum so received by Borrower was
Five Hundred Ninety-Six Thousand Dollars Four Hundred Fifty Dollars
($596,450), leaving a balance of Four Hundred Three Thousand Five Hundred
Fifty Dollars ($403,550) (the "June Commitment Balance").
G. Borrower and Lenders desire to cancel any obligation of Lenders to
advance the June Commitment Balance to Borrower, and to defer the payment by
Borrower of Two Hundred Fifteen Thousand Dollars ($215,000) in interest owed
pursuant to the existing Loan Agreement until the date that the Note attached
hereto is due (the "Deferred Interest Amount"), which Deferred Interest Amount
shall bear like interest as advances pursuant to this Loan Agreement.
H. Lenders have incurred outstanding legal fees and costs in
connection with the loan evidenced by the Loan Agreement in the amount of
$20,277.33 through July 31, 1998 (the "Deferred Legal Fee Amount"). Borrower
and Lenders desire to confirm the obligation to pay with interest and to defer
the payment by Borrower of the Deferred Legal Fee Amount until the date that
the Note attached hereto is due.
I. Lenders have received a request from the Borrower to advance the
sum of Four Hundred Thousand Dollars ($400,000) under the March Commitment for
working capital purposes (the "Initial Advance").
J. The purpose of this 1998 Loan Agreement is to document the terms
and conditions of the Initial Advance and said loans and provide for the
implementation of the March Commitment and June Commitment, and shall
supersede the March Commitment and June Commitment in their entirety.
K. The capitalized terms not otherwise defined herein shall have the
terms as defined in the Loan Agreement.
IN WITNESS WHEREOF, the parties agree as follows:
1. Agreement to Loan. Lenders (severally and not jointly each as to
one-half) agree to lend to the Borrower up to a principal sum of One Million
Dollars ($1,000,000) (the "Principal Sum") on the terms and conditions set
forth herein (hereafter referred to as the "Loan") and subject to the payment
terms set forth in the Promissory Note attached hereto as Exhibit "A." The
Initial Advance pursuant to this 1998 Loan Agreement shall be net of an
origination fee of Ten Thousand Dollars ($10,000) and the legal fees set forth
in Section 7 below.
2. Security. The Loan shall be secured by a deed of trust
encumbering the Borrower's hotel/casino property in Mesquite, Nevada in the
form attached hereto as Exhibit "B" (the "Deed of Trust"). Borrower and
Lender understand, acknowledge and agree that the Deed of Trust shall
initially encumber those portions of Borrower's hotel/casino property located
in Mesquite, Nevada commonly known as the Rite-Aid pad and the A&W pad (the
"Outparcels"), the legal descriptions of which are attached hereto as Exhibit
"C." Each of the Outparcels is presently the subject of a separate escrow at
Fidelity National Title Agency of Nevada in Las Vegas, Nevada, to be sold to
two different third parties (the "Outparcel Escrows"). Lenders agree to
promptly deposit in the Outparcel Escrows partial reconveyances of the
Outparcels from the lien of the above-referenced Deed of Trust with
irrevocable instructions to record same upon the close of escrow for the sale
of each Outparcel. In the event that (i) the sales of the Outparcels are not
completed pursuant to the Outparcel Escrows, or (ii) the Outparcels are not
sold to other third parties within ninety (90) days of the date of this
Agreement, Lenders shall have no obligation to give partial releases from the
Deed of Trust for the Outparcels without the Lenders' further written
consent. The Lenders agree that the advances pursuant to this 1998 Loan
Agreement shall be subject to the existing Intercreditor Agreement to which
the Lenders are a party with each other.
3. Advances by Lenders. Lenders will advance to the Borrower for
current and future working capital purposes an amount as needed up to an
aggregate cumulative amount equal to the Principal Sum on twenty (20) days'
prior written notice of the Borrower to Lenders in the amounts and at the
times provided herein but no sooner than the date hereof and no later than
March 26, 1999. The Lender's obligation to make any advances shall be subject
to the conditions precedent set forth below in Section 4. After the Initial
Advance, in light of the fact that NevStar has already made a request for an
additional advance, Two Hundred Thousand Dollars ($200,000) may be scheduled
for disbursement on or after August 31, 1998 upon ten (10) days' prior written
notice, and an additional Four Hundred Thousand Dollars ($400,000) may be
scheduled for disbursement on or after September 30, 1998 upon twenty (20)
days' prior written notice.
4. Conditions to Advance. The obligation of the Lenders to make any
advance hereunder shall be subject to the following express conditions
precedent:
a. The Borrower shall possess all gaming and other licenses
required to fully operate the Mesquite Star Hotel and Casino, and no
proceedings or investigations with respect to the continued maintenance of
such licenses shall be pending or threatened.
b. There shall have been recorded in the official real estate
records of Xxxxx County, Nevada, the Deed of Trust and the Lender shall have
received an ALTA policy of title insurance insuring such in form and substance
reasonably acceptable to Lender.
c. There shall be no uncured default pursuant to the terms of
the Loan Agreement or the 1998 Loan Agreement.
d. With respect to every advance other than the Initial
Advance, the Borrower shall demonstrate to the Lender's satisfaction that the
assets of the Borrower exceed the liabilities of the Borrower. Assets and
liabilities shall be determined in accordance with the Generally Accepted
Accounting Principles consistently applied.
e. With respect to all advances except for the Initial Advance
hereunder, all mechanic's liens shall be removed from the real property and
Lender shall have received an endorsement to its title insurance policy
insuring the Deed of Trust, assuring it that all mechanic's liens have been
removed.
