LOAN AND SECURITY AGREEMENT
Dated as of February 12, 1997
between
COUNTRY STAR RESTAURANTS, INC.,
CAMERON CAPITAL LTD.,
as Agent for Lenders,
and
Lenders from time to time party hereto.
TABLE OF CONTENTS
ARTICLE 1 - INTERPRETATION OF THIS AGREEMENT.................................1
1.1 Definitions......................................................1
1.2 Accounting Terms.................................................9
1.3 Other Terms......................................................9
1.4 Computation of Time Periods.....................................10
ARTICLE 2 - LOANS...........................................................10
2.1 Total Facility..................................................10
2.2 Line of Credit Loans............................................10
2.3 Exchange; Convertible Term Loan.................................10
2.4 Warrants........................................................11
ARTICLE 3 - INTEREST AND FEES...............................................11
3.1 Interest........................................................11
3.2 Maximum Interest Rate...........................................12
ARTICLE 4 - PAYMENTS AND PREPAYMENTS........................................12
4.1 Line of Credit Loans............................................12
4.2 Convertible Term Loan...........................................12
4.4 Mandatory Prepayments of the Loans..............................13
4.5 Place and Form of Payments; Extension of Time...................13
4.6 Apportionment, Application and Reversal of Payments.............13
4.7 Agent and Lenders' Books and Records; Monthly Statements........14
ARTICLE 5 - COLLATERAL......................................................14
5.1 Grant of Security Interest......................................14
5.2 Perfection and Protection of Security Interest..................15
5.3 Location of Collateral..........................................16
5.4 Title to, Liens on, and Sale and Use of Collateral..............16
5.5 Access and Examination..........................................17
5.6 Collateral Reporting............................................17
5.7 Inventory.......................................................17
5.8 Equipment.......................................................17
5.9 Documents, Instruments, and Chattel Paper.......................18
5.10 Right to Cure...................................................18
5.11 Power of Attorney...............................................18
5.12 Agent's and Lenders' Rights, Duties and Liabilities.............19
ARTICLE 6 - BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES...............19
6.1 Books and Records...............................................19
6.2 Financial Information...........................................19
6.3 Notices to Agent................................................21
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ARTICLE 7 - GENERAL WARRANTIES AND REPRESENTATIONS..........................22
7.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents................................22
7.2 Validity and Priority of Security Interest......................23
7.3 Organization and Qualification..................................23
7.4 Corporate Name; Prior Transactions..............................23
7.5 Subsidiaries and Affiliates.....................................23
7.6 Financial Statements............................................23
7.7 Capitalization..................................................24
7.8 Debt............................................................24
7.9 Distributions...................................................24
7.10 Title to Property...............................................24
7.11 Real Estate; Leases.............................................24
7.12 Proprietary Rights..............................................25
7.13 Trade Names.....................................................25
7.14 Litigation......................................................25
7.15 Restrictive Agreements..........................................25
7.16 Labor Disputes..................................................25
7.17 Environmental Matters...........................................25
7.18 No Violation of Law.............................................27
7.19 No Default......................................................27
7.20 ERISA...........................................................27
7.21 Taxes...........................................................28
7.22 Investment Act..................................................29
7.23 Margin Securities...............................................29
7.24 Disclosure......................................................29
7.25 Bank Accounts...................................................29
7.26 Public Utility Holding Company..................................29
7.27 Broker's Fees...................................................30
7.28 Transactions with Affiliates....................................30
ARTICLE 8 - AFFIRMATIVE AND NEGATIVE COVENANTS..............................30
8.1 Taxes and Other Obligations.....................................30
8.2 Corporate Existence and Good Standing...........................30
8.3 Compliance with Law and Agreements..............................30
8.4 Maintenance of Property.........................................31
8.5 Insurance.......................................................31
8.6 Condemnation....................................................32
8.7 Environmental Laws..............................................32
8.8 ERISA...........................................................32
8.9 Mergers, Consolidations, Acquisitions, or Sales.................33
8.10 Distributions; Capital Change...................................33
8.11 Transactions Affecting Collateral or Obligations................33
8.12 Guaranties......................................................33
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8.13 Debt............................................................33
8.14 Prepayment......................................................34
8.15 Transactions with Affiliates....................................34
8.16 Investment Banking and Finder's Fees............................34
8.17 Business Conducted..............................................34
8.18 Liens...........................................................34
8.19 Sale and Leaseback Transactions.................................34
8.20 New Subsidiaries................................................34
8.21 Restricted Investments..........................................35
8.22 Capital Expenditures............................................35
8.23 Operating Lease Obligations.....................................35
8.24 [Reserved]......................................................35
8.25 General and Administration Expense..............................35
8.26 Use of Proceeds.................................................35
8.27 Termination of Employee Accounts;
Reimbursement of Employee Expenses..............................35
8.28 [Reserved]......................................................35
8.29 [Reserved]......................................................35
8.30 Election of Board Members; Attendance at Board Meetings.........36
8.31 Registration Rights.............................................36
8.32 Fiscal Year.....................................................36
8.33 Further Assurances..............................................36
ARTICLE 9 - CONDITIONS OF LENDING...........................................36
9.1 Conditions Precedent to Making of Loans on the Closing Date.....36
9.2 Conditions Precedent to Each Loan...............................38
ARTICLE 10 - DEFAULT; REMEDIES..............................................38
10.1 Events of Default...............................................38
10.2 Remedies........................................................41
ARTICLE 11 - TERM AND TERMINATION...........................................42
11.1 Term and Termination............................................42
ARTICLE 12 - MISCELLANEOUS..................................................42
12.1 Cumulative Remedies; No Prior Recourse to Collateral............42
12.2 No Implied Waivers..............................................43
12.3 Severability....................................................43
12.4 Governing Law; Choice of Forum; Service of Process; Jury
Trial Waiver....................................................43
12.5 Survival of Representations and Warranties......................44
12.6 Other Security and Guaranties...................................44
12.7 Fees and Expenses...............................................45
12.8 Notices.........................................................45
12.9 Indemnity.......................................................46
12.10 Waiver of Notices...............................................47
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12.11 Binding Effect; Assignment; Disclosure..........................47
12.12 Modification....................................................47
12.13 Counterparts....................................................47
12.14 Captions........................................................47
12.15 Right of Set Off................................................47
12.16 Assignment of a Lender's Interest; Participating Lender's
Security Interests..............................................47
12.17 Appointment of Agent............................................48
12.18 Investment Representations of each Lender.......................48
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This LOAN AND SECURITY AGREEMENT (this "Agreement") is dated as of
February 12, 1997 among CAMERON CAPITAL LTD., a Bermuda corporation, with an
office at 00 Xxxxxxxxx Xxxx, Xxxxxxxx, XX 19, Bermuda ("Cameron"), in its
capacity as a lender hereunder and the other lenders from time to time party
hereto (such lenders and their respective successors and assigns being sometimes
hereinafter referred to collectively as "Lenders" and each of such financial
institutions and its successors and assigns being sometimes hereinafter referred
to individually as a "Lender"), Cameron as agent for Lenders (Cameron in such
capacity or its successor and assigns in such capacity, being "Agent"), and
COUNTRY STAR RESTAURANTS, INC., a Delaware corporation, with an office at 00000
Xxxxx Xxxxxx Xxxx., Xxx Xxxxxxx, Xxxxxxxxxx 00000 ("Borrower"). In consideration
of the mutual conditions and agreements set forth in this Agreement, and for
good and valuable consideration, the receipt of which is hereby acknowledged,
Borrower, Agent, and Lenders hereby agree as follows:
ARTICLE 1 - INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. As used herein:
"Accounts" means all of Borrower's now owned or hereafter acquired
or arising accounts, contract rights, and any other rights to payment for the
sale or lease of goods or rendition of services, whether or not they have been
earned by performance.
"Account Debtor" means each Person obligated in any way on or in
connection with an Account.
"Affiliate" means: (a) any Person which, directly or indirectly,
controls, is controlled by or is under common control with, Borrower; (b) any
Person which beneficially owns or holds, directly or indirectly, five percent
(5.0%) or more of any class of Voting Stock of Borrower; or (c) any Person, five
percent (5.0%) or more of any class of the Voting Stock (or if such Person is
not a corporation, five percent (5.0%) or more of the equity interest) of which
is beneficially owned or held, directly or indirectly, by Borrower. Control
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used herein, means the possession, directly or
indirectly, of the power in any form to direct or cause the direction of the
management and policies of the Person in question.
"Anniversary Date" means each anniversary of the Closing Date.
"Bankruptcy Code" means Title 11 of the United States Code (11
X.X.X.xx. 101 et seq.).
"Benefit Plan" means a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which Borrower or
an ERISA Affiliate is, or within the immediately preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.
"Business Day" means any day that is not a Saturday, Sunday, or day
on which banks in the State of Illinois are required or permitted to close.
"Capital Expenditures" means, for any fiscal period, the cost of any
fixed asset or improvement, or replacement, substitution, or addition thereto,
acquired during such period and having a useful life of more than one year,
including, without limitation, those costs arising in connection with the direct
or indirect acquisition of such assets by way of increased product or service
charges or offset items or in connection with a Capital Lease.
"Capital Lease" means any lease of property by Borrower or any of
its Subsidiaries on a consolidated basis which, in accordance with GAAP, is or
should be reflected as a liability on the consolidated balance sheet of Borrower
and its Subsidiaries.
"Closing Date" means the date on which the initial Line of Credit
Loans and the Convertible Term Loan are made hereunder.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, any successor statute, and the rules and regulations promulgated
thereunder.
"Collateral" has the meaning specified in Section 5.1.
"Contaminant" means any pollutant, hazardous substance, toxic
substance, hazardous waste, petroleum or petroleum-derived waste, asbestos,
polychlorinated biphenyls ("PCBs"), or any hazardous or toxic constituent of any
such substance or waste.
"Convertible Term Loan" has the meaning specified in Section 2.3.
"Convertible Note" has the meaning specified in Section 2.3.
"Debt" means all liabilities, obligations and indebtedness of
Borrower and its Subsidiaries on a consolidated basis to any Person, of any kind
or nature, now or hereafter owing, arising, due or payable, howsoever evidenced,
created, incurred, acquired or owing, whether primary, secondary, direct,
contingent, fixed or otherwise, and including, without in any way limiting the
generality of the foregoing: (i) Borrower's or any Subsidiary's liabilities and
obligations to trade creditors; (ii) all of the Obligations; (iii) all of
Borrower's obligations for borrowed money; (iv) all obligations and liabilities
of any Person secured by any Lien on Borrower's or any Subsidiary's property,
even though Borrower or such Subsidiary shall not have assumed or become liable
for the payment thereof; provided, however, that all such obligations and
liabilities which are limited in recourse to such property shall be included in
Debt only to the extent of the value of such property as shown on a consolidated
balance sheet of Borrower and its Subsidiaries prepared in accordance with GAAP;
(v) all obligations or liabilities created or arising under any Capital Lease or
conditional sale or other title retention agreement other than a true lease,
with respect to property used or acquired by Borrower or any Subsidiary, even if
the rights and remedies of the lessor, seller or lender thereunder are limited
to repossession of such property; provided, however, that all such obligations
and liabilities which are limited in recourse to such property shall be included
in Debt only to the extent of the value of such property as shown on a
consolidated balance sheet of Borrower and its Subsidiaries prepared in
accordance with GAAP; (vi) all accrued pension fund and other employee
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benefit plan obligations and liabilities; (vii) all obligations and liabilities
under Guaranties; and (viii) deferred taxes.
"Default" means any event or condition which, with notice, the
passage of time, the happening of any other condition or event, or any
combination thereof, would constitute an Event of Default.
"Default Rate" means a fluctuating per annum interest rate at all
times equal to the sum of (a) the otherwise applicable Interest Rate plus (b)
ten percent 10.00%. Each Default Rate shall be adjusted simultaneously with any
change in the applicable Interest Rate.
"Distribution" means, in respect of any corporation: (a) the payment
or making of any dividend or other distribution of property in respect of
capital stock (or any options or warrants for such stock) of such corporation,
other than distributions in capital stock (or any options or warrants for such
stock) of the same class; or (b) the redemption or other acquisition of any
capital stock (or any options or warrants for such stock) of such corporation.
"DOL" means the United States Department of Labor or any successor
department or agency.
"Environmental Laws" means all federal, state and local laws, rules,
regulations, ordinances, permits, guidance, orders and consent decrees of any
Public Authority relating to health, safety, hazardous substances, and
environmental matters. Such laws and regulations include, without limitation,
the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss. 9601 et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.,
the Clean Water Act, 42 U.S.C. ss. 466 et seq., the Clean Air Act, 46 U.S.C. ss.
7401 et seq., state and federal lien and environmental cleanup programs; the
Occupational Safety and Health Act, 29 U.S.C. xx.xx. 651 et seq.; and U.S.
Department of Transportation regulations.
"Environmental Lien" means a Lien in favor of any Public Authority
for (1) any liability under any Environmental Laws, or (2) damages arising from,
or costs incurred by such Public Authority in response to, a Release or
threatened Release of a Contaminant into the environ ment.
"Environmental Property Transfer Act" means any applicable
requirement of law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the closure of any property or the
transfer, sale or lease of any property or deed or title for any property for
environmental reasons, including, but not limited to, any so-called
"Environmental Cleanup Responsibility Acts" or "Responsible Property Transfer
Acts."
