AMENDED AND RESTATED Exhibit 10-f
CONSOLIDATED ACQUISITION AGREEMENT
AGREEMENT made this 6th day of June, 2005 by and among HEADLINERS
ENTERTAINMENT GROUP, INC., a Delaware corporation with offices at 000
Xxxxxxxxxx Xxxxxx, Xxxxxxxxx, XX 00000 ("Headliners"), XXXX XXXXXX, with
offices at 0000 Xxxxxx Xxxx, Xxxxxx, XX 00000 ("Xxxxxx"), XXX X. FIELD,
with offices at 0000 Xxxxxx Xxxx, Xxxxxx, XX 00000 ("Field"), and JHF
PROPERTY HOLDINGS, LLC, d/b/a JHF PROPERTIES, LLC, an Ohio limited
liability company with offices at 0000 Xxxxxx Xxxx, Xxxxxx, XX 00000
("JHF")
WHEREAS, Headliners, Xxxxxx and JHF executed a Consolidated
Acquisition Agreement dated March 29, 2005 pursuant to which Headliners
acquired from Xxxxxx and JHF (referred to herein collectively as the
"Transferors") equity interests in seven limited liability companies that
operate dance clubs under several service marks, including "Banana
Joe's," "Xxxxxxxxx Mama's," "Red Cheetah," "Parrot Beach" and "Cactus
Cafe" (collectively, the "JHF Marks"); and
WHEREAS, the parties wish to amend the terms of the Consolidated
Acquisition Agreement made on March 29, 2005, to add Field as a party to
the agreement, and to restate the entire agreement as amended.
NOW, THEREFORE, it is agreed:
A. TERMINATION OF XXXXXX AGREEMENT AND PROJECTS AGREEMENT
The "Properties Acquisition Agreement - Xxxxxx" dated June 23, 2004
and the "Project Acquisition Agreement" dated June 23, 2004, both of
which were modified by an Omnibus Modification Agreement dated November
22, 2004, are hereby terminated, and shall have no further force or
effect.
I. ACQUISITION OF PROPERTIES
1.1 The Properties. JHF manages entertainment facilities in
Cincinnati, Kansas City, Tucson, Xxxxxxx, Omaha, Louisville and Hampton
that carry on business under one of the JHF Marks (the "Projects"). Each
Project is owned and operated by an Ohio limited liability company (a
"Project Owner") as follows:
a. 0000 Xxxxxxxx Xx. LLC (Cincinnati)
b. 0000 Xxxx Xxxxxx LLC (Kansas City)
c. 000 X. Xxxxx LLC (Tucson)
d. 0000 Xxxxxxxxx Xx LLC (Jackson)
e. 0000 Xxxxxx Xx LLC (Omaha)
f. JP 0xx Xxxxxx Line LLC (Louisville)
g. JEP, Power Plant Way, LLC (Hampton)
Each of the Project Owners has a single member, who is Xxxx Xxxxxx.
Each of the Project Owners is managed by JHF pursuant to a management
agreement that provides for payment to JHF of the net cash flow of the
Projects. Field is the sole member of JHF.
1.2 Initial Closing. On the Initial Closing Date, the following
shall be deemed to have occurred:
a. The Transferors have transferred to Headliners all of their
record and equity interest in the five Project Owners other than JP 0xx
Xxxxxx Line LLC ("Louisville") and JEP, Power Plant Way, LLC
("Virginia").
b. The Transferors shall be deemed to have assigned to Headliners
the right to receive the Net Cash Flow of Louisville until the earlier of
(a) a Second Closing pursuant to Section 1.3 hereof or (b) a termination
of the assignment pursuant to Section 3.3.1.2 hereof.
c. The Transferors shall be deemed to have assigned to Headliners
the right to receive the Net Cash Flow from Virginia (defined herein)
until the earlier of (a) a Virginia Closing pursuant to Section 2.3
hereof or (b) a termination of the assignment pursuant to Section 3.3.1.1
hereof.
d. The management agreements between the Project Owners and JHF
shall be deemed to have been terminated. JHF hereby waives all rights to
compensation under said management agreements for any services performed
after the Initial Closing Date, and shall refund to the Project Owners
any payments received in compensation after that date, except for
payments authorized under the Consolidated Acquisition Agreement as in
effect from March 29, 2005 through May 31, 2005.
For this purpose, "Net Cash Flow" means the cash receipts from operations
of the facilities owned by the Project Owner less cash expenditures
directly resulting from the operations of the facilities owned by Project
Owner. In the case of Virginia, Net Cash Flow will not include
expenditures attributable to the development of the Virginia Project
which are capital expenditures.
1.3 Second Closing. On the Second Closing Date, the Transferors
shall transfer to Headliners all of their record and equity interest in
Louisville. Each of the Transferors shall execute and deliver such
documents as are necessary to permit Headliners to assume control of
Louisville and to own and operate the business carried on by Louisville,
including, as needed, assignments of leaseholds, liquor licenses,
permits, and any other rights, interests and privileges which may be
impaired by the assignment of ownership of that Project Owner.
1.4 Warranties. The Transferors, jointly and severally,
represent and warrant to Headliners that:
1.4.1 The assignment of the Transferors' interests in the Project
Owners pursuant to Section 1.2 and Section 1.3 will vest in
Headliners all of the right, title and interest in the
Project Owners, free of liens, claims and encumbrances.