5. Default. An Event of Default shall exist hereunder if (i) there
is a failure to pay any principal, interest or other amount within five (5)
days when due under the terms hereof; (ii) there shall be a failure to perform
or observe any obligation under this 1998 Loan Agreement or the exhibits
hereto, (iii) if there exists a default or event of default under the Note or
Deed of Trust, or (iv) there is an uncured Event of Default under the Loan
Agreement. In the event a default shall have occurred which would constitute
an Event of Default under the terms of section (ii) or (iii) above, which
cannot be cured by the payment of money, an Event of Default shall not be
deemed to have occurred in the event such matter is cured to the reasonable
satisfaction of Lender within fifteen (15) days after Lender gives notice
thereof. In the event such matter cannot be cured within such fifteen (15)
day period and it does not materially affect the security granted to Lender
under the Deed of Trust, then an Event of Default shall not be deemed to have
occurred in the event that after such notice from Lender, Borrower promptly
commences and diligently pursues the cure of the default and completes the
cure of such default to the reasonable satisfaction of Lender within one
hundred twenty (120) days.
6. Warrants. In connection with this 1998 Loan Agreement and the
Initial Advance, Lenders shall receive 32,250 warrants to purchase shares of
the Borrower's common stock at a purchase price of $2.50 per share, and 60,000
warrants to purchase shares of the Borrower's common stock at a purchase price
of $2.00 per share. For each additional One Hundred Thousand Dollar
($100,000) Principal Amount advanced pursuant to this 1998 Loan Agreement, the
Lenders shall receive 15,000 warrants (or pro rata portion thereof based upon
a partial draw of less than One Hundred Thousand Dollars ($100,000) rounded to
the nearest whole warrant) to purchase shares of the Borrower's common stock
at a purchase price of $2.00 per share. All warrants shall be in the form
attached hereto. The parties shall use best efforts to structure the
additional warrants in a manner to minimize taxation to the Lenders. All
shares of common stock of the Borrower issued upon exercise of the warrant
shall be subject to the terms and conditions of any existing lock-up
agreements which have been executed by the party receiving the shares and
shall constitute "Registerable Securities" as defined in Article X of the
Stock Purchase Agreement dated as of May 9, 1997 by and between the Company,
PMJ Enterprises, Inc., Xxxxxxx X. Xxxxxxx and the Lenders (the "Stock Purchase
Agreement"). The Lenders and the Borrower acknowledge and agree that the
registration of these shares of common stock shall be governed by Article X of
the Stock Purchase Agreement.
7. Lender's Attorneys' Fees. The Borrower agrees to pay and the
Lender is authorized to disburse from such loan, monies to pay fees and costs
incurred by Lender's counsel in preparation of negotiation of this 1998 Loan
Agreement and other matters in connection therewith subject to a cap of Seven
Thousand Five Hundred Dollars ($7,500).
8. Entire Agreement. This 1998 Loan Agreement and exhibits hereto
constitute the entire agreement between the parties with respect to the
advance of the funds specified herein and supersedes all prior oral or written
agreements, understandings, representations, warranties and courses of conduct
and dealing between the parties on the subject matter thereof and expressly
supersedes the March Commitment and the June Commitment.
9. General Provisions. Article 13 of the Loan Agreement, which
contains the General Provisions, is hereby incorporated herein by this
reference as though it was set forth in full herein.
10. Enforcement. In the event that the Lender is required to take any
action to enforce the terms and provision of this 1998 Loan Agreement or the
exhibits hereto or other obligations of the Borrower in connection herewith,
the Borrower agrees to pay all costs and expenses incurred by Lender in doing
so, including, but not limited to, reasonable attorneys' fees incurred by the
Lender.
11. Counterparts. This 1998 Loan Agreement may be executed in one or
more counterparts, all of which when fully executed and delivered by all
parties hereto and taken together shall constitute a single agreement, binding
each of the parties. Unless prohibited by law or by any applicable
governmental authority, any document shall be signed and transmitted by
facsimile with the same validity as if it were an ink-signed document.
12. North Las Vegas Option. As consideration for Borrower waiving One
Hundred Thousand Dollars ($100,000) of the June Commitment amount, Xx. Xxx
agrees to cause "Seller" and "High Mesa" (as defined in that certain Option
Agreement dated April 23, 1996 in which Borrower is the "Buyer") to enter into
the Fourth Amendment to Option Agreement and Amendment to Note in the form
attached hereto as Exhibit "D." Xxxxxxx Xxx Xxxxxx shall have no obligations
whatsoever in connection with this Section 12.
13. Deferred Amounts. The Deferred Interest Amount and the Deferred
Legal Fee Amount (the "Deferred Amounts") shall bear interest from the date
hereof at the Base Rate as set forth in the Loan Agreement and Borrower hereby
confirms that the obligation to pay the Deferred Amounts is an obligation
under the Loan Agreement and secured by the security given to secure same.
The Deferred Interest Amount and all accrued interest thereon shall be all due
and payable at the earlier of (i) the date the promissory note evidencing the
principal amount upon which the Deferred Interest accrued is due, whether upon
maturity or upon acceleration thereof; or (ii) the date the Note attached
hereto is due, whether upon maturity or upon acceleration thereof.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the parties have executed this agreement as of the date
first set above.
"Borrower" NEVSTAR GAMING & ENTERTAINMENT CORPORATION, a Nevada
corporation
By:/s/ Xxxxxxx X. Xxxxxxxxxx
By:
"Lenders"
/s/ Xxxxxxx X. Xxxxxx
XXXXXXX XXX XXXXXX
/s/ Xxxxxxx Xxx
XX. XXXXXXX XXX
[Signature Page to Loan Agreement]
EXHIBIT "A"
FORM OF PROMISSORY NOTE
EXHIBIT "B"
FORM OF DEED OF TRUST