"Equipment" means all of Borrower's now owned and hereafter acquired
machinery, equipment, furniture, furnishings, fixtures, and other tangible
personal property (except Inventory), including, without limitation, motor
vehicles, aircraft, dies, tools, jigs, and office equipment, as well as all of
such types of property leased by Borrower and all of Borrower's rights and
interests with
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respect thereto under such leases (including, without limitation, options to
purchase); together with all present and future additions and accessions
thereto, replacements therefor, component and auxiliary parts and supplies used
or to be used in connection therewith, and all substitutes for any of the
foregoing, and all manuals, drawings, instructions, warranties and rights with
respect thereto; wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute.
"ERISA Affiliate" means (i) any corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Code) as Borrower; (ii) a Partnership or other trade or business (whether or
not incorporated) under common control (within the meaning of Section 414(c) of
the Code) with Borrower; or (iii) a member of the same affiliated service group
(within the meaning of Section 414(m) of the Code) as Borrower, any cor poration
described in clause (i) above or any partnership, trade or business described in
clause (ii) above.
"Event of Default" has the meaning specified in Section 10.1.
"GAAP" means at any particular time with respect to Borrower,
generally accepted accounting principles as in effect at such time, consistently
applied.
"General Intangibles" means all of Borrower's now owned or hereafter
acquired general intangibles, choses in action and causes of action and all
other intangible personal property of Borrower of every kind and nature (other
than Accounts), including, without limitation, all Proprietary Rights, corporate
or other business records, inventions, designs, blueprints, plans,
specifications, trade secrets, goodwill, customer lists, registrations,
licenses, franchises, tax refund claims, any funds which may become due to
Borrower in connection with the termination of any Plan or other employee
benefit plan or any rights thereto and any other amounts payable to Borrower
from any Plan or other employee benefit plan, rights and claims against carriers
and shippers, rights to indemnification, business interruption insurance and
proceeds thereof, property, casualty or any similar type of insurance and any
proceeds thereof, proceeds of insurance covering the lives of key employees on
which Borrower is beneficiary, and any letter of credit, guarantee, claim,
security interest or other security held by or granted to Borrower to secure
payment by an account debtor of any of the Accounts.
"Guaranty" means, with respect to any Person, all obligations of
such Person which in any manner directly or indirectly guarantee or assure, or
in effect guarantee or assure, the payment or performance of any indebtedness,
dividend or other similar obligation of any other Person (the "guaranteed
obligations"), or assure or in effect assure the holder of the guaranteed
obligations against loss in respect thereof, including, without limitation, any
such obligations incurred through an agreement, contingent or otherwise: (a) to
purchase the guaranteed obligations or any property constituting security
therefor; (b) to advance or supply funds for the purchase or payment of the
guaranteed obligations or to maintain a working capital or other balance sheet
condition; or (c) to lease property or to purchase any debt or equity Securities
or other property or services.
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"Interest Rate" means each or any of the interest rates, including
the Default Rate, set forth in Section 3.1.
"Inventory" means all of Borrower's now owned and hereafter acquired
inventory, goods, merchandise, and other personal property, wherever located, to
be furnished under any contract of service or held for sale or lease, including,
without limitation, all returned goods, raw materials, work-in-process
inventory, finished goods and other materials and supplies of any kind, nature
or description which are or might be consumed in Borrower's business or used in
connection with the packing, shipping, advertising, selling or finishing of such
goods, merchandise and such other personal property, and all documents of title
or other documents representing them.
"IRS" means the Internal Revenue Service or any successor agency.
"Lien" means: (a) any interest in property securing an obligation
owed to, or a claim by, a Person other than the owner of the property, whether
such interest is based on the common law, statute, or contract, and including
without limitation, a security interest, charge, claim, or lien arising from a
mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, agreement, security agreement, conditional sale or trust receipt or
a lease, consignment or bailment for security purposes; and (b) to the extent
not included under clause (a), any reservation, exception, encroachment,
easement, right-of-way, covenant, condition, restriction, lease or other title
exception or encumbrance affecting property.
"Line of Credit Facility" means that portion of the Total Facility
providing for Line of Credit Loans.
"Line of Credit Loans" has the meaning specified in Section 2.2.
"Loans" means, collectively, all loans and advances provided for in
Article 2.
"Loan Documents" means this Agreement, the Convertible Note, the
Registration Rights Agreement, the Warrants, the Trademark Agreement, the
Mortgages, the Pledge, and all other agreements, instruments, and documents
heretofore, now or hereafter evidencing, securing, guaranteeing or otherwise
relating to the Obligations, the Collateral, or any other aspect of the trans
actions contemplated by this Agreement, together with all amendments,
restatements, supplements, replacements, or other modifications thereof.
"Maturity Date" means, (i) in the case of all Line of Credit Loans
made hereunder, the second Anniversary Date or, if earlier, the date of
termination of this Agreement in accordance with Article 10, and (ii) in the
case of all Convertible Term Loans made hereunder, October 9, 1999 or, if
earlier, the date of termination of this Agreement in accordance with Article
10.
"Mortgages" means all real property mortgages, leasehold mortgages,
assignments of leases, mortgage deeds, deeds of trust, deeds to secure debt,
security agreements, and other similar instruments hereafter entered into which
provide Agent a Lien on or other interest in any portion of the Premises or the
Real Estate or which relate to any such Lien or interest.
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"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which was at any time during the current year or the
immediately preceding six years contributed to by Borrower or any ERISA
Affiliate.
"Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and debts owing by Borrower to
Agent and Lenders, whether or not arising under this Agreement, whether or not
evidenced by any note, or other instrument or document, whether arising from an
extension of credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment from others, and any participation by
any Lender in Borrower's debts owing to others), absolute or contingent, due or
to become due, primary or secondary, as principal or guarantor, and including,
without limitation, all principal, interest, charges, expenses, fees, attorneys'
fees, filing fees and any other sums chargeable to Borrower hereunder, under
another Loan Document, or under any other agreement or instrument with Agent or
any Lender.
"Pledge" means that certain Pledge Agreement dated as of the date
hereof executed by Borrower in favor of Agent pledging all of its interest in
Country Star Las Vegas LLC now owned or hereafter acquired by Borrower as
security for the payment and performance of the Obligations.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the functions thereof.
"Permitted Liens" means:
(a) Liens for taxes not yet payable or statutory Liens for taxes in
an amount not to exceed $100,000 provided that the payment of such taxes which
are due and payable is being con tested in good faith and by proper proceedings
diligently pursued, and that reserves or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor and that a stay of
enforcement of any such Lien is in effect;
(b) Liens in favor of Agent;
(c) Liens upon Equipment granted in connection with the acquisition
of such Equipment by Borrower after the date hereof (including, without
limitation, pursuant to Capital Leases), provided that (i) the cost of each such
acquisition constitutes a Capital Expenditure permitted by Section 8.22, (ii)
the Debt incurred to finance each such acquisition is permitted by Section 8.13,
and (iii) each such Lien attaches only to the Equipment acquired with the Debt
secured thereby;
(d) deposits under workmen's compensation, unemployment insurance,
social security and other similar laws, or to secure the performance of bids,
tenders or contracts (other than for the repayment of borrowed money) or to
secure indemnity, performance or other similar bonds for the performance of
bids, tenders or contracts (other than for the repayment of borrowed money) or
to secure statutory obligations (other than liens arising under ERISA or
Environmental Liens) or
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surety or appeal bonds, or to secure indemnity, performance or other similar
bonds in the ordinary course of business;
(e) liens which arise by operation of law under Article 2 of the
Uniform Commercial Code in favor of unpaid sellers of goods or prepaying buyers
of goods, or liens in items of any accompanying documents or proceeds of either
arising by operation of law under Article 4 of the Uniform Commercial Code in
favor of a collecting bank;
(f) liens securing the claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons, provided that the
payment thereof is not at the time required by Section 8.1;
(g) reservations, exceptions, encroachments, easements, rights of
way, covenants running with the land, and other similar title exceptions or
encumbrances affecting any Real Estate; provided that they do not in the
aggregate materially detract from the value of the Real Estate or materially
interfere with its use in the ordinary conduct of Borrower's or any Subsidiary's
business; and
(h) liens in existence on the Closing Date and reflected on Schedule
7.2.
"Permitted Rentals" has the meaning specified in Section 8.23.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
Public Authority, or any other entity.
"Plan" means any employee benefit plan as defined in Section 3(3) of
ERISA under which Borrower or any ERISA Affiliate is, or within the immediately
preceding six (6) years was, an "employer" as defined in Section 3(5) of ERISA.
"Premises" means the land identified by addresses on Schedule 7.11,
together with all buildings, improvements, and fixtures thereon and all
tenements, hereditament, and appurtenances belonging or in any way appertaining
thereto, and which constitutes all of the real property in which Borrower has
any interests on the Closing Date.
"Prime Rate" means, for any calendar month or portion thereof, the
highest "prime rate" of interest quoted on the twenty-fifth day of the preceding
calendar month in the Eastern Edition of The Wall Street Journal as the "base
rate on corporate loans at large U.S. money center commercial banks" on such day
or, if the Eastern Edition of The Wall Street Journal is not published on such
day, the first preceding day on which such edition is published; provided,
however, that in the event that The Wall Street Journal ceases quoting a "prime
rate" of the type described, "Prime Rate" means, for any calendar month or
portion thereof, the highest per annum rate of interest then most recently
quoted as the "Bank Prime Loan" rate for "This week" in Statistical Release H.15
(519) of the United States Federal Reserve Board.
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"Proprietary Rights" means all of Borrower's now owned and hereafter
arising or acquired: licenses, franchises, permits, patents, patent rights,
copyrights, works which are the subject matter of copyrights, computer software,
trademarks, service marks, trade names, trade styles, patent, trademark and
service xxxx applications, and all licenses and rights related to any of the
foregoing, including, without limitation, those patents, trademarks, service
marks and copyrights set forth on Schedule 7.12 hereto, and all other rights
under any of the foregoing, all extensions, renewals, reissues, divisions,
continuations, and continuations-in-part of any of the foregoing, and all rights
to xxx for past, present and future infringement of any of the foregoing.
"Public Authority" means the government of any country or sovereign
state, or of any state, province, municipality, or other political subdivision
thereof, or any department, agency, public corporation or other instrumentality
of any of the foregoing.
"Real Estate" means all of the present and future interests of
Borrower, as owner, lessee, or otherwise, in the Premises, including, without
limitation, any option to purchase or lease.
"Registration Rights Agreement" means that certain Registration
Rights Agreement of even date herewith in the form of Exhibit B hereto executed
and delivered by Borrower in favor of Agent.
"Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any Real
Estate or other property, including the movement of Con taminants through or in
the air, soil, surface water, groundwater or Real Estate or other property.
"Rentals" has the meaning specified in Section 8.23.
"Reportable Event" means any of the events described in Section 4043
of ERISA.
"Restricted Investment" means any acquisition of property by
Borrower or any of its Subsidiaries in exchange for cash or other property,
whether in the form of an acquisition of stock, debt Security, or other
indebtedness or obligation, or the purchase or acquisition of any other
property, or a loan, advance, capital contribution, or subscription, except
acquisitions of the following: (a) fixed assets to be used in the business of
Borrower or a Subsidiary, so long as the acquisition costs thereof constitute
Capital Expenditures permitted hereunder; (b) goods held for sale or lease or to
be used in the provision of services by Borrower or a Subsidiary in the ordinary
course of business; (c) current assets arising from the sale or lease of goods
or the rendition of services in the ordinary course of business of Borrower or a
Subsidiary; (d) direct obligations of the United States of America, or any
agency thereof, or obligations guaranteed by the United States of America,
provided that such obligations mature within one year from the date of
acquisition thereof; (e) certificates of deposit maturing within one year from
the date of acquisition, bankers' acceptances, Eurodollar bank deposits, or
overnight bank deposits, in each case issued by, created by, or with a bank or
trust company organized under the laws of the United States or any state thereof
having capital and surplus aggregating at least $100,000,000; and (f) commercial
paper given the highest
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rating by a national credit rating agency and maturing not more than 270 days
from the date of creation thereof.
"Subsidiary" means any entity of which more than fifty percent
(50.0%) of the outstanding securities of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions),
is at the time, directly or indirectly through one or more intermediaries, owned
by Borrower and/or one or more of its Subsidiaries.
"Termination Event" means: (1) a Reportable Event under any Benefit
Plan; (2) the withdrawal of Borrower or any ERISA Affiliate from a Benefit Plan
during a plan year in which Borrower or such ERISA Affiliate was a "substantial
employer" under Section 4001(a)(2) of ERISA; (3) an obligation of Borrower or
any ERISA Affiliate arises under Section 4041 of ERISA to provide affected
parties written notice of intent to terminate a Benefit Plan in a distress
termination under Section 4041(c) of ERISA; (4) the PBGC institutes proceedings
to terminate a Benefit Plan; (5) any event or condition constitutes grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Benefit Plan; (5) any withdrawal of Borrower or any
ERISA Affiliate from a Multiemployer Plan; or (6) the cessation of operations
which results in the termination of employment of twenty percent (20.0%) of
Benefit Plan participants who are employees of Borrower and its ERISA
Affiliates.
"Total Facility" has the meaning specified in Section 2.1.
"Trademark Agreement" means the Trademark Security Agreement dated
as of the date hereof, executed and delivered by Borrower to Agent pursuant to
Section 5.2.
"UCC" means the Uniform Commercial Code (or any successor statute)
of the State of Illinois or of any other state the laws of which are required by
Section 9-103 thereof to be applied in connection with the issue of perfection
of security interests.