1.4.2 The Project Owners hold unencumbered title to the leaseholds
used by the Projects, and have full unencumbered right to the
revenues generated by the Projects.
1.5 Convertible Debenture.
1.5.1 On the Initial Closing Date Headliners issued to JHF a
convertible debenture in the principal amount of $500,000 and issued to
Xxxxxx a convertible debenture in the principal amount of $4,500,000
(collectively, the "March 31 Debentures"). JHF and Xxxxxx hereby
surrender the March 31 Debentures, which shall have no further force or
effect.
1.5.2 On the Restated Closing Date, Headliners will issue to JHF a
convertible debenture in the principal amount of Five Million Dollars
($5,000,000) (the "Convertible Debenture"). The Convertible Debentures
will be in the form annexed hereto as Appendix A. The Convertible
Debentures, the Two Million Two Hundred Forty Thousand Dollars
($2,240,000) previously paid by Headliners to JHF, and the other
undertakings by Headliners in this agreement will constitute the
consideration given for the Project Owners other than Virginia.
1.6 Registration Statement. Within thirty (30) days after the
date of this amended and restated agreement, Headliners shall prepare and
file with the Securities and Exchange Commission a registration statement
and such other documents, including a prospectus, as may be necessary in
the opinion of counsel for Headliners in order to comply with the
provisions of the Securities Act, so as to permit a public sale by JHF of
the common shares issuable upon conversion of the Convertible Debenture
and the shares issued in June 2004 to JHF that are referenced in Section
2.2 of this agreement (the "Registrable Shares"). In connection with the
registration of the Registrable Shares, Headliners covenants and agrees
as follows:
a) Headliners will use its best efforts to cause the registration
statement to be declared effective as promptly as practicable.
b) Until either (i) all of the Registrable Shares have been sold
or (ii) JHF will be able to sell all of the remaining
Registrable Shares in the public market without a prospectus
within a six month period, Headliners will file such
amendments to the registration statement as are necessary in
order to permit continued use of the prospectus.
c) Headliners acknowledges that JHF and Field are unfamiliar with
the rules and procedures of the Securities and Exchange
Commission, and will rely on Headliners and its counsel for
compliance therewith.
1.7 Sale of Shares.
1.7.1 Limitation on Resale. As used in this section, "Resale
Shares" means both the Registrable Shares identified in Section 1.6
hereof, the shares issued to Xxxxxx pursuant to Section 3.3.1 hereof, and
any shares hereafter issued to Field pursuant to Section 3.3.1. As used
herein, "Resellers" means JHF, Xxxxxx and Field. The Resellers jointly
agree that prior to June 27, 2005 the maximum number of Resale Shares
that they will sell is the number that yields approximately Two Hundred
Thirty Thousand Dollars ($230,000) in net proceeds. Commencing on June
27, 2005, the maximum number of Resale Shares which they will sell is
that number of Resale Shares that yields approximately Thirty Thousand
Dollars ($30,000) in net proceeds per week, averaged over a four week
period; provided, however, that during the period from June 27, 2005
through August 21, 2005 the Resellers may also sell the number of shares
contemplated in Section 3.3.1.1 as necessary in order to achieve the
Thresholds. Upon request (made no more than once per month), the
Resellers will account to Headliners for all sales of Resale Shares,
showing dates of sale and net proceeds. The parties agree that any
material breach by a Reseller of the covenant in this Section 1.7.1 will
justify action by Headliners that will effect a de-registration of the
remaining Registrable Shares. Prior to taking any action to effect a de-
registration of the Registrable Shares, Headliners will give the
Resellers written notice of the breach and allow them fifteen days to
effect a cure.
1.7.2 Private Transfers. Each of the Resellers will have the right
to assign any of the Resale Shares to an Authorized Transferee without
that assignment being included in the calculation of the limitation on
resale pursuant to Section 1.7.1. An "Authorized Transferee" will be an
individual or an entity (but only if the entity is under control of a
Reseller) who (a) acquires the shares in a private transaction not
reported on the public market and (b) executes and delivers to Headliners
a written agreement to be deemed a "Reseller" and to be subject to the
obligations and limitations imposed on the Resellers by Section 1.7.1
hereof.
1.7.3 Guarantee of Proceeds. In the event that, during the
period commencing on (a) June 27, 2005 and ending on the date on which
the Convertible Debenture has been satisfied, there occurs a calendar
week during which it is impracticable for the Resellers to obtain $30,000
in net proceeds from the sale of Resale Shares due to reasons outside the
Resellers' control, then JHF shall notify Headliners of the shortfall,
and Headliners shall within seven days after receipt of said notice pay
to JHF in cash the amount of the shortfall.
1.8 Initial Closing; Restated Closing. The "Initial Closing"
took place at the offices of Headliners on March 31, 2005 (the "Initial
Closing Date"). At the Initial Closing, in addition to all deliveries
recited herein, each party is deemed to have delivered to the other a
certification attesting that the warranties and representations of that
party made herein are true and correct on the Initial Closing Date as if
made with reference to the Initial Closing Date. The "Restated Closing
Date" is June 7, 2005. On the Restated Closing Date, each party will be
deemed to have delivered to the other a certification attesting that the
warranties and representations of that party made herein are true and
correct on the Restated Closing Date as if made with reference to the
Restated Closing Date.