"Voting Stock" means Securities of any class or classes of a
corporation, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
"Warrants" means that certain Warrant of even date herewith in the
form of Exhibit C issued by Borrower to Cameron under Article 2 and any other
Warrant issued by Borrower to any Lender thereunder, together with each
substitute Warrant thereof.
1.2 Accounting Terms. Any accounting term used in this Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial Statements.
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1.3 Other Terms. All other undefined terms contained in this
Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein. Any
references herein to exhibits, schedules, sections or articles are references to
exhibits, schedules, sections or articles of this Agreement, unless otherwise
specified. Wherever appropriate in the context, terms used herein in the
singular also include the plural, and vice versa, and each masculine, feminine,
or neuter pronoun shall also include the other genders.
1.4 Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" shall mean "from and including" and the words "to" and "until"
shall each mean "to but excluding." Periods of days referred to in this
Agreement shall be counted in calendar days unless Business Days are expressly
prescribed and references in this Agreement to months and years shall be to
calendar months and calendar years unless otherwise specified.
ARTICLE 2 - LOANS
2.1 Total Facility. Subject to all of the terms and conditions of
this Agreement, this Agreement evidences a total credit facility (the "Total
Facility") comprised of: (a) the Line of Credit Loans, under and as described in
Sections 2.2, and (b) the Convertible Term Loan, under and as described in
Section 2.3.
2.2 Line of Credit Loans. Subject to the satisfaction of all of the
conditions precedent set forth in Article 9, Lenders shall, upon Borrower's
request, make a term loan (the "Line of Credit Loan") to Borrower in the
aggregate principal amount of $500,000 ("Initial Line of Credit Amount"). The
Initial Line of Credit Amount shall be represented by two advances of $250,000,
the first advance to be made upon the Closing Date and the second to be made
within ten (10) Business Days of the Closing Date. Lenders, however, in their
sole and absolute discretion, may elect to make additional discretionary term
loan advances to Borrower as Line of Credit Loans in excess of the Initial Line
of Credit Amount on one or more occasions up to an aggregate amount of
$3,000,000, but if they do so, Lenders shall not be deemed thereby to have
changed the limits of the Initial Line of Credit Amount or to be obligated to
exceed the limits of the Initial Line of Credit Amount on any occasion. Each
Lender will charge all Line of Credit Loans and other Obligations to a loan
account of Borrower maintained with such Lender. Borrower may request Line of
Credit Loans either orally or in writing. All requests by Borrower for Line of
Credit Loans shall be made to Agent on behalf of Lenders. Each oral request for
a Line of Credit Loan shall be conclusively presumed to be made by a person
authorized by Borrower to do so and the crediting of a Line of Credit Loan to
Borrower's deposit account, or transmittal to such Person as Borrower shall
direct, shall conclusively establish the obligation of Borrower to repay such
Line of Credit Loan as provided herein. Notwithstanding terms, if any, to the
contrary in this Agreement or the other Loan Documents, Lenders shall have
neither any obligation nor commitment to make any Line of Credit Loans in excess
of the Initial Line of Credit Amount and the making of Line of Credit Loans in
excess of the Initial Line of Credit Amount shall be in the sole and absolute
discretion of Lenders.
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2.3 Exchange; Convertible Term Loan. Subject to the satisfaction of
all of the conditions precedent set forth in Article 9, on the Closing Date
Cameron shall exchange 4,000 shares of its Series B 7% Convertible Preferred
Stock of Borrower ("Series B Preferred Stock"), together with all of Cameron's
claims for accrued dividends, interest, and penalties under such Series B
Preferred Stock, for (a) a term loan ("Convertible Term Loan") owing from
Borrower in the principal amount of $4,000,000, which shall be evidenced by and
repayable in accordance with and subject to the terms of Article 4 and the
conversion and other terms set forth in the Convertible Note (the "Convertible
Note"), authorized, issued and delivered by Borrower to Cameron, in the form
attached as Exhibit A and made a part hereof and (b) 365,522 shares of duly
authorized, fully paid, and non assessable Common Stock of Borrower ("Common
Stock") issued in the name of Cameron (the "Cameron Shares"). Upon execution and
delivery of the Convertible Note by Borrower to Cameron, delivery of the Cameron
Shares to Cameron, and satisfaction of all of the other conditions precedent set
forth in Article 9, (a) Cameron will deliver to Borrower all stock certificates,
duly endorsed, evidencing Cameron's Series B Preferred Stock and (b) Cameron
will execute and deliver, and cause the execution and delivery by Cameron
Capital Management Ltd. ("Cameron Management"), to Borrower of a termination
agreement terminating all of the rights of Cameron and Cameron Management under
that certain Subscription Agreement dated October 9, 1996 among Xxxxxxx, Xxxxxxx
Management, and Borrower.
2.4 Warrants. In addition to the other conditions precedent to
making Line of Credit Loans as set forth in Article 9, each advance by a Lender
of a Line of Credit Loan shall be accompanied by a Warrant issued by Borrower to
such Lender which shall provide for, among the other terms and conditions set
forth in each Warrant, such Lender's right to purchase for $.625 per share the
number of shares of common stock of Borrower equal to number derived by dividing
the dollar amount of such Line of Credit Loan by three (3). Each Warrant shall
expire on the fifth anniversary of its date of issuance.
ARTICLE 3 - INTEREST AND FEES
3.1 Interest. (a) Borrower shall pay Lenders interest on the unpaid
principal balance of the Line of Credit Loans (including, to the extent
permitted by law, on interest on such Loans not paid when due), and on any other
Obligations incurred hereunder or pursuant to the Loan Documents (other than the
Convertible Term Loan), at a fluctuating per annum rate equal to four percent
(4.00%) plus the Prime Rate. Each change in the Prime Rate shall be reflected in
the fore going interest rates as of the effective date of such change.
(b) Borrower shall pay Lenders interest on the unpaid principal
balance of the Convertible Term Loan (including, to the extent permitted by law,
on interest on such Loans not paid when due) at per annum rate equal to seven
percent (7.00%).
(c) If any of the Obligations owed hereunder are not paid when due
(whether by acceleration or otherwise), then such unpaid amounts shall bear
interest at the Default Rate applicable thereto until so paid.
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(d) If any Default or Event of Default occurs and Agent in its
discretion so elects, then, while any such Default or Event of Default is
outstanding, all of the Obligations shall bear interest at the Default Rate
applicable thereto.
(e) Interest charges under this Agreement shall be computed on the
basis of a year of 360 days and actual days elapsed and will be payable to
Lenders as set forth in Article 4.
3.2 Maximum Interest Rate. In no event shall any interest rate
hereunder exceed the maximum rate permissible for corporate borrowers under
applicable law (the "Maximum Rate"). If, in any month, any interest rate, absent
such limitation, would have exceeded the Maximum Rate, then the interest rate
for that month shall be the Maximum Rate, and, if in future months, that
interest rate would otherwise be less than the Maximum Rate, then that interest
rate shall remain at the Maximum Rate until such time as the amount of interest
paid hereunder equals the amount of interest which would have been paid if the
same had not been limited by the Maximum Rate. In the event that, upon payment
in full of the Obligations under this Agreement, the total amount of interest
paid or accrued under the terms of this Agreement is less than the total amount
of interest which would, but for this Section 3.2, have been paid or accrued if
the interest rates otherwise set forth in this Agreement had at all times been
in effect, then Borrower shall, to the extent permitted by applicable law, pay
Lenders an amount equal to the difference between (a) the lesser of (i) the
amount of interest which would have been charged if the Maximum Rate had, at all
times, been in effect or (ii) the amount of interest which would have accrued
had the interest rates otherwise set forth in this Agreement, at all times, been
in effect and (b) the amount of interest actually paid or accrued under this
Agreement. In the event that a court determines that any Lender has received
interest and other charges hereunder in excess of the Maximum Rate, such excess
shall be deemed received on account of, and shall automatically be applied to
reduce, the Obligations other than interest, in the inverse order of maturity,
and if there are no Obligations outstanding, such Lender shall refund to
Borrower such excess.
ARTICLE 4 - PAYMENTS AND PREPAYMENTS
4.1 Line of Credit Loans. Borrower shall repay the outstanding
principal balance of the Line of Credit Loans, plus all accrued but unpaid
interest thereon, upon the Maturity Date applicable to Line of Credit Loans or,
if earlier, upon acceleration in accordance with Article 10. Borrower may prepay
Line of Credit Loans at any time. Borrower shall not reborrow any Line of Credit
Loans. Scheduled payments of interest accruing hereunder on the principal
balance of the Line of Credit Loans shall be made by Borrower on June 30 and
December 31 of each calendar year; provided, however, that such interest
payments shall not commence until December 31, 1997.
4.2 Convertible Term Loan. Borrower shall repay the outstanding
principal balance of the Convertible Term Loan, plus accrued but unpaid interest
thereon and premium owing thereon in accordance with the Convertible Note, upon
the Maturity Date applicable to the Convertible Term Loan or, if earlier, upon
acceleration in accordance with Article 10. Borrower shall not reborrow any the
Convertible Term Loan. Scheduled payments of interest accruing hereunder on the
principal balance of the Convertible Term Loan shall be made by Borrower on June
30 and December 31 of each calendar year; provided, however, that such interest
payments shall not
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commence until December 31, 1997. The repayment of the principal and interest of
the Convertible Term Loan shall be further subject to the terms and conditions
set forth in the Convertible Note.
4.3 Voluntary Prepayments of the Loans. Borrower may prepay the
principal balance of the Line of Credit Loans at any time and from time to time
without premium. Each prepayment of principal shall be accompanied by payment of
all accrued but unpaid interest on the principal balance of the Line of Credit
Loans to the date of prepayment. Borrower may prepay the principal balance of
the Convertible Term Loan solely in accordance with the terms and conditions set
forth in the Convertible Note.
4.4 Mandatory Prepayments of the Loans. Borrower shall pay the
entire unpaid principal balance of the Line of Credit Loans and the Convertible
Term Loan, and all accrued but unpaid interest thereon, upon the Maturity Date
applicable to such Loan or, if earlier, upon acceleration in accordance with
Article 10. Notwithstanding provisions contained in this Agreement or the other
Loan Documents prohibiting the sale or other transfer of Collateral, in the
event that any of Borrower's Collateral, the sale or transfer of which requires
Lenders' or Agent's consent under this Agreement or any other Loan Document, is
sold or otherwise transferred, whether in violation of the terms of this
Agreement or other Loan Document or pursuant to a consent granted by Lenders or
Agent, Borrower shall immediately upon receipt of the proceeds of such sale or
transfer, make a prepayment of the Convertible Term Loan in the amount of the
net proceeds from such sale or transfer. Any mandatory prepayment of the
Convertible Term Loan shall be further subject to the premium and other
prepayment provisions of the Convertible Note.
4.5 Place and Form of Payments; Extension of Time. All payments of
principal, interest, premium, and other sums due to Lenders shall be made to The
Bank of Bermuda International, New York, New York for credit to The Bank of
Bermuda Limited, Xxxxxxxx Bermuda (or to such other accounts as Holder may
direct Borrower). All such payments shall be made in immediately available funds
in United States currency by noon Atlantic standard time (AST) on the date
payment is to be made; provided, however, that Agent may elect, in its sole
discretion, to receive payment for part or all of any accrued interest hereunder
in kind in shares of Common Stock of Borrower, in lieu of immediately available
funds, in such number of shares to be determined based upon the average closing
bid price (as reported by the Nasdaq Stock Market) of the Common Stock of
Borrower for the five (5) consecutive trading days immediately prior to the date
that such interest is payable. If Agent elects to receive payment in kind in
shares of Common Stock in accordance with this Section, the due date for such
payment received in kind shall be extended three (3) Business Days and, on such
extended due date, Borrower shall deliver to Agent stock certificates, together
with any necessary stock powers and/or endorsements, evidencing the number of
shares of Common Stock of Borrower required for such payment under this Section.
If any payment of principal, interest, premium, or other sum to be made
hereunder becomes due and payable on a day other than a Business Day, the due
date of such payment shall be extended to the next succeeding Business Day and
interest thereon shall be payable at the applicable Interest Rate during such
extension.
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4.6 Apportionment, Application and Reversal of Payments. (a) Unless
an Event of Default shall have occurred, all payments received by Agent and
Lenders from Borrower hereunder shall be applied to the Obligations as follows:
first, to fees and expenses due and payable under this Agreement; second, to
accrued interest then due and payable on the Line of Credit Loans; third, to
accrued interest then due and payable on the Convertible Term Loan; fourth, to
installments, if any, then owing of principal which have been scheduled as due
and payable on the Line of Credit Loans before the final maturity or
acceleration of such Loans; fifth, to installments, if any, then owing of
principal which have been scheduled as due and payable on the Convertible Term
Loan before the final maturity or acceleration of such Loan; sixth, to accrued
interest not yet due and payable on the Line of Credit Loans; seventh, to the
principal the Line of Credit Loans, and, if payable in installments, to the
installments thereof in the inverse order of maturity, whether or not then due,
together with any premium due thereon; eighth, to accrued interest not yet due
and payable on the Convertible Term Loan; ninth, to the principal of the
Convertible Term Loan, and, if payable in installments, to the installments
thereof in the inverse order of maturity, whether or not then due, together with
any premium due thereon; and last, to any other Obligations owing to Agent and
Lenders.
(b) If an Event of Default shall have occurred, all payments received by
Agent from Borrower hereunder shall be applied to the Obligations the order and
manner which the Agent in its sole discretion shall determine.
(c) Borrower hereby irrevocably waives the right to direct the application
of any payment or proceeds in respect of the Obligations. Agent and Lenders
shall have the continuing and exclusive right to apply and reverse and reapply
any and all such proceeds and payments to any portion of the Obligations.
4.7 Agent and Lenders' Books and Records; Monthly Statements.
Borrower agrees that Agent's and Lenders' books and records showing the
Obligations and the transactions pursuant to this Agreement and the other Loan
Documents shall be admissible in any action or proceeding arising therefrom, and
shall constitute prima facie proof thereof, irrespective of whether any
Obligation is also evidenced by a promissory note or other instrument.
ARTICLE 5 - COLLATERAL
5.1 Grant of Security Interest. (a) As security for all Obligations,
Borrower hereby grants to Agent, for its benefit and the benefit of the Lenders,
a continuing security interest in, lien on, assignment of, and right of set-off
against all of the following property of Borrower, whether now owned or existing
or hereafter acquired or arising and regardless of where located:
(i) all Accounts, contract rights, letters of credit, chattel paper,
instru ments, notes, documents, and documents of title;
(ii) General Intangibles;
(iii) Inventory;
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(iv) Equipment;
(v) all moneys, securities, and other property of any kind of
Borrower in the possession or under the control of Agent or any Lender,
any assignee of or participant in the Obligations or a bailee of any such
party or such party's affiliates;
(vi) all of Borrower's deposit accounts, credits, and balances with
and other claims against Agent, any Lender or any of their affiliates or
any other financial institution with which Borrower maintains deposits;
(vii) all books, records and other property relating to or referring
to any of the foregoing, including, without limitation, all books,
records, ledger cards, data processing records, computer software and
other property and general intangibles at any time evidencing or relating
to any of the foregoing; and
(viii) all accessions to, substitutions for and replacements,
products and proceeds of any of the foregoing, including, but not limited
to, proceeds of any insurance policies, claims against third parties, and
condemnation or requisition payments with respect to all or any of the
foregoing.
All of the foregoing, together with the Real Estate and all other property of
Borrower or any Subsidiary in which Agent may at any time be granted a Lien, is
herein collectively referred to as the "Collateral."
(b) As additional security for the Obligations, Borrower shall
simultaneously herewith execute and deliver to Agent (or, if applicable, cause
its Subsidiary to execute and deliver) the Mortgages and such other agreements
to grant to Agent, for its benefit and the benefit of Lenders, a continuing and
perfected mortgage liens on the Real Estate.
(c) All of the Obligations shall be secured by all of the
Collateral. Agent may, in its sole discretion, (i) exchange, waive, or release
any of the Collateral, (ii) apply Collateral and direct the order or manner of
sale thereof as Agent may determine, and (iii) settle, compromise, collect, or
otherwise liquidate any Collateral in any manner, all without affecting the
Obligations or Agent's or Lenders' right to take any other action with respect
to any other Collateral.
5.2 Perfection and Protection of Security Interest. Borrower shall,
and shall cause its Subsidiaries to, at its expense, perform all steps requested
by Agent at any time to perfect, maintain, protect, and enforce its Liens in the
Collateral including, without limitation: (a) executing and recording of the
Mortgages, and the Trademark Agreement and executing and filing financing or
continuation statements, and amendments thereof, in form and substance
satisfactory to Agent; (b) delivering to Agent the original certificates of
title for motor vehicles with Agent's security interest properly endorsed
thereon; (c) delivering to Agent the originals of all instruments, documents,
and chattel paper, and all other Collateral of which Agent determines it should
have physical possession in order to perfect and protect Agent's security
interest therein, duly endorsed or assigned to Agent without restriction; (d)
delivering to Agent warehouse receipts covering any
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portion of the Collateral located in warehouses and for which warehouse receipts
are issued; (e) transferring Inventory to warehouses designated by Agent; (f)
placing notations on Borrower's books of account to disclose Agent's security
interest; (g) delivering to Agent all letters of credit on which Borrower is
named beneficiary; and (h) taking such other steps as are deemed necessary or
desirable by Agent to maintain and protect its Liens. To the extent permitted by
applicable law, Agent may file, without Borrower's signature, one or more
financing statements disclosing its Liens. Borrower agrees that a carbon,
photographic, photostatic, or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement.
If any Collateral is at any time in the possession or control of any
warehouseman, bailee or any of Borrower's agents or processors, then Borrower
shall notify Agent thereof and shall notify such Person of Agent's security
interest in such Collateral and, upon Agent's request, instruct such Person to
hold all such Collateral for Agent's account subject to Agent's instructions. If
at any time any Collateral is located on any premises that are not owned by
Borrower, then Borrower shall obtain written waivers, in form and substance
satisfactory to Agent, of all present and future Liens to which the owner or
lessor or any mortgagee of such premises may be entitled to assert against the
Collateral.
From time to time, Borrower shall, upon Agent's request, execute and
deliver confirmatory written instruments pledging to Agent the Collateral, but
Borrower's failure to do so shall not affect or limit Agent's security interest
or Agent's or Lenders' other rights in and to the Collateral. So long as this
Agreement is in effect and until all Obligations have been fully satisfied,
Agent's Liens shall continue in full force and effect in all Collateral.
5.3 Location of Collateral. Borrower represents and warrants to
Agent and Lenders that: (a) Schedule 5.3 is a correct and complete list of
Borrower's chief executive office, the location of its books and records, the
locations of the Collateral, and the locations of all of its other places of
business; and (b) Schedule 5.3 correctly identifies any of such facilities and
locations that are not owned by Borrower and sets forth the names of the owners
and lessors or sublessors of, and, to the best of Borrower's knowledge, the
holders of any mortgages on, such facilities and locations. Borrower covenants
and agrees that it will not (i) maintain any Collateral at any location other
than those listed on Schedule 5.3, (ii) otherwise change or add to any of such
locations, or (iii) change the location of its chief executive office from the
location identified in Schedule 5.3, unless it gives Agent at least thirty (30)
days' prior written notice thereof and executes any and all financing statements
and other documents that Agent requests in connection therewith.
5.4 Title to, Liens on, and Sale and Use of Collateral. Borrower
represents and warrants to Agent and Lenders and agrees with Agent and Lenders
that: (a) all of Borrower's Collateral is and will continue to be owned by
Borrower free and clear of all Liens whatsoever, except for Permitted Liens; (b)
Agent's Liens in the Collateral will not be subject to any prior Lien except for
those Permitted Liens, if any, specifically identified on Schedule 7.2; (c)
Borrower will use, store, and maintain the Collateral with all reasonable care
and will use the Collateral for lawful purposes only; and (d) Borrower will not,
without Agent's prior written approval, sell, or dispose of or permit the sale
or disposition of any Collateral, except for sales of Inventory in the ordinary
course of business and as permitted by Section 5.9. The inclusion of proceeds in
the Collateral shall not be
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deemed to constitute Agent's consent to any sale or other disposition of the
Collateral except as expressly permitted herein.
5.5 Access and Examination. Agent may at all reasonable times (and
at any time when a Default or Event of Default exists) at its own expense
(except when a Default or Event of Default exists, in which case at Borrower's
expense) have access to, examine, audit, make extracts from and inspect
Borrower's records, files, and books of account and the Collateral, and discuss
Borrower's affairs with Borrower's officers and management. Borrower will
deliver to Agent any instrument necessary for Agent to obtain records from any
service bureau maintaining records for Borrower. Agent may at all reasonable
times (and at any time when a Default or Event of Default exists) at its own
expense (except when a Default or Event of Default exists, in which case at
Borrower's expense) make copies of all of Borrower's books and records, or
require Borrower to deliver such copies to Agent. Agent may at its own expense
(except when a Default or Event of Default exists, in which case at Borrower's
expense) use such of Borrower's personnel, supplies, and premises as may be
reasonably necessary for maintaining or enforcing Agent's Liens.
5.6 Collateral Reporting. Borrower will provide Agent with all
information concerning the Collateral as Agent shall reasonably request,
together with a certificate of an officer of Borrower certifying as to the
accuracy and completeness of such information. If any of Borrower's records or
reports of the Collateral are prepared by an accounting service or other agent,
Borrower hereby authorizes such service or agent to deliver such records,
reports, and related documents to Agent.
5.7 Inventory. Borrower represents and warrants to Agent and Lenders
and agrees with Agent and Lenders that all of the Inventory is and will be held
for sale or lease, or to be furnished in connection with the rendition of
services, in the ordinary course of Borrower's business, and is and will be fit
for such purposes. Borrower will keep the Inventory in good and marketable
condition, at its own expense. Borrower will not, without prior written notice
to Agent, acquire or accept any Inventory on consignment or approval. Borrower
agrees that all Inventory will be produced in accordance with the Federal Fair
Labor Standards Act of 1938, as amended, and all rules, regulations, and orders
thereunder. Borrower will maintain a perpetual inventory reporting system at all
times. Borrower will conduct a physical count of the Inventory at least once
each Fiscal Year, and at such other times as Agent reasonably requests, and
shall promptly supply Agent with a copy of such count accompanied by a report of
the value of such inventory (determined on a first-in-first-out basis and valued
at the lower of cost or market value). Borrower will not sell any Inventory on a
xxxx-and-hold, guaranteed sale, sale and return, sale on approval, consignment,
or other repurchase or return basis.
5.8 Equipment. Borrower represents and warrants to Agent and Lenders
and agrees with Agent and Lenders that all of the Equipment is and will be used
or held for use in Borrower's business, and is and will be fit for such
purposes. Borrower shall keep and maintain the Equipment in good operating
condition and repair (ordinary wear and tear excepted) and shall make all
necessary replacements thereof. Borrower shall promptly inform Agent of any
material additions to or deletions from the Equipment. Borrower shall not permit
any Equipment to become a fixture to real property or an accession to other
personal property, unless Agent has a valid, perfected, and
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first priority Lien in such real or personal property. Borrower will not,
without Agent's prior written consent, alter or remove any identifying symbol or
number on the Equipment. Borrower shall not, without Agent's prior written
consent, sell, lease as a lessor, or otherwise dispose of any of the Equipment;
provided, however, that Borrower may dispose of obsolete or unusable Equipment
having an orderly liquidation value no greater than $500 individually, and
$10,000 in the aggregate in any Fiscal Year, without Agent's consent, subject to
the conditions set forth below. In the event any of the Equipment is sold,
transferred or otherwise disposed of, (a) if such sale, transfer or disposition
is effected without replacement of such Equipment, or such Equipment is replaced
by Equipment leased by Borrower or by Equipment purchased by Borrower subject to
a Lien, then Borrower shall deliver all of the cash proceeds of any such sale,
transfer or disposition to Agent, which proceeds shall be applied to the
repayment of the Obligations and without premium or penalty or (b) if such sale,
transfer or disposition is made in connection with the purchase by Borrower of
replacement Equipment (other than Equipment subject to a Lien), then Borrower
shall use the proceeds of such sale, transfer or disposition to finance the
purchase by Borrower of such replacement Equipment and shall deliver to Agent
written evidence of the use of the proceeds for such purchase. All replacement
Equipment purchased by Borrower shall be free and clear of all Liens, claims and
encumbrances, except for Permitted Liens.
5.9 Documents, Instruments, and Chattel Paper. Borrower represents
and warrants to Agent and Lenders and agrees with Agent and Lenders that (a) all
documents, instruments, and chattel paper describing, evidencing, or
constituting Collateral, and all signatures and endorsements thereon, are and
will be complete, valid, and genuine and (b) all goods evidenced by such
documents, instruments, and chattel paper are and will be owned by Borrower free
and clear of all Liens other than Permitted Liens.
5.10 Right to Cure. Agent and Lenders may, in their discretion and
at any time, for Borrower's account and at Borrower's expense, pay any amount or
do any act required of Borrower hereunder or requested by Agent to preserve,
protect, maintain or enforce the Obligations, the Collateral or Agent's Liens
therein, and which Borrower fails to pay or do, including, without limitation,
payment of any judgment against Borrower, any insurance premium, any warehouse
charge, any finishing or processing charge, any landlord's claim, and any other
Lien upon or with respect to the Collateral. All payments that Agent and/or any
Lender makes under this Section and all out-of-pocket costs and expenses that
Agent or any Lender pays or incurs in connection with any action taken by it
hereunder shall be charged to Borrower's loan account as a Line of Credit Loan.
Any payment made or other action taken by Agent or any Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed thereafter as herein provided.
5.11 Power of Attorney. Borrower hereby appoints Agent and Agent's
designees as Borrower's attorney, with power: (a) to endorse Borrower's name on
any checks, notes, acceptances, money orders, or other forms of payment or
security that come into Agent's or any Lender's possession; (b) to sign
Borrower's name on any invoice, xxxx of lading, or other document of title
relating to any Collateral, on drafts against customers, on assignments of
Accounts, on notices of assignment, financing statements and other public
records; (c) to notify the post office authorities, when an Event of Default
exists, to change the address for delivery of Borrower's mail to an address
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designated by Agent and to receive, open and dispose of all mail addressed to
Borrower; (d) to send requests for verification of accounts to customers or
account debtors; and (e) to do all things necessary to carry out this Agreement.
Borrower ratifies and approves all acts of such attorney. Neither Agent nor the
attorney will be liable for any good faith acts or omissions or for any error of
judgment or mistake of fact or law. This power, being coupled with an interest,
is irrevocable until this Agreement has been terminated and the Obligations have
been fully satisfied.