1.9 Second Closing. The "Second Closing" will take place at the
offices of Headliners on a date fixed by Headliners in a Closing Notice
addressed to JHF. The date on which the Second Closing occurs will be
the "Second Closing Date." The "Closing Notice" may be given at any time
after the net proceeds realized by the Resellers from sale of Resale
Shares equal or exceed Two Million Three Hundred Thousand Dollars
($2,300,000).
IA CONTROL OF THE PROJECT OWNERS
1A.1 Transfers of Title. Immediately after the Restated Closing
Date, each of the Transferors shall execute and deliver such documents as
are necessary to permit Headliners to assume ownership and control of the
five Project Owners assigned at the Initial Closing, and to own and
operate the businesses carried on by the Projects, including, as needed,
assignments of leaseholds, liquor licenses, permits, and any other
rights, interests and privileges which may be impaired by the assignment
of ownership of a Project Owner. Headliners undertakes that it will
promptly prepare and file as necessary such documents as are required to
effect assignments of leaseholders, liquor licenses and the like. Each
party agrees that it will cooperate with the others in order to complete
and file the necessary documents such that the transfers will be
accomplished in compliance with the applicable regulations governing
liquor licenses and other applicable government regulations.
1A.2 Transfers of Control. On the Restated Closing Date, each of
the Transferors shall execute and deliver such documents as are necessary
to permit Headliners to assume control over the operations of Louisville
and Virginia. The Transferors shall also instruct the local management
of those Projects that they are to report to Headliners exclusively.
Each party agrees that it will cooperate with the others in order to
complete and file the necessary documents such that the transfers of
control will be accomplished in compliance with the applicable
regulations governing liquor licenses and other applicable government
regulations.
1A.3 Transfers of Cash Access. Immediately after execution of
this Agreement, each of the Transferors will cause to be delivered to
Headliners at such place as is designated by Headliners all of the books
and records of the seven (7) Project Owners referred to in Section 1.2
hereof. Included in the transfer will be all records of bank accounts
and other accounts owned or controlled by the Project Owners or for their
benefit. Also included will be all cash and other assets of the Project
Owners that is under the possession or control of the Transferors. The
preceding sentence will not require, however, that cash or assets in the
possession and under the control of the Project Owners be transferred.
In addition, any such cash, assets or books and records that come into
the Transferors' possession in the future will be immediately identified
to Headliners and delivered over to Headliners.
1A.4 Cooperation. The Transferors agree that they will assist
Headliners, when requested, in obtaining effective control over the
operations of the seven (7) Project Owners. The Transferors will
instruct all managerial personnel employed by the Project Owners to
report to such personnel as Headliners directs. The Transferors will
also assist Headliners in obtaining such rights and licenses, including
modifications or assignments of liquor licenses, as are needed in order
for Headliners to own and manage the Project Owners in compliance with
applicable state and local regulations.
1A.5 Personnel. Effective on the Restated Closing Date,
Headliners shall assume the executory contractual obligations of JHF to
Xxxx XxXxx, Xxxx Xxxxxx, Silver Xxxxxx and Xxxx Xxxx (the "Assigned
Personnel"). The Assigned Personnel shall be either employees of or
consultants to Headliners, in accordance with their relationships to JHF
prior to the Restated Closing Date. JHF shall promptly pay to the
Assigned Personnel all amounts due to them for services prior to the
Restated Closing Date. If at any time JHF wishes to obtain the services
of any of the Assigned Personnel, JHF may request that Headliners make
such individual available. If Headliners provides the services of the
Assigned Personnel, JHF will reimburse Headliners weekly for its
expenditures with respect to the individuals provided.
1A.6 Limitations on Project Owner Distributions. Headliners
agrees that none of the Project Owners will make any payment to
Headliners or its affiliates at any time when any of the following are
unpaid: (a) any amount due and payable to the Transferors hereunder, (b)
any amount due and payable to the owner of the premises leased to
Louisville, or (c) any amount due and payable to the owner of the
Premises leased to Virginia. Payments made by a Project Owner in
satisfaction of any of the liabilities identified in the preceding
sentence will not be in breach of this Section 1A.6. To secure
Headliners' obligation under this Section, Louisville will at all times
maintain a cash balance that equals or exceeds one month's rent to the
owner of the premises leased to Louisville.
II VIRGINIA PROJECT
2.1 The Virginia Project. The parties have completed development
of a project in Hampton VA (the "Virginia Project") that was designed and
developed by JHF with the approval of Headliners.
2.2 Virginia Fee. JHF was responsible for supervising the
development and construction of the Virginia Project. The "Fee" charged
by JHF to Headliners for design, development and completion of the
Virginia Project was One Million Four Hundred Thousand Dollars
($1,400,000) plus the value of the seven million common shares issued by
Headliners to JHF in June 2004. The cash Fee was payable at the Initial
Closing, and payment is hereby acknowledged by JHF. The Fee included all
costs and expenses of bringing the Virginia Project to its opening,
including materials, labor, subcontractor invoices, and all compensation
to be paid to JHF for its services and reimbursement of JHF's expenses.