5.12 Agent's and Lenders' Rights, Duties and Liabilities. Borrower
assumes all responsibility and liability arising from or relating to the use,
sale or other disposition of the Collateral. Neither Agent, Lenders nor any of
their officers, directors, employees, and agents shall be liable or responsible
in any way for the safekeeping of any of the Collateral, or for any loss or
damage thereto, or for any diminution in the value thereof, or for any act of
default of any warehouseman, carrier, forwarding agency or other Person
whomsoever, all of which shall be at Borrower's sole risk. The Obligations shall
not be affected by any failure of Agent or any Lender to take any steps to
perfect its Liens or to collect or realize upon the Collateral, nor shall loss
of or damage to the Collateral release Borrower from any of the Obligations.
Agent may (but shall not be required to), without notice to or consent from
Borrower, xxx upon or otherwise collect, extend the time for payment of, modify
or amend the terms of, compromise or settle for cash, credit, or otherwise upon
any terms, grant other indulgences, extensions, renewals, compositions, or
releases, and take or omit to take any other action with respect to the
Collateral, any security therefor, any agreement relating thereto, any insurance
applicable thereto, or any Person liable directly or indirectly in connection
with any of the foregoing, without discharging or otherwise affecting the
liability of Borrower for the Obligations or under this Agreement or any other
agreement now or hereafter existing between Agent and Lenders and Borrower.
ARTICLE 6 - BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
6.1 Books and Records. Borrower shall maintain, at all times,
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions in accordance with GAAP applied
consistently with the audited Financial Statements required to be delivered
pursuant to Section 6.2. Borrower shall, by means of appropriate entries,
reflect in such accounts and in all Financial Statements proper liabilities and
reserves for all taxes and proper provision for depreciation and amortization of
property and bad debts, all in accordance with GAAP. Borrower shall maintain at
all times books and records pertaining to the Collateral in such detail, form
and scope as Agent shall reasonably require, including, but not limited to,
records of (a) all payments received and all credits and extensions granted with
respect to the Accounts; (b) the return, rejections, repossession, stoppage in
transit, loss, damage, or destruction of any Inventory; and (c) all other
dealings affecting the Collateral.
6.2 Financial Information. Borrower shall promptly furnish to Agent
or its agents all such financial information as Agent shall reasonably request,
and notify its auditors and accountants that Agent is authorized to obtain such
information directly from them. Without limiting the foregoing, Borrower and its
Subsidiaries will furnish to the Agent, in such detail as the Agent shall
request, the following:
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(a) As soon as available, but in any event not later than one
hundred five (105) days after the close of each Fiscal Year, (1) Borrower's
Annual Report on Form 10-K (or any successor form) and (2) consolidated and
consolidating audited balance sheets, and statements of income and expense,
statements of cash flow, and statements of stockholders' equity for Borrower and
its consolidated Subsidiaries for such Fiscal Year; together with the
accompanying notes thereto, setting forth in each case in comparative form
figures for the previous Fiscal Year, all in reasonable detail, fairly
presenting the financial position and the results of operations of Borrower and
its consolidated Subsidiaries as at the date thereof and for the Fiscal Year
then ended, all prepared in accordance with GAAP. Such statements shall be
examined in accordance with generally accepted auditing standards by and
accompanied by a report thereon unqualified as to scope of Borrower's
independent certified public accountants.
(b) In the case of October, November, and December 1996, not later
than February 28, 1996, in the case of January 1997, not later than March 15,
1997, and the case of February and March 1997, not later than thirty (30) days
after the end of each such calendar month, and, in the case of each calendar
month thereafter, not later than fifteen (15) days after the end of each
calendar month: (1) consolidated and consolidating (by each restaurant location)
unaudited balance sheets of Borrower and its consolidated Subsidiaries as at the
end of such month; (2) consolidated and consolidating (by each restaurant
location) unaudited statements of income and expenses for Borrower and its
consolidated Subsidiaries for such month and for the period from the beginning
of the Fiscal Year to the end of such month; and (3) consolidated and
consolidating (by each restaurant location) unaudited statements of cash flow
for Borrower and its consolidated Subsidiaries for such month and for the period
from the beginning of the Fiscal Year to the end of such month; all of the
foregoing items in reasonable detail, fairly presenting the financial position
and results of operation of Borrower and its consolidated Subsidiaries as at the
date thereof and for such periods, and prepared in accordance with GAAP applied
consistently with the audited Financial Statements. Such statements shall be
certified to be correct by the chief financial or accounting officer of
Borrower, subject to normal year-end adjustments.
(c) With each of the annual audited and monthly unaudited Financial
Statements delivered pursuant to Sections 6.2(a) and 6.2(b), a certificate of
the chief executive or chief financial officer of Borrower (i) setting forth in
reasonable detail the calculations required to establish that Borrower was in
compliance with its covenants set forth Article 8 during the period covered in
such Financial Statements and as at the end thereof, and (ii) stating that,
except as explained in reasonable detail in such certificate, (A) all of the
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents are correct and complete as at the date of such certificate
as if made at such time, (B) Borrower is, at the date of such certificate, in
compliance with all of its covenants and agreements in this Agreement and the
other Loan Documents, and (C) no Default or Event of Default then exists or
existed during the period covered by such Financial Statements.
(d) On or before February 28, 1997, a rolling three (3) calendar
month budget report ("Budget Report") satisfactory to Agent for the period
beginning February 1, 1997, setting forth in complete detail all projected
expenditures of Borrower for such period. Not later than fifteen (15) days after
the end of each calendar month, commencing with the end of February 1997,
subsequent Budget Reports satisfactory to Agent for the rolling three (3)
calendar month period
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commencing in the calendar month succeeding the month in which such Budget
Report is due, setting forth in complete detail all projected expenditures of
Borrower for such period. The first month component of each Budget Report shall
be detailed by daily projected expenditures and the second and third month
component of each Budget report shall be detailed by weekly projected
expenditures.
(e) With each request for a Line of Credit Loan, a detailed report
satisfactory to Agent, listing by amount and payee the uses for the proceeds of
such Line of Credit Loan ("Use of Proceeds Schedule").
(f) Promptly after their preparation, copies of any all (1) proxy
statements, financial statements, and reports which Borrower makes available to
its stockholders and (2) all reports and registration statements and
prospectuses filed by Borrower or any of its Subsidiaries with any securities
exchange or the Securities and Exchange Commission.
(g) Promptly after filing with the PBGC, DOL, or IRS, a copy of each
annual report or other filing or notice filed with respect to each Benefit Plan
of Borrower or any ERISA Affiliate.
(h) Promptly after filing with the IRS, a copy of each tax return
filed by Borrower or by any of its Subsidiaries.
(i) Within ten Business Days after the Closing Date,
6.3 Notices to Agent. Borrower shall notify Agent of any change in
Borrower's name, state of incorporation, or form of organization, trade names or
styles under which Borrower will sell Inventory or create Accounts, or to which
instruments in payment of Accounts may be made payable, at least thirty (30)
days prior thereto. In addition, Borrower shall notify Agent in writing of the
following matters promptly and in any event not later than two (2) Business Days
after becoming aware thereof:
(a) any Default or Event of Default.
(b) the assertion by the holder of any capital stock of Borrower or
of any Debt in an outstanding principal amount exceeding $25,000, that a default
exists with respect thereto or that Borrower is not in compliance with the terms
thereof, or the threat or commencement by such holder of any enforcement action
because of such asserted default or non-compliance.
(c) any material adverse change in Borrower's or any Subsidiary's
property, business, operations, or condition (financial or otherwise).
(d) any pending or threatened action, suit, proceeding, or
counterclaim by any Person, or any pending or threatened investigation by a
Public Authority, which may materially and adversely affect the Collateral, the
repayment of the Obligations, Agent's or any Lender's rights
-21-
under the Loan Documents, or Borrower's or any Subsidiary's property, business,
operations, or condition (financial or otherwise).
(e) any pending or threatened strike, work stoppage, material unfair
labor practice claim, or other material labor dispute affecting Borrower or any
of its Subsidiaries.
(f) any violation of any law, statute, regulation, or ordinance of
Public Authority applicable to Borrower, any Subsidiary, or their respective
properties (including, without limitation, any Environmental Law) which may
materially and adversely affect the Collateral, the repayment of the
Obligations, Agent's or any Lender's rights under the Loan Documents, or
Borrower's property, business, operations, or condition (financial or
otherwise).
(g) when Borrower or any ERISA Affiliate knows or has reason to
know, that a Termination Event or a prohibited transaction (as defined in
Sections 406 of ERISA and 4975 of the Code) has occurred, and, when known, any
action taken or threatened by the IRS, the DOL or the PBGC with respect thereto.
(h) receipt by Borrower or any ERISA Affiliate of copies of the
following: (i) each actuarial report for any Benefit Plan or Multiemployer Plan
and annual report for any Multiemployer Plan; (ii) any notices of the PBGC's
intention to terminate a Benefit Plan or to have a trustee appointed to
administer such Benefit Plan; (iii) any favorable or unfavorable determination
letter from the IRS regarding the qualification of a Plan under Section 401(a)
of the Code; or (iv) any notice from a Multiemployer Plan regarding the
imposition of withdrawal liability.
(i) (1) any increases in the benefits of any existing Plan or the
establishment of any new Plan or the commencement of contributions to any Plan
to which Borrower or any ERISA Affiliate was not previously contributing; or (2)
any failure by Borrower or any ERISA Affiliate to make a required installment or
any other required payment under Section 412 of the Code on or before the due
date for such installment or payment.
(j) after Borrower or any ERISA Affiliate knows or has reason to
know that any of the following events has or will occur: (i) a Multiemployer
Plan has been or will be terminated; (ii) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan; or (iii) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
Each notice given under this Section shall describe the subject matter
thereof in reasonable detail, and shall set forth the action that Borrower any
Subsidiary and any ERISA Affiliate, as applicable, has taken or proposes to take
with respect thereto. For purposes of subsections (g) through (j) above,
Borrower and any ERISA Affiliate shall be deemed to know all facts known by the
Administrator of any Plan of which Borrower or any ERISA Affiliate is the plan
sponsor.
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ARTICLE 7 - GENERAL WARRANTIES AND REPRESENTATIONS
Borrower warrants and represents to Agent and Lenders, that:
7.1 Authorization, Validity, and Enforceability of this Agreement
and the Loan Documents. Borrower has the corporate power and authority to
execute, deliver and perform this Agreement and other Loan Documents, to incur
the Obligations, and to grant to Agent Liens upon and security interests in the
Collateral. Borrower has taken all necessary corporate action to authorize its
execution, delivery, and performance of this Agreement and the other Loan
Documents. No consent, approval, or authorization of, or declaration or filing
with, any Public Authority, and no consent of any other Person, is required in
connection with Borrower's execution, delivery, and performance of this
Agreement and the other Loan Documents, except for those already duly obtained.
Each of this Agreement and the other Loan Documents has been duly executed and
delivered by Borrower, and constitutes the legal, valid and binding obligation
of Borrower, enforce able against it in accordance with its terms. Borrower's
execution, delivery, and performance of this Agreement and the other Loan
Documents do not and will not conflict with, or constitute a violation or breach
of, or constitute a default under, or result in the creation or imposition of
any Lien upon the property of Borrower or any of its Subsidiaries by reason of
the terms of (a) any contract, mortgage, Lien, lease, agreement, indenture, or
instrument to which Borrower or any of its Subsidiaries is a party or which is
binding upon it, (b) any judgment, law, statute, rule or governmental regulation
applicable to Borrower or any of its Subsidiaries, or (c) the Certificate or
Articles of Incorporation or By-laws of Borrower or any of its Subsidiaries.
7.2 Validity and Priority of Security Interest. The provisions of
this Agreement, the Mortgages, and the other Loan Documents create legal and
valid Liens on all the Collateral in Agent's favor for its benefit and the
benefit of Lenders, and such Liens constitute perfected and continuing Liens on
all the Collateral, having priority over all other Liens on the Collateral
except those Permitted Liens specifically identified on Schedule 7.2, securing
all the Obligations, and enforceable against Borrower and all third parties.
7.3 Organization and Qualification. Borrower (a) is duly
incorporated and organized and validly existing in good standing under the laws
of the State of Delaware, (b) is qualified to do business as a foreign
corporation and is in good standing in the States of California, Georgia, and
Nevada, which are the only states in which qualification is necessary in order
for it to own or lease its property and conduct its business, and (c) has all
requisite power and authority to conduct its business and to own its property.
7.4 Corporate Name; Prior Transactions. Borrower has not, during the
past five (5) years, been known by or used any other corporate or fictitious
name (other than the Delaware corporate name "Country Music Restaurants, Inc."
during the period from May 27, 1993 to June 3, 1993), or been a party to any
merger or consolidation, or acquired all or substantially all of the assets of
any Person, or acquired any of its property outside of the ordinary course of
business.
-23-
7.5 Subsidiaries and Affiliates. Schedule 7.5 is a correct and
complete list of the name and relationship to Borrower of each and all of
Borrower's Affiliates. Borrower has no Subsidiaries other than Country Star Las
Vegas LLC.
7.6 Financial Statements. Borrower has delivered to Agent the
unaudited balance sheet and related statements of income, retained earnings,
statement of cash flow, and changes in stockholders equity as of September 30,
1996. All such financial statements have been prepared in accordance with GAAP
and present accurately and fairly the financial position of Borrower as at the
dates thereof and its results of operations for the periods then ended.
7.7 Capitalization.
(a) Prior to the consummation of the transactions contemplated by
this Agreement, Borrower's authorized capital stock consists of: (a)
25,000,000 shares of common stock, par value $0.001 per share, of which
15,153,331 shares are validly issued and outstanding, fully paid and
non-assessable, and are owned beneficially and of record; (b) 2,000,000
shares of preferred stock, par value $0.001 per share, of which (1)
363,806 shares are validly issued and outstanding as Series A Preferred
Stock (each convertible into six shares of common stock), fully paid and
non-assessable, and are owned beneficially and of record; and (2) 4,000
shares are validly issued and outstanding as Series B Convertible
Preferred Stock, fully paid and non-assessable, and are owned beneficially
and of record; (c) 90,000 qualified stock options, each exercisable into
one share of common stock; (d) 1,138,000 nonqualified stock options, each
exercisable into one share of common stock; and (e) 4,911,592 warrants to
purchase common stock, each exercisable into one share of common stock.
After giving effect to the consummation of the transactions contemplated
by this Agreement, Borrower's capitalization shall remain unchanged,
except that Cameron's 4,000 shares of Series B Convertible Preferred Stock
shall be exchanged in accordance with Article 2.
(b) Upon issuance in accordance with the terms hereof the Common
Shares shall be duly authorized, validly issued, fully paid and
non-assessable. The share of common stock issuable upon conversion of the
Convertible Note and upon exercise of the Warrant have been duly reserved
for issuance, and, upon issuance in accordance with the terms of the
Convertible Note or the Warrants, as the case may be, shall be duly
authorized, validly issued, fully paid and non-assessable.
7.8 Debt. After giving effect to the transactions contemplated by
this Agreement, and the making of the Convertible Term Loan and the Line of
Credit Loans to be made on the Closing Date, Borrower has no Debt, except (a)
the Obligations, (b) Debt set forth on the latest Financial Statements delivered
to Agent prior to or on the Closing Date, and (c) trade payables and other
contractual obligations arising in the ordinary course of business.
7.9 Distributions. On and after the Closing Date, no Distribution
has been declared, paid, or made upon or in respect of any capital stock or
other securities of Borrower except as expressly permitted hereby.
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7.10 Title to Property. Borrower has good, indefeasible, and
merchantable title to all of its property (including, without limitation, the
assets reflected on the Financial Statements delivered to Agent, except as
disposed of in the ordinary course of business since the date thereof or as
otherwise expressly permitted hereby), free of all Liens except Permitted Liens.
7.11 Real Estate; Leases. Schedule 7.11 sets forth a correct and
complete list of all Real Estate owned by Borrower, all leases and subleases of
real or personal property by Borrower as lessee or sublessee, and all leases and
subleases of real or personal property by Borrower as lessor, lessee, sublessor
or sublessee. Each of such leases and subleases is valid and enforceable in
accord ance with its terms and is in full force and effect, and no default by
any party to any such lease or sublease exists.
7.12 Proprietary Rights. Schedule 7.12 sets forth a correct and
complete list of all of the Proprietary Rights. None of the Proprietary Rights
is subject to any licensing agreement or similar arrangement except as set forth
on Schedule 7.12. To the best of Borrower's knowledge, none of the Proprietary
Rights infringes on or conflicts with any other Person's property, and no other
Person's property infringes on or conflicts with the Proprietary Rights. The
Proprietary Rights described on Schedule 7.12 constitute all of the property of
such type necessary to the current and anticipated future conduct of Borrower's
business.
7.13 Trade Names. All trade names or styles under which Borrower
will sell Inventory or create Accounts, or to which instruments in payment of
Accounts may be made payable, are listed on Schedule 7.4.
7.14 Litigation. Except as set forth on Schedule 7.14, there is no
pending or (to the best of Borrower's knowledge) threatened, action, suit,
proceeding, or counterclaim by any Person, or investigation by any Public
Authority, or any basis for any of the foregoing, which may materially and
adversely affect the Collateral, the repayment of the Obligations, Agent's or
Lenders' rights under the Loan Documents, or Borrower's or any Subsidiary's
property, business, operations, or condition (financial or otherwise).
7.15 Restrictive Agreements. Borrower is not a party to any contract
or agreement, and is not subject to any charter or other corporate restriction,
which affects its ability to execute, deliver, and perform the Loan Documents
and repay the Obligations or which materially and adversely affects or, insofar
as Borrower can reasonably foresee, could materially and adversely affect,
Borrower's property, business, operations, or condition (financial or
otherwise), or would in any respect materially and adversely affect the
Collateral, the repayment of the Obligations, Agent's or Lenders' rights under
the Loan Documents, or Borrower's or any Subsidiary's property, business,
operations, or condition (financial or otherwise).
7.16 Labor Disputes. Except as set forth on Schedule 7.16, (a) there
is no collective bargaining agreement or other labor contract covering employees
of Borrower or any of its Subsidiaries, (b) no such collective bargaining
agreement or other labor contract is scheduled to expire during the term of this
Agreement and (c) no union or other labor organization is seeking to organize,
or to be recognized as, a collective bargaining unit of employees of Borrower or
any of its
-25-
Subsidiaries or for any similar purpose, and (d) there is no pending or (to the
best of Borrower's knowledge) threatened, strike, work stoppage, material unfair
labor practice claim, or other material labor dispute against or affecting
Borrower, or any of its Subsidiaries or their respective employees.
7.17 Environmental Matters. Except as otherwise disclosed on
Schedule 7.17:
(a) Each of Borrower and its Subsidiaries has complied in all
material respects with all Environmental Laws and health and safety laws
applicable to its property and business, and neither Borrower nor any Subsidiary
nor any of their respective present property or operations, or Seller's past
property or operations, are subject to any order from or agreement with any
Public Authority or private Person respecting (i) compliance with any
Environmental Law or health or safety requirements of law, or (ii) any potential
liabilities and costs or remedial action arising from the Release or threatened
Release of a Contaminant.
(b) Each of Borrower and its Subsidiaries has obtained all
environmental, health and safety permits necessary for its operation, and all
such permits are in good standing and Borrower and such Subsidiaries are in
compliance with all terms and conditions of such permits.
(c) Except as necessary in the ordinary course of business, and in
all cases in compliance with Environmental Laws, neither Borrower nor any of its
Subsidiaries, nor, to the best of Borrower's knowledge, any of Seller or
Seller's predecessors in interest, has generated, handled, used, stored or
disposed of any hazardous or toxic waste or substance, as defined pursuant to 40
CFR Part 261 or any equivalent Environmental Law, on or off its property
(whether or not owned by it), nor has Borrower filed any notice with any Public
Authority indicating such generation, handling, use, storage or disposal.
(d) Borrower has no material contingent liability with respect to
non-compliance with any Environmental Laws or any Release or threatened Release
of a Contaminant or the generation, handling, use, storage, or disposal of
hazardous or toxic wastes or substances.
(e) Neither Borrower nor any of its Subsidiaries, nor to the best of
Borrower's knowledge, any of Seller or Seller's predecessors in interest, has
received any summons, complaint, order or similar notice that it is not in
compliance with, or that any Public Authority is investigating its compliance
with, any Environmental Laws or health and safety laws or that it is or may be
liable to any other Person as a result of a Release or threatened Release of a
Contaminant.
(f) Except as necessary in the ordinary course of business, and in
all cases in compliance with Environmental Laws, there is not now, nor has there
ever been on or in the Premises: (i) any generation, treatment, recycling,
storage or disposal of any hazardous waste, as that term is defined under 40 CFR
Part 261 or any equivalent Environmental Law; (ii) any underground storage tanks
or surface impoundments; (iii) any asbestos containing material, or (iv) any
polychlorinated biphenyls (PCBs) used in hydraulic oils, electrical transformers
or other equipment.
(g) Neither Borrower nor any of its Subsidiaries has filed any
notice under any applicable Environmental Law reporting a Release of a
Contaminant into the environment.
-26-
(h) No Environmental Lien has attached to any property of Borrower
or any Subsidiary.
(i) No Environmental Property Transfer Acts are applicable to the
transactions contemplated by this Agreement and Borrower has provided all
notices and obtained all necessary environmental permit transfers and consents,
if any, required in order to consummate the transactions contemplated by this
Agreement or to perfect Agent's Liens and to operate Borrower's business as
presently or proposed to be operated.
7.18 No Violation of Law. Neither Borrower nor any of its
Subsidiaries is in violation of any law, statute, regulation, ordinance,
judgment, order, or decree applicable to it which violation would in any respect
materially and adversely affect the Collateral, the repayment of the
Obligations, Agent's or Lenders' rights under the Loan Documents, or Borrower's
or any Subsidiary's property, business, operations, or condition (financial or
otherwise).
7.19 No Default. Neither Borrower nor any of its Subsidiaries is in
default with respect to any note, indenture, loan agreement, mortgage, lease,
deed, or other agreement to which Borrower is a party or by which it is bound,
which default would materially and adversely affect the Collateral, the
repayment of the Obligations, Agent's or Lenders' rights under the Loan
Documents, or Borrower's or any Subsidiary's property, business, operations, or
condition (financial or other wise).
7.20 ERISA. (a) Neither Borrower nor any ERISA Affiliate maintains
or contributes to any Plan other than those listed on Schedule 7.21.
(b) No Plan has been terminated or partially terminated or is
insolvent or in reorganization, nor have any proceedings been instituted to
terminate or reorganize any Plan.
(c) Neither Borrower nor any ERISA Affiliate has any withdrawal
liability, including contingent withdrawal liability, to any Benefit Plan
pursuant to Title IV of ERISA.
(d) Neither Borrower nor any ERISA Affiliate has incurred any
liability to the PBGC which remains outstanding other than the payment of
premiums, and there are no premium payments which have become due which are
unpaid.
(e) No Benefit Plan has incurred any accumulated funding deficiency
(as defined in Sections 302(a)(2) of ERISA and 412(a) of the Code), whether or
not waived.
(f) Neither Borrower nor any ERISA Affiliate has breached any of the
respon sibilities, obligations or duties imposed on it by ERISA or regulations
promulgated thereunder with respect to any Plan. Each Plan is in substantial
compliance with ERISA, and neither Borrower nor any ERISA Affiliate has received
any notice asserting that a Plan is not in compliance with ERISA.
(g) Each Plan which is intended to be a qualified Plan has been
determined by the IRS to be qualified under Section 401(a) of the Code as
currently in effect and each trust related to
-27-
such Plan has been determined to be exempt from federal income tax under Section
501(a) of the Code.
(h) Except as provided on Schedule 7.21, neither Borrower nor any
ERISA Affiliate maintains or contributes to any employer welfare benefit plan
within the meaning of Section 3(1) of ERISA which provides benefits to employees
after termination of employment other than as required by Section 601 of ERISA.
(i) Schedule B to the most recent annual report filed with the IRS
with respect to each Benefit Plan and furnished to Agent is complete and
accurate. Since the date of each such Schedule B, there has been no adverse
change in funding status or financial condition of the Benefit Plan relating to
such Schedule B.
(j) Neither Borrower nor any ERISA Affiliate has failed to make a
required installment under subsection (m) of Section 412 of the Code or any
other payment required under Section 412 of the Code on or before the due date
for such installment or other payment.
(k) Neither Borrower nor any ERISA Affiliate is required to provide
security to a Plan under Section 401(a)(29) of the Code due to a Plan amendment
that results in an increase in current liability for the plan year.
(l) Neither Borrower nor any ERISA Affiliate nor any fiduciary of
any Plan which is not a Multiemployer Plan (i) has engaged in a nonexempt
prohibited transaction described in Sections 406 of ERISA or 4975 of the Code or
(ii) has taken or failed to take any action which would constitute or result in
a Termination Event.
(m) Neither Borrower nor any ERISA Affiliate has failed to make a
required contribution or payment to a Multiemployer Plan nor has Borrower or any
ERISA Affiliate made a complete or partial withdrawal under Sections 4203 or
4205 of ERISA from a Multiemployer Plan.
(n) Borrower has given to Agent copies of all of the following: each
Benefit Plan and related trust agreement (including all amendments to such Plan
and trust) in existence or committed to as of the date hereof and the most
recent summary plan description, actuarial report, determination letter issued
by the IRS and Form 5500 filed in respect of each such Benefit Plan in
existence; a listing of all of the Multiemployer Plans with the aggregate amount
of the most recent annual contributions required to be made by Borrower and all
ERISA Affiliates to each such Multiemployer Plan, any information which has been
provided to Borrower or an ERISA Affiliate regarding withdrawal liability under
any Multiemployer Plan and the collective bargaining agreement pursuant to which
such contribution is required to be made; each employee welfare benefit plan
within the meaning of Section 3(1) of ERISA which provides benefits to employees
after termination of employment other than as required by Section 601 of ERISA,
the most recent summary plan description for such plan and the aggregate amount
of the most recent annual payments made to terminated employees under each such
Plan.
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(o) Neither Borrower nor any ERISA Affiliate has, or would
reasonably be expected to have, any liability under Sections 4063, 4064, 4069,
4204 or 4212(c) of ERISA.
7.21 Taxes. Borrower has filed all tax returns and other reports
which it was required by law to file on or prior to the date hereof and has paid
all taxes assessments, fees, and other governmental charges, and penalties and
interest, if any, against it or its property, income, or franchise, that are due
and payable.
7.22 Investment Act. Neither Borrower nor any of its Subsidiaries is
an "invest ment company" nor an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are defined
in the Investment Company Act of 1940, as amended (15 U.S.C. ss. 80(a)(1), et
seq.), nor is Borrower or any Subsidiary subject to any other state or federal
regulation limiting its ability to incur Debt. The making of the Line of Credit
Loans, the Convertible Term Loan, and other financial accommodations hereunder
by Agent and Lenders, the application of the proceeds and repayment thereof by
Borrower and the consummation of the other transactions contemplated by this
Agreement and the Loan Documents do not violate any provisions of such laws or
any rule, regulation or order issued by the Securities and Exchange Commission
or other Public Authority thereunder.