Headliners acknowledges its understanding that the following items in
connection with the initiation of operations of the Virginia Project were
not included in the Fee and must be funded otherwise: inventory,
training wages, utility and other deposits, advertising, initial cash
drawer and similar expenditures.
2.3 Virginia Closing. The "Virginia Closing" will take place at
the offices of Headliners on a date fixed by Headliners in a Virginia
Closing Notice addressed to JHF. The date on which the Virginia Closing
occurs will be the "Virginia Closing Date." The "Virginia Closing
Notice" may be given at any time after the net proceeds realized by the
Resellers from sale of Resale Shares equal or exceed Six Hundred Seventy-
Five Thousand Dollars ($675,000). On the Virginia Closing Date, the
Transferors shall transfer to Headliners all of their record and equity
interest in Virginia. The Transferors shall execute and deliver such
documents as are necessary to permit Headliners to assume control of
Virginia and to own and operate the business carried on by Virginia,
including, as needed, assignments of leaseholds, liquor licenses,
permits, and any other rights, interests and privileges which may be
impaired by the assignment of ownership of Virginia.
III. CONSULTING SERVICES.
3.1 Services. During the period commencing on June 1, 2005 and
continuing for 175 weeks after June 1, 2005, JHF will provide consulting
services to Headliners in connection with its operation of the Projects
and any other similar ventures jointly developed by Headliners and JHF.
JHF shall provide such services at times and in locations mutually
acceptable to Headliners and JHF and reasonable under the circumstances.
JHF's consulting services will include advice regarding marketing of the
Projects, regarding financial management of the Projects, regarding
personnel recruitment and practices, and regarding such other matters of
expertise with respect to the operation of the Projects and the Project
Owners as JHF has accumulated.
3.2 Assignment of Obligations. At any time during the term of
this Article III, the principals of JHF may organize a separate entity or
entities, independent of JHF, for the purpose of assuming JHF's
responsibilities under this Section III and receiving the related
compensation. Throughout this Section III, any reference to JHF will
include any assignee of JHF permitted under this Section 3.2.
3.3 Compensation. The following payments and deliveries shall be
made to Xxxxxx, Field and JHF in compensation for the consulting services
to be rendered pursuant to this Article III.
3.3.1 Stock. On the Initial Closing Date Headliners issued to
Xxxxxx, on behalf of JHF, 770,000 shares of Headliners common stock that
had a Market Value of Two Million Three Hundred Thousand Dollars
($2,300,000), receipt of which is hereby acknowledged. Xxxxxx agrees
that he will sell the shares in accordance with the schedule set forth in
Section 1.7 hereof, and shall deliver to Headliners copies of the
confirmations of each sale. Three days after Xxxxxx notifies Headliners
that he has sold all of the shares issued pursuant to this Section 3.3.1,
Headliners shall issue to Field additional shares of Headliners common
stock whose Market Value equals the remainder of (i) $2,300,000 less (ii)
the net proceeds of sales by JHF of shares previously issued pursuant to
this Section 3.3.1 plus any payments by Headliners pursuant to Section
1.7.3 or Section 3.3.1.1 or Section 3.3.1.2. Headliners shall continue
to issue shares to Field in this manner until the earlier of (x) the date
on which the net proceeds of sales by Xxxxxx and Field plus payments
pursuant to Section 1.7.3 and Section 3.3.1.1 equal $2,300,000 or (y) the
date on which, pursuant to Section 3.3.1.2 hereof, JHF terminates
Headliners' right to give notice of the Second Closing Date. The
issuance of shares pursuant to this Section 3.3.1 shall be made pursuant
to the terms of an equity incentive plan that Headliners shall register
with the SEC on Form S-8 and no additional registration statement will be
necessary to permit Xxxxxx and Field to resell the shares to the public.
Headliners acknowledges that the shares being issued pursuant to this
Section 3.3.1 compensate JHF primarily for services that will be rendered
promptly after the Initial Closing Date, involving assistance in
implementing systems and personnel necessary in order for the Project
Owners to function as subsidiaries of a public company. For that reason,
Headliners agrees that its obligation under this Section 3.3.1 is
absolute and the shares to be issued hereunder are non-refundable,
notwithstanding non-performance, underperformance or other breach by JHF,
Xxxxxx or Field. Headliners' obligation under this Section 3.3.1 shall
not be subject to any right of offset. In the event that Xxxxxx or Field
hold shares acquired pursuant to this Section 3.3.1 at a time when the
net proceeds of sales by Xxxxxx and Field of shares issued pursuant to
this Section 3.3.1 plus any payments by Headliners pursuant to Section
1.7.3, Section 3.3.1.1 or Section 3.3.1.2 equals $2,300,000, then Xxxxxx
or Field, as the case may be, will promptly surrender those shares to
Headliners.
3.3.1.1 Liquidation Shortfall - Virginia. For purposes hereof,
the "Virginia Testing Dates" and related "Thresholds" shall be June 21,
2005 - $410,000, July 21, 2005 - $542,000 and August 22, 2005 - $675,000.
If on a Virginia Testing Date, despite best efforts by the Resellers, the
net proceeds of sales by the Resellers of Headliners shares (including
$180,000 in net proceeds realized prior to the date of this Amended
Agreement) is less than the related Threshold, then Headliners will have
thirty (30) days after the Virginia Testing Date to effect a cure. The
shortfall will be deemed to have been cured if on or before that
thirtieth day the aggregate of (a) the net proceeds as of the Virginia
Testing Date plus (b) net proceeds realized by the Resellers after the
Virginia Testing Date in excess of Thirty Thousand Dollars ($30,000) per
week plus (c) cash paid by Headliners to JHF pursuant to Section 1.7.3 or
for this purpose equals or exceeds the Threshold. In the event that
Headliners fails to effect a cure for the shortfall within the terms of
this Section 3.3.1.1, JHF may by written notice to Headliners terminate
Headliners' right hereunder to give notice of a Virginia Closing Date and
terminate the assignment of Net Cash Flow of Virginia described in
Section 1.2 hereof and the assignment of control over the operations of
Virginia described in Article IA hereof. JHF's right to terminate
Headliners' rights with respect to Virginia will be the Resellers'
exclusive remedy for Headliners' failure to cure a shortfall within the
terms of this Section 3.3.1.1
3.3.1.2 Liquidation Shortfall - Louisville. In the event that on
the date which is fifty-eight (58) weeks after the Restated Closing Date
(the "Louisville Testing Date"), despite best efforts by the Resellers,
the net proceeds of sales by the Resellers of Headliners shares is less
than Two Million Three Hundred Thousand Dollars ($2,300,000), then
Headliners will have sixty (60) days after the Louisville Testing Date to
effect a cure. The shortfall will be deemed to have been cured if on or
before that sixtieth day the aggregate of (a) the net proceeds realized
by the Resellers from sale of Headliners shares plus (b) cash paid by
Headliners to JHF pursuant to Section 1.7.3 or for this purpose equals or
exceeds $2,300,000. In the event that Headliners fails to effect a cure
for the shortfall within the terms of this Section 3.3.1.2, JHF may by
written notice to Headliners terminate Headliners' right hereunder to
give notice of a Second Closing Date and terminate the assignment of Net
Cash Flow of Louisville described in Section 1.2 hereof and the
assignment of control over the operations of Louisville described in
Article IA hereof. JHF's right to terminate Headliners' rights with
respect to Louisville will be the Resellers' exclusive remedy for
Headliners' failure to cure a shortfall within the terms of this Section
3.3.1.2
3.3.2 Cash. Headliners will pay to JHF a cash fee for the
consulting services provided pursuant to this Article III. The fee shall
consist of One Hundred Seventy-Five (175) consecutive weekly payments of
Six Thousand Dollars ($6,000), commencing on June 1, 2005 - i.e. a total
fee of One Million Fifty Thousand Dollars ($1,050,000). Each weekly
payment will be made on Tuesday by ACH automatic transfer.
IV WARRANTIES AND REPRESENTATIONS
4.1 Transferors Warranties. The Transferors, jointly and
severally, warrant and represent to Headliners that:
4.1.1 Governmental Matters. JHF has each permit, license, waiver,
approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
U.S., state, county, local or foreign governmental authority,
instrumentality, agency or commission that is required by or with respect
to the Project Owners, the Projects and their business ("Government
Privileges"). On the Initial Closing Date, the Project Owners will have
all such Government Privileges in full force and effect. JHF has not
received notice that any governmental agency or authority is actively
contemplating withdrawing or terminating any of the Governmental
Privileges.
4.1.2 Taxes. Each of the Project Owners has filed all tax returns
that it is required to file with all governmental agencies, wherever
situate, and has paid or accrued for payment all taxes as shown on such
returns except for taxes being contested in good faith. There is no
material claim for taxes that is a lien against the property of any
Project Owner other than liens for taxes not yet due and payable.
4.1.3 Pending Actions. There are no material legal actions,
lawsuits, proceedings or investigations, either administrative or judicial,
pending or threatened, against or affecting any of the Project Owners. None
of the Project Owners is subject to any order, writ, judgment, injunction,
decree, determination or award of any court, arbitrator or administrative,
governmental or regulatory authority or body which would be likely to have
a material adverse effect on the business of the Project Owner.
4.1.4 Financial Statements. JHF has delivered to Headliners the
audited financial statements of the Project Owners as of December 31, 2004
("Project Financial Statements"). The Project Financial Statements fairly
present the financial condition of the Project Owners as of the date shown
on the Project Financial Statements and the results of operations of the
Project Owners for the period covered in the Project Financial Statements.