7.23 Margin Securities. Neither Borrower nor any of its Subsidiaries
owns any "margin security," as that term is defined in Regulations G and U of
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), and the proceeds of the Line of Credit Loans, the Convertible Term
Loan, and the other financial accommodations made pursuant to this Agreement
will be used only for the purposes contemplated hereunder. None of the
transactions contemplated by this Agreement will violate Regulations G, T, U or
X of the Federal Reserve Board. None of the Line of Credit Loans, the
Convertible Term Loan, or the other financial accommodations hereunder will be
used, directly or indirectly, for the purpose of purchasing or carrying any
margin security, for the purpose of reducing or retiring any Debt or other
Person's indebtedness which was originally incurred to purchase or carry any
margin security, or for any other purpose which might cause any such loan or
other financial accommodation to be considered a "purpose credit" within the
meaning of Regulation G, U or X of the Federal Reserve Board. Borrower will
neither take nor permit any agent acting on its behalf to take any action which
might cause any transaction, obligation or right created by this Agreement, or
any document or instrument delivered pursuant hereto, to violate any regulation
of the Federal Reserve Board.
7.24 Disclosure. Neither this Agreement nor any document or
statement furnished to Agent or any Lender by or on behalf of Borrower hereunder
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein or therein not
misleading.
7.25 Bank Accounts. Schedule 7.26 contains an accurate list of (a)
all bank accounts maintained by Borrower with any bank or other financial
institution and (b) all corporate credit cards and bank cards of Borrower (which
cards shall be terminated before the Closing Date in accordance with Section
8.27).
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7.26 Public Utility Holding Company. Borrower is not a "holding
company" or a "subsidiary company" of a "holding company" or an Affiliate of a
"holding company" within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
7.27 Broker's Fees. No broker or finder is entitled to receive
compensation for services rendered with respect to the transactions contemplated
by this Agreement, except as disclosed by Borrower to Agent in writing prior to
the Closing Date.
7.28 Transactions with Affiliates. Except as disclosed on Schedule
7.29, Borrower has no agreements with or obligations to any Affiliates,
including without limitation, any agreement to sell, transfer, distribute, or
pay any money or property or to pay any fees or expenses of any nature
(including, but not limited to, any fees or expenses for management services) to
any Affiliate or employee thereof, or lend or advance money or property to any
Affiliate or employee thereof, or invest in (by capital contribution or
otherwise) or purchase or repurchase any stock or indebtedness, or any property,
of any Affiliate or employee thereof, or become liable on any guaranty of the
indebtedness, dividends, or other obligations of any Affiliate or employee
thereof.
ARTICLE 8 - AFFIRMATIVE AND NEGATIVE COVENANTS
Borrower covenants that, so long as any of the Obligations remain
outstanding or this Agreement is in effect:
8.1 Taxes and Other Obligations. Borrower shall, and shall cause
each of its Subsidiaries to, (a) file when due all tax returns and other reports
which it is required to file, (b) pay, or provide for the payment, when due, of
all taxes, fees, assessments and other governmental charges against it or upon
its property, income and franchises, make all required withholding and other tax
deposits, and establish adequate reserves for the payment of all such items, and
provide to Agent, upon request, satisfactory evidence of its timely compliance
with the foregoing and (c) pay when due all claims of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons, and all other
indebtedness owed by it and perform and discharge in a timely manner all other
obligations undertaken by it; provided, however, that Borrower and its
Subsidiaries need not pay any tax, fee, assessment, governmental charge, or
Debt, or discharge any other obligation, that any of them is contesting in good
faith by appropriate proceedings diligently pursued, and for which adequate
reserves are maintained, so long as no Lien, other than a Permitted Lien,
results from such non-payment.
8.2 Corporate Existence and Good Standing. Borrower shall, and shall
cause each of its Subsidiaries to, maintain its corporate existence and its
qualification and good standing in all states necessary to conduct its business
and own its property, and shall obtain and maintain all licenses, permits,
franchises and governmental authorizations necessary to conduct its business and
own its property.
8.3 Compliance with Law and Agreements. Borrower shall, and shall
cause each of its Subsidiaries to, comply with the material terms and provisions
of each judgment, law, statute,
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rule, and governmental regulation applicable to it and each material contract,
mortgage, lien, lease, indenture, order, instrument, agreement, or document to
which it is a party or by which it is bound.
8.4 Maintenance of Property. Borrower shall, and shall cause each of
its Subsidiaries to, maintain all of its property necessary and useful in its
business in good operating condition and repair, ordinary wear and tear
excepted.
8.5 Insurance. Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, with financially sound and reputable insurers,
insurance against loss or damage by fire with extended coverage; theft,
burglary, pilferage and loss in transit; public liability and third party
property damage; larceny, embezzlement or other criminal liability; business
interruption; public liability and third party property damage; and such other
hazards or of such other types as is customary for Persons engaged in the same
or similar business, as Agent shall specify, in amounts, and under policies
acceptable to Agent. Borrower shall also maintain flood insurance, in the event
of a designation of the area in which any Real Estate is located as "flood
prone" or a "flood risk area," as defined by the Flood Disaster Protection Act
of 1973, in an amount to be reasonably determined by Agent, and shall comply
with the additional requirements of the National Flood Insurance Program as set
forth in said Act. Borrower shall also maintain, for the benefit of its officers
and directors, insurance with financially sound and reputable insurers against
loss or damage for the acts or omissions of its officers and directors with
coverage amounts not less than $3,000,000.
Borrower shall cause Agent to be named in each such policy as
secured party or mortgagee and loss payee or additional insured, in a manner
acceptable to Agent. Each policy of insurance shall contain a clause or
endorsement requiring the insurer to give not less than thirty (30) days' prior
written notice to Agent in the event of cancellation of the policy for any
reason whatsoever and a clause or endorsement stating that the interest of Agent
and Lenders shall not be impaired or invalidated by any act or neglect of
Borrower or the owner of any premises for purposes more hazardous than are
permitted by such policy. All premiums for such insurance shall be paid by
Borrower when due, and certificates of insurance and, if requested, photocopies
of the policies shall be delivered to Agent. If Borrower fails to procure such
insurance or to pay the premiums therefor when due, Agent may (but shall not be
required to) do so and charge the costs thereof to Borrower's loan account as a
Line of Credit Loan.
Borrower shall promptly notify Agent of any material loss, damage,
or destruction to the Collateral or arising from its use, whether or not covered
by insurance. Agent is hereby authorized to collect all insurance proceeds
directly. After deducting from such proceeds the expenses, if any, incurred by
Agent and Lenders in the collection or handling thereof, Agent may apply such
proceeds to the reduction of the Obligations in such order as Agent determines,
or at Agent's option, may permit or require Borrower to use such money, or any
part thereof, to replace, repair, restore or rebuild the Collateral in a
diligent and expeditious manner with materials and workmanship of substantially
the same quality as existed before the loss, damage or destruction. Without
limiting the foregoing, in case of any loss, damage or destruction with respect
to any of the Equipment or Real Estate, including any improvements, Agent is
authorized to collect all insurance proceeds payable in connection therewith and
apply them at its option, to the reduction of the Loans (applying such proceeds
to the Obligations as set forth in Article 4) or to any of the other Obligations
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then due hereunder. Agent may, at its option, permit or require Borrower to use
any such insurance proceeds, or any part thereof, to replace, or to repair,
restore or rebuild, the lost, damaged or destroyed property. If the lost,
damaged or destroyed property is to be replaced, repaired, restored or rebuilt,
such replacement, repair, restoration or rebuilding shall be done with materials
and workmanship of substantially as good a quality as existed before such loss,
damage or destruction, and Borrower shall commence the work of replacement,
repair, restoration or rebuilding as soon as practicable and proceed diligently
with it until completion. Plans and specifications for any such repair or
restoration shall be reasonably satisfactory to Agent and shall be submitted to
Agent prior to commencement of the work and shall be subject to the reasonable
approval of Agent.
8.6 Condemnation. Borrower shall, immediately upon learning of the
institution of any proceeding for the condemnation or other taking of any of its
property, notify Agent of the pendency of such proceeding, and agrees that Agent
may participate in any such proceeding, and Borrower from time to time will
deliver to Agent all instruments reasonably requested by Agent to permit such
participation. Agent is authorized to collect the proceeds of any condemnation
claim or award and apply them, at its option, to the reduction of the Loans or
to any of the other Obligations then due. If the condemned property is to be
replaced, repaired, restored or rebuilt, such replacement, repair, restoration
or rebuilding shall be done with materials and workmanship of substantially as
good a quality as existed before such loss, damage or destruction, and Borrower
shall commence the work of replacement, repair, restoration or rebuilding as
soon as practicable and proceed diligently with it until completion. Plans and
specifications for any such repair or restoration shall be reasonably
satisfactory to Agent and shall be submitted to Agent prior to commencement of
the work and shall be subject to the reasonable approval of Agent.
8.7 Environmental Laws. Borrower shall, and shall cause each of its
Subsidiaries to, conduct its business in full compliance with all Environmental
Laws applicable to it, including, without limitation, those relating to the
generation, handling, use, storage, and disposal of hazardous and toxic wastes
and substances. Borrower shall, and shall cause each of its Subsidiaries to,
take prompt and appropriate action to respond to any non-compliance with
Environmental Laws and shall regularly report to Agent on such response.
Whenever Borrower gives notice to Agent pursuant to Section 6.3(f), Borrower
shall, at Agent's request and Borrower's expense (a) cause an independent
environmental engineer acceptable to Agent to conduct such tests of the site
where the non-compli ance or alleged non-compliance with Environmental Laws has
occurred and prepare and deliver to Agent a report setting forth the results of
such tests, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof and (b) provide to Agent
a supplemental report of such engineer whenever the scope of the environmental
problems, or the response thereto or the estimated costs thereof, shall change.
8.8 ERISA. (a) Borrower shall, and shall cause each of its ERISA
Affiliates to, establish, maintain and operate all Plans to comply in all
material respects with the provisions of ERISA, the Code, all regulations and
interpretations promulgated thereunder, and all other applicable laws and
regulations.
(b) Borrower shall not, and shall not permit any ERISA Affiliate, to:
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(i) Engage in any prohibited transaction described in Sections 406
of ERISA or 4975 of the Code for which a statutory or class exemption is
not available or a private exemption has not been previously been obtained
from the DOL;
(ii) Permit to exist any accumulated funding deficiency (as defined
in Section 302 of ERISA and Section 412 of the Code) whether or not
waived;
(iii) Fail to pay timely required contributions or annual
installments due with respect to any waived funding deficiency to any
Benefit Plan;
(iv) Terminate any Benefit Plan which would result in any liability
of Borrower or an ERISA Affiliate under Title IV of ERISA;
(v) Fail to make any contribution or payment to any Multiemployer
Plan which Borrower or any ERISA Affiliate may be required to make under
any agree ment relating to such Multiemployer Plan, or any law pertaining
thereto;
(vi) Fail to pay any required installment under section (m) of
Section 412 of the Code or any other payment required under Section 412 of
the Code on or before the due date for such installment or other payment;
or
(vii) Amend a Plan resulting in an increase in current liability for
the plan year such that Borrower or any ERISA Affiliate is required to
provide security to such Plan under Section 401(a)(29) of the Code.
8.9 Mergers, Consolidations, Acquisitions, or Sales. Neither
Borrower nor any of its Subsidiaries shall enter into any transaction of merger,
reorganization, or consolidation, or transfer, sell, assign, lease, or otherwise
dispose of all or any part of its property, or wind up, liquidate or dissolve,
or agree to do any of the foregoing, except (a) for sales of Inventory in the
ordinary course of its business and (b) as otherwise expressly permitted hereby.
8.10 Distributions; Capital Change. Neither Borrower, nor any of its
Subsidiaries shall (a) directly or indirectly declare or make, or incur any
liability to make, any Distribution, except Distributions to Borrower by a
Subsidiary wholly owned by Borrower or by one or more other Subsidiaries that
are wholly owned by Borrower or (b) make any change in its capital structure
which could adversely affect the repayment of the Obligations.
8.11 Transactions Affecting Collateral or Obligations. Neither
Borrower nor any of its Subsidiaries shall enter into any transaction which
materially and adversely affects the Collateral or Borrower's ability to repay
the Obligations.
8.12 Guaranties. Neither Borrower nor any of its Subsidiaries shall
make, issue, or become liable on any Guaranty, except Guaranties in favor of
Agent and Lenders.
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8.13 Debt. Neither Borrower nor any Subsidiary shall incur or
maintain any Debt, other than: (a) the Obligations; (b) trade payables and
contractual obligations to suppliers and customers incurred in the ordinary
course of business; (c) obligations to fund any of Borrower's pension or
employee benefit plans in the ordinary course of business; (d) liability for
employees' salaries incurred in the ordinary course of business; (e) tax
liability incurred in the ordinary course of business; and (f) other Debt
existing on the Closing Date and reflected in the audited Financial Statements
delivered to Agent.
8.14 Prepayment. Borrower shall not voluntarily prepay any Debt
(other than prepayment of trade payables in the ordinary course of business),
except the Obligations in accordance with their terms.