4.1.5. Absence Of Certain Changes Or Events. To the knowledge of
JHF, since December 31, 2004:
(A) there has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of the Projects or
(ii) any damage, destruction, or loss to any of the Projects (whether or
not covered by insurance) materially and adversely affecting the
business, operations, properties, assets, or condition of that Project,
except such events as have been brought to the knowledge of Headliners by
direct correspondence or other media;
(B) None of the Project Owners has (i) made any material change
in its method of management, operation, or accounting; (ii) other than in
the ordinary course of business, entered into any other material
transaction; (iii) other than pursuant to any existing employment
agreement, made any accrual or arrangement for payment of bonuses or
special compensation of any kind or any severance or termination pay to
any present or former officer or employee; (iv) other than pursuant to
any existing employment agreement, increased the rate of compensation
payable or to become payable by it to any of its officers or any of its
employees whose monthly compensation exceeds $5,000; or (v) other than
pursuant to any existing employment agreement, made any increase in any
profit sharing, bonus, deferred compensation, insurance, pension,
retirement, or other employee benefit plan, payment, or arrangement made
to, for, or with its officers, directors, or employees;
(C) None of the Project Owners has (i) materially borrowed or
agreed to borrow any funds, or incurred, or become subject to, any
material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (ii) paid any
material obligation or liability (absolute or contingent) other than
current liabilities reflected in or shown on the Project Financial
Statements and current liabilities incurred since that date in the
ordinary course of business; (iii) sold or transferred, or agreed to sell
or transfer, any of its assets, properties, or rights (except non-
material assets, properties, or rights not used or useful in its business
which, in the aggregate have a value of less than $50,000), or canceled,
or agreed to cancel, any debts or claims (except non-material debts or
claims which in the aggregate are of a value of less than $50,000); or
(iv) made or permitted any amendment or termination of any contract,
agreement, or license to which it is a party if such amendment or
termination is material, considering the business of the Project); and
(D) to the knowledge of the Transferors, none of the Projects has
become subject to any law or regulation which materially and adversely
affects, or in the future is substantially likely to have a material
adverse effect on the Project.
4.1.6 Ownership of Assets. Except as specifically identified in the
Project Financial Statements, each of the Project Owners has good,
marketable title, without any liens or encumbrances of any nature whatever,
to all of its assets.
4.1.7 No Interest in Suppliers, Customers, Creditors or Competitors.
Neither JHF nor any principal or executive of JHF nor any member of their
respective families has any interest of any nature whatever in any
supplier, creditor or competitor of any of the Projects.
4.1.8. No Debt Owed to JHF. None of the Project Owners owes any money
or property to JHF or to a principal or executive of JHF or any member of
their families or to any company controlled by or under common control with
such a person, directly or indirectly, except for balances stemming out of
the recording of opening balances on March 31, 2005 for the transfer of
cash balances, recorded inventory, or prepaid expenses less liabilities
assumed.
4.1.9. Compliance with Laws. The operations of the Projects have been
conducted in all material respects in accordance with all applicable
statutes, laws, rules and regulations.
4.1.10 Liabilities. As of the Restated Closing Date, each of the
Project Owners owns its Project free of liens, claims or encumbrances, none
of the Project Owners is liable for any debt, and none of the Project
Owners is liable for accounts payable in excess of Five Thousand Dollars
($5,000), except for balances stemming out of the recording of opening
balances on March 31, 2005 for the transfer of cash balances, recorded
inventory, or prepaid expenses less liabilities assumed.
4.2 Headliners Warranties. Headliners warrants and represents to
the Transferors that:
4.2.1 Due Authority. The execution, delivery, and performance of
this Agreement by the executive officers of Headliners has been duly
authorized by all necessary corporate and shareholder action, and this
Agreement, upon its execution by the parties, will constitute the valid
and binding obligation of Headliners enforceable against it in accordance
with and subject to its terms, except as enforceability may be affected
by bankruptcy, insolvency or other laws of general application affecting
the enforcement of creditors' rights
4.2.2 SEC Filings. The reports filed by Headliners with the SEC
since January 1, 2004 are complete and accurate in all material respects,
and comply with the filing requirements of the Rules of the SEC.
4.2.3 Absence Of Certain Changes Or Events. Except as set forth in
filings made by Headliners with the SEC, to the knowledge of Headliners,
since September 30, 2004:
(A) there has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of Headliners or
(ii) any damage, destruction, or loss to any of its properties (whether
or not covered by insurance) materially and adversely affecting the
business, operations, properties, assets, or condition of Headliners;
(B) Headliners has not (i) made any material change in its method
of management, operation, or accounting; or (ii) other than in the
ordinary course of business, entered into any other material transaction;
(C) Headliners has not (i) materially borrowed or agreed to
borrow any funds, or incurred, or become subject to, any material
obligation or liability (absolute or contingent) except liabilities
incurred in the ordinary course of business; (ii) paid any material
obligation or liability (absolute or contingent) other than current
liabilities; (iii) sold or transferred, or agreed to sell or transfer,
any of its assets, properties, or rights (except non-material assets,
properties, or rights not used or useful in its business which, in the
aggregate have a value of less than $50,000), or canceled, or agreed to
cancel, any debts or claims (except non-material debts or claims which in
the aggregate are of a value of less than $50,000); or (iv) made or
permitted any amendment or termination of any contract, agreement, or
license to which it is a party if such amendment or termination is
material, considering the business of Headliners); and
(D) to the knowledge of Headliners, none of its properties has
become subject to any law or regulation which materially and adversely
affects, or in the future is substantially likely to have a material
adverse effect on Headliners.
V. JHF MARKS
JHF specifically retains the right to use the JHF Marks in
developing projects and properties, provided that such projects and
properties do not compete directly with any of the Projects. Two
properties will be deemed to be in competition with each other if they
are located within fifty (50) miles of each other.
VI PLEDGE OF SECURITIES
On the Restated Closing Date, Headliners will execute and tender to
JHF the Securities Pledge Agreement in the form annexed hereto as
Appendix B, in which Headliners will pledge 66?% of its interest in the
Project Owners identified as Cincinnati, Kansas City and Tucson to secure
the obligations set forth in this Agreement.
VII MISCELLANEOUS
7.1 Notice. All notices given in writing shall be effective when
either served by personal delivery or by an overnight courier with a
national reputation, if the signature of the intended recipient is
obtained. In order to be effective, all notices shall addressed to the
President of the party at the address set forth on the first page of this
Agreement, or to such other address as either party may later specify by
written notice.
7.2 Governing Law. This agreement shall be governed by the laws
of the State of New Jersey applicable to contracts made and to be carried
out therein.
7.3 Arbitration. All disputes, controversies, or claims arising
out of or relating to this Agreement or a breach thereof shall be
submitted to and finally resolved by arbitration under the rules of the
American Arbitration Association ("AAA") then in effect. There shall be
one arbitrator, and such arbitrator shall be chosen by mutual agreement
of the parties in accordance with AAA rules. The arbitration shall take
place in Newark, New Jersey. The findings of the arbitrator shall be
final and binding on the parties, and may be entered in any court of
competent jurisdiction for enforcement.
IN WITNESS WHEREOF, the parties have executed this agreement as of
the date written on its first line.
HEADLINERS ENTERTAINMENT JHF PROPERTY HOLDINGS, LLC
GROUP, INC.
By: /s/ Xxxxxxx Xxxxxxxxx By: /s/ Xxx X. Field
----------------------------- ------------------------
Xxxxxxx Xxxxxxxxx, C.E.O. Xxx X. Field, C.E.O.
/s/ Xxx X. Field /s/ Xxxx Xxxxxx
------------------------------ ------------------------
XXX X. FIELD XXXX XXXXXX
APPENDIX A
THIS DEBENTURE, AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE (COLLECTIVELY,
THE "SECURITIES"), HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE
SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER
REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD UNLESS
THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO REGULATION D OR
PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT
AND THE COMPANY WILL BE PROVIDED WITH OPINION OF COUNSEL OR OTHER SUCH
INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH EXEMPTIONS ARE
AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE
MADE EXCEPT IN COMPLIANCE WITH THE ACT.
HEADLINERS ENTERTAINMENT GROUP, INC.
0% Convertible Debenture
June 7, 2005
No. 1 US $5,000,000
This Debenture (the "Debenture") is issued on June 7, 2005
(the "Closing Date") by Headliners Entertainment Group, Inc., a Delaware
corporation (the "Company"), to JHF Property Holding, LLC (together with
its permitted successors and assigns, the "Holder") pursuant to
exemptions from registration under the Securities Act of 1933, as
amended.
1.01 Principal and Interest. For value received, the Company
hereby promises to pay to the order of the Holder on March 31, 2008 (the
"Payment Date") in lawful money of the United States of America and in
immediately available funds the principal sum of Five Million U.S.
Dollars ($5,000,000). This obligation shall not bear interest. At the
Company's option, the entire principal amount that remains outstanding on
the Payment Date may be converted in accordance with Section 1.02 herein.
In no event shall the Holder be entitled to convert this Debenture for a
number of shares of Common Stock in excess of that number of shares of
Common Stock which, upon giving effect to such conversion, would cause
the aggregate number of shares of Common Stock beneficially owned by the
Holder and its affiliates to exceed 9.99% of the outstanding shares of
the Common Stock following such conversion.
1.02 Optional Conversion. The Holder is entitled, at its option,
to convert, and sell on the same day, at any time and from time to time,
until payment in full of this Debenture, all or any part of the principal
amount of the Debenture into shares (the "Conversion Shares") of the
Company's common stock, $.001 par value ("Common Stock"), at the price
per share (the "Conversion Price") equal to the average of the closing
bid prices of the Company's Common Stock, as quoted by Bloomberg, LP, for
the five (5) trading days immediately preceding the Conversion Date (as
defined herein). No fraction of shares or scrip representing fractions
of shares will be issued on conversion, but the number of shares issuable
shall be rounded to the nearest whole share. To convert this Debenture,
the Holder hereof shall deliver written notice thereof, substantially in
the form of Exhibit "A" to this Debenture, with appropriate insertions
(the "Conversion Notice"), to the Company at its address as set forth
herein. The date upon which the conversion shall be effective (the
"Conversion Date") shall be deemed to be the date set forth in the
Conversion Notice.
1.03 Right of Redemption. The Company, at its option, shall have
the right to redeem, with five (5) business days advance written notice
(the "Redemption Notice"), a portion or all of the outstanding principal
amount of this Debenture. The redemption price shall be par.
1.04 Events of Default. An "Event of Default" is defined as
follows: (a) failure by the Company to pay amounts due hereunder within
fifteen (15) days of the date of maturity of this Debenture; (b) failure
by the Company for ten (10) days after notice to it to comply with any of
its other agreements in the Debenture; or (c) events of bankruptcy or
insolvency. Upon the occurrence of an Event of Default, the Holder may,
in its sole discretion, accelerate full repayment of the Debentures or
may, notwithstanding any limitations contained in this Debenture, convert
the entire principal amount of this Debentures outstanding into shares of
Common Stock pursuant to Section 1.02 herein.
2.01 Notice. Notices regarding this Debenture shall be sent to
the parties at the following addresses, unless a party notifies the other
parties, in writing, of a change of address:
If to the Company, to:
Headliners Entertainment Group, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxx, Esq.
000 0xx Xxxxxx
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Holder:
JHF Property Holding, LLC
0000 Xxxxxx Xxxx
Xxxxxx, XX 00000
Telephone:
Facsimile:
2.02 Governing Law. This Debenture shall be deemed to be made
under and shall be construed in accordance with the laws of the State of
New Jersey without giving effect to the principals of conflict of laws
thereof.
2.03 Arbitration. All disputes, controversies, or claims arising
out of or relating to this Debenture shall be submitted to and finally
resolved by arbitration under the rules of the American Arbitration
Association ("AAA") then in effect. There shall be one arbitrator, and
such arbitrator shall be chosen by mutual agreement of the parties in
accordance with AAA rules. The arbitration shall take place in Newark,
New Jersey. The findings of the arbitrator shall be final and binding on
the parties, and may be entered in any court of competent jurisdiction
for enforcement.
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
Company as executed this Debenture as of the date first written above.
HEADLINERS ENTERTAINMENT GROUP, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
-----------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: President
EXHIBIT "A"
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert the Debenture)
TO:
The undersigned hereby irrevocably elects to convert US$
of the principal amount of the above Debenture into
Shares of Common Stock of Headliners Entertainment Group, Inc., according
to the conditions stated therein, as of the Conversion Date written
below.
Conversion Date:
------------------------------------
Applicable Conversion Price:
------------------------------------
Signature:
------------------------------------
Name:
------------------------------------
Address:
------------------------------------
Amount to be converted: US$
------------------------------------
Amount of Debenture
unconverted: US$
------------------------------------
Conversion Price per share: US$
------------------------------------
Number of shares of Common
Stock to be issued:
------------------------------------
Please issue the shares of
Common Stock in the following
name and to the following
address:
------------------------------------
Issue to:
------------------------------------
Authorized Signature:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
Phone Number:
------------------------------------
Broker DTC Participant Code:
------------------------------------
Account Number:
------------------------------------
APPENDIX B
SECURITIES PLEDGE AGREEMENT
This SECURITIES PLEDGE AGREEMENT (the "Agreement") is made and
entered into as of June 7, 2005 by and among HEADLINERS ENTERTAINMENT
GROUP, INC., a Delaware corporation with offices at 000 Xxxxxxxxxx
Xxxxxx, Xxxxxxxxx, XX 00000 ("Debtor") and JHF PROPERTY HOLDING, LLC, an
Ohio limited liability company with offices at 0000 Xxxxxx Xxxx, Xxxxxx,
XX 00000 (the "Secured Party").
RECITALS
Pursuant to the terms of a Consolidated Acquisition Agreement dated
March 29, 2005, as amended by the Amended and Restated Consolidated
Acquisition Agreement dated June 6, 2005 (collectively, the "Secured
Agreement"), the Debtor agreed to make certain payments and deliveries to
the Secured Party in exchange for the equity in certain entities now
owned by the Secured Party. Pursuant to the provisions of the Secured
Agreement, the Debtor has agreed to provide certain collateral to secure
the Debtor's obligations to the Secured Party under the Secured
Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the
covenants set forth herein, the Secured Party and the Debtor hereby agree
as follows:
ARTICLE I
COLLATERAL
As security for the Debtor's obligations under the Secured
Agreement, the Debtor hereby grants to the Secured Party a continuing
security interest in a divided two-third's share of Debtor's right, title
and interest in each of the following entities (the "Collateral"):
a. 0000 Xxxxxxxx Xx. LLC (Cincinnati)
b. 0000 Xxxx Xxxxxx LLC (Kansas City)
c. 296 X. Xxxxx LLC (Tucson)
The Collateral shall be reduced as the Debtor's obligation to the Secured
Party under the 0% Convertible Debenture dated the same date as this
agreement (the "Debenture") is satisfied. When the Debtor's obligation
under the Debenture has been reduced by One Million Dollars ($1,000,000),
the pledge of the Debtor's interest in the entity identified as
"Cincinnati" will terminate. When the Debtor's obligation under the
Debenture has been reduced by Two Million Dollars ($2,000,000), the
pledge of the Debtor's interest in the entity identified as "Kansas City"
will terminate. When the Debtor's obligation under the Debenture has
been reduced by Three Million Dollars ($3,000,000), this agreement and
the pledge of Debtor's interest in the entity identified as Tucson will
terminate.
ARTICLE II
OBLIGATIONS SECURED
The Collateral and the power of collection pertaining thereto shall
secure the prompt and complete performance and payment of any and all
obligations of the Debtor to the Secured Party pursuant to the Secured
Agreement, except such obligations as to which the Secured Agreement
recites an exclusive remedy, together with all fees, expenses,
commissions, charges, penalties, and other amounts owing by or chargeable
to the Debtor under this Agreement (collectively, the "Obligations").
ARTICLE III
DUTIES OF THE DEBTOR REGARDING COLLATERAL
At all times hereafter, the Debtor shall:
(a) maintain good and complete title to the Collateral;
(b) keep the Collateral free and clear at all times of all
other security interests, liens, or encumbrances of any kind, including,
without limitation, any lien arising as a result of the Debtor's failure
to pay any and all taxes or governmental assessments or charges of any
kind whatsoever;
(c) refrain from selling, assigning or otherwise disposing
of any of the Collateral without the prior written consent of the Secured
Party, or until all of the Debtor's obligations have been paid in full;
and