8.15 Transactions with Affiliates. Neither Borrower nor any of its
Subsidiaries shall, sell, transfer, distribute, or pay any money or property,
including, but not limited to, any fees or expenses of any nature (including,
but not limited to, any fees or expenses for management services) to any
Affiliate or employee thereof, or lend or advance money or property to any
Affiliate or employee thereof, or invest in (by capital contribution or
otherwise) or purchase or repurchase any stock or indebtedness, or any property,
of any Affiliate or employee thereof, or become liable on any Guaranty of the
indebtedness, dividends, or other obligations of any Affiliate or employee
thereof, except for actual and reasonable expenses incurred and approved in
advance in writing by the Crisis Manager and other expenses permitted to be
incurred in accordance with Section 8.27.
8.16 Investment Banking and Finder's Fees. Neither Borrower nor any
of its Subsidiaries shall pay or agree to pay, or reimburse any other party with
respect to, any investment banking or similar or related fee, underwriter's fee,
finder's fee, or broker's fee to any Person in connection with this Agreement.
Borrower shall defend and indemnify each of Agent and Lenders against and hold
it harmless from all claims of any Person for any such fees, and all costs and
expenses (including without limitation, attorneys' fees) incurred by Agent or
Lenders in connection therewith.
8.17 Business Conducted. Borrower and its Subsidiaries shall not
engage, directly or indirectly, in any line of business other than the
businesses in which Borrower and its Subsidiaries are engaged on the Closing
Date.
8.18 Liens. Neither Borrower nor any of its Subsidiaries shall
create, incur, assume, or permit to exist any Lien on any property now owned or
hereafter acquired by any of them, except Permitted Liens.
8.19 Sale and Leaseback Transactions. Neither Borrower nor any of
its Subsidiaries shall, directly or indirectly, enter into any arrangement with
any Person providing for Borrower or a Subsidiary to lease or rent property that
Borrower or a Subsidiary has or will sell or otherwise transfer to such Person.
8.20 New Subsidiaries. Borrower shall not, directly or indirectly,
organize or acquire any Subsidiary.
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8.21 Restricted Investments. Neither Borrower nor any of its
Subsidiaries shall make any Restricted Investment.
8.22 Capital Expenditures. Neither Borrower nor any of its
Subsidiaries shall make or incur any Capital Expenditure if, after giving effect
thereto, the aggregate amount of all Capital Expenditures by Borrower and its
Subsidiaries on a consolidated basis would exceed (i) $240,000 from and after
the Closing Date through the end of Fiscal Year 1997 and (ii) in any Fiscal Year
thereafter, an amount equal to depreciation expense for tangible personal
property for the immediately preceding Fiscal Year, as determined in accordance
with GAAP applied consistently with the Financial Statements.
8.23 Operating Lease Obligations. Neither Borrower nor any of its
Subsidiaries shall enter into any lease of real or personal property as lessee
or sublessee (other than a Capital Lease), if, after giving effect thereto, the
aggregate amount of Rentals (as hereinafter defined) payable by Borrower and its
Subsidiaries on a consolidated basis in any Fiscal Year in respect of such lease
and all such leases would exceed $150,000 (such amount being referred to herein
as "Permitted Rentals"). The term "Rentals" means all payments due from the
lessee or sublessee under a lease, including, without limitation, basic rent,
percentage rent, property taxes, utility or maintenance costs, and insurance
premiums.
8.24 [Reserved]
8.25 General and Administration Expense. Borrower covenants that
within sixty (60) days after the Closing date its consolidated selling, general,
and administrative expenses (exclusive of compensation to the Crisis Manager),
as reflected on Borrower's books and records and determined in accordance with
GAAP, shall not exceed $100,000 for any calendar month.
8.26 Use of Proceeds. Borrower shall not use the proceeds any Line
of Credit Loans for any payment not expressly set forth on the Use of Proceeds
Schedule applicable to such Line of Credit Loan.
8.27 Termination of Employee Accounts; Reimbursement of Employee
Expenses. Commencing upon the making of the initial advance under the Line of
Credit Loan, there shall be no corporate credit cards or bank cards, upon which
Borrower could be obligated, issued or outstanding to Borrower's employees,
officers, or directors. Borrower agrees that no employee, officer, or director
of Borrower shall be reimbursed for any out of pocket expense unless such
expense is incurred in accordance with Borrower's established company expense
policy and the party seeking reimbursement provides Borrower with reasonable and
customary evidence of incurring such expense prior to reimbursement; provided
however that, in addition to the foregoing restrictions, no expense in excess of
$250 per transaction shall be reimbursed by Borrower unless previously approved
by the Company's Chief Executive Officer.
8.28 [Reserved]
8.29 [Reserved]
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8.30 Election of Board Members; Attendance at Board Meetings.
Borrower shall cause the election to the board of directors of Borrower of up to
three (3) directors which have been designated by Agent in its sole discretion,
including the individuals initially appointed to the board of directors pursuant
to Section 9.1(g), and any successors thereto designated by Agent from time to
time. Neither the number of directors of Borrower nor the size of the board of
directors of Borrower shall ever exceed five (5) without Agent's prior written
consent. Whether or not Agent shall have appointed any director pursuant to the
preceding sentence, Borrower shall give Agent written notice of each meeting of
Borrower's board or directors and each committee thereof at the same time and in
the same manner as notice is given to the directors, and Borrower shall permit
representatives chosen by Agent to attend as an observer of all meetings of its
board of directors and all committees thereof, including telephonic meetings.
Unless such observer is a director, such observer(s) shall have no right to vote
at any such meetings. Such representative will receive all written materials and
other information given to directors in connection with such meetings at the
same time such materials and information are given to Borrower's directors,
including, without limitation, copies of all minutes and resolutions of
directors meetings. If Borrower proposes to take any action by written consent
in lieu of a meeting of its board of directors or of any committee thereof,
Borrower will give written notice thereof to Agent prior to the effectiveness of
such consent describing in reasonable detail the nature and substance of such
action. Borrower will pay the reasonable out-of-pocket expenses of the
representative(s) incurred in connection with attending such board and committee
meetings.
8.31 Registration Rights. In accordance with the terms of the
Registration Rights Agreement, Borrower shall cause a registration statement to
be filed on or before May 1, 1997 and such registration statement shall be
effective on or before June 30, 1997.
8.32 Fiscal Year. Borrower will not change its Fiscal Year from a
Fiscal Year ending on the last day of December.
8.33 Further Assurances. Borrower shall execute and deliver, or
cause to be executed and delivered, to Agent such documents and agreements, and
shall take or cause to be taken such actions, as Agent may, from time to time,
request to carry out the terms and conditions of this Agreement and the other
Loan Documents.
ARTICLE 9 - CONDITIONS OF LENDING
9.1 Conditions Precedent to Making of Loans on the Closing Date. The
obligation of Lenders to make the initial Line of Credit Loan on the Closing
Date and to make the Convertible Term Loan is subject to the following
conditions precedent having been satisfied in a manner satisfactory to Agent:
(a) Borrower shall have performed and complied with all covenants,
agreements and conditions contained herein which are required to be
performed or complied with by Borrower before or on such Closing Date.
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(b) Agent shall have received a certificate dated such Closing Date
and signed by the chief executive officer and the chief financial officer
of Borrower certifying that the conditions specified in Subsection 9.1(a)
above have been fulfilled.
(c) Borrower shall have executed and delivered to Agent and Agent
shall have received all Loan Documents and all items on the List of
Closing Documents attached hereto as Exhibit D which are not elsewhere
identified in this Article 9, such items to be in form and substance
satisfactory to Agent, and to be executed by all parties thereto when the
nature of such items so requires.
(d) Borrower shall have paid to Agent all fees, costs, and expenses
(including, without limitation, the attorneys' and paralegals' fees and
disbursements of Xxxxxxxx & Xxxxxx in an amount not to exceed $50,000)
incurred by Agent and Lenders as of the Closing Date in connection with
the negotiation, preparation, and consummation of this Agreement, the
other Loan Agreements and the transactions contemplated thereby.
(e) Each of Xxxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxxxx shall have
executed and delivered (i) resignation letters in form and substance
satisfactory to Agent and (ii) Consulting Agreements in form and substance
satisfactory to Agent, it being understood and agreed that it is a further
condition to the making of the Line of Credit Loan that Xx. Xxxxxxxxx'x
resignation and his Consulting Agreement shall have taken effect.
(f) Borrower shall have delivered to Agent the written waiver, in
form and substance satisfactory to Agent, of Xxxxxxxxxx Xxxx & Xxxx to any
rights it may have to any fees in connection with the transactions
contemplated by this Agreement.
(g) Borrower shall have caused to be elected to the board of
directors of Borrower up to three individuals designated by Agent and
shall have caused the resignation (as evidenced by an executed original
letter of resignation) of any and all board members other than Messrs.
Xxxxxxxxx and Xxxxxxxx.
(h) All proceedings taken in connection with the execution of this
Agreement, the Convertible Note, all other Loan Documents and all
documents and papers relating thereto shall be satisfactory to Agent.
Agent shall have received copies of such documents and papers as Agent may
reasonably request in connection therewith, all in form and substance
satisfactory to Agent.
The acceptance by Borrower of any Loans made on the Closing Date shall be deemed
to be a representation and warranty made by Borrower to the effect that all of
the conditions to the making of such Loans set forth in this Section 9.1 have
been satisfied, with the same effect as delivery to Agent of a certificate
signed by the president and chief financial officer of Borrower, dated the
Closing Date, to such effect.
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9.2 Conditions Precedent to Each Loan. Lenders shall not be
obligated to make the Loans and the Loans shall be made by Lenders only in their
sole discretion; further, Agent and Lenders may require that certain conditions
precedent be satisfied before making any Loan, which shall include, without
limitation that on the date of any such extension of credit:
(a) the following statements shall be true, and the acceptance by
Borrower of any extension of credit shall be deemed to be a statement to
the effect set forth in clauses (i) and (ii), with the same effect as the
delivery to Agent of a certificate signed by the president and chief
financial officer of Borrower, dated the date of such extension of credit,
stating that:
(i) The representations and warranties contained in this
Agreement and the other Loan Documents are correct in all material
respects on and as of the date of such extension of credit as though
made on and as of such date, except to the extent Agent has been
notified by Borrower that any representation or warranty is not
correct and Agent has explicitly waived in writing compliance with
such representation or warranty; and
(ii) No event has occurred and is continuing, or would result
from such extension of credit, which constitutes a Default or an
Event of Default; and
(b) Agent shall have received a Use of Proceeds Schedule
satisfactory to it and such other approvals, documents, agreements, or
instruments as it may request, including without limitation, evidence that
all Liens on the Collateral granted and purported to be granted by
Borrower hereunder have attached, are perfected, and are first priority
Liens on the Collateral;
(c) no order, judgment or decree of any Public Authority and no law,
rule or regulation applicable to Agent or Lenders shall purport by its
terms to enjoin, restrain or otherwise prohibit the making of such Loan;
and
(d) since the Closing Date, no material adverse change shall have
occurred with respect to the business, operations, assets or condition
(financial or otherwise) of Borrower and its subsidiaries.
ARTICLE 10 - DEFAULT; REMEDIES
10.1 Events of Default. It shall constitute an event of default
("Event of Default") if any one or more of the following shall occur for any
reason:
(a) any failure to pay the principal of or interest or premium on
any of the Loans or other Obligations when due, whether upon demand or
otherwise;
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(b) any representation or warranty made by Borrower in this
Agreement, any of the other Loan Documents, any Financial Statement, or
any certificate furnished by Borrower or any Subsidiary at any time to
Agent or any Lender shall prove to be untrue in any material respect as of
the date on which made;
(c) any failure by Borrower to comply with any of the covenants set
forth in Article 8 of this Agreement;
(d) any failure by Borrower to comply with any of the other
covenants and agreements contained in this Agreement, the Convertible
Note, the Warrants, the Registration Rights Agreement, the Mortgages, the
other Loan Documents, or any other agreement entered into at any time to
which Borrower or any Subsidiary and Agent or any Lender are party, for
more than (i) ten (10) days after notice of such failure by Agent to
Borrower, (ii) ten (10) days after the date that Borrower discovers, or
reasonably should have discovered, such failure, or (iii) if such failure
shall have existed for more than twenty (20) days, upon the earlier of (A)
written notice thereof from Agent to Borrower or (B) Borrower's discovery
of such failure; provided, however, that no such grace period shall apply,
and an Event of Default shall exist promptly upon such failure to comply,
if such failure to comply may not, in Agent's reasonable determination, be
cured by Borrower during such grace period; or if any such agreement,
instrument or document shall terminate (other than in accordance with its
terms or the terms hereof or with the written consent of Agent) or become
void or unenforceable without the written consent of Agent;
(e) default shall occur with respect to any Debt for borrowed money
or any indebtedness for borrowed money of any Subsidiary (other than the
Obligations) in an outstanding principal amount in excess of $25,000 or
under any agreement or instrument under or pursuant to which any such Debt
or indebtedness may have been issued, created, assumed, or guaranteed by
Borrower or any Subsidiary, and such default shall continue for more than
the period of grace, if any, therein specified, if the effect thereof
(with or without the giving of notice or further lapse of time or both) is
to accelerate, or to permit the holders of any such Debt or indebtedness
to accelerate, the maturity of any such Debt; or any such Debt or
indebtedness shall be declared due and payable or be required to be
prepaid (other than by a regularly scheduled required prepayment) prior to
the stated maturity thereof;
(f) Borrower or any Subsidiary shall (i) file a voluntary petition
in bankruptcy or file a voluntary petition or an answer or otherwise
commence any action or proceeding seeking reorganization, arrangement or
readjustment of its debts or for any other relief under the federal
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency
act or law, state or federal, now or hereafter existing, or consent to,
approve of, or acquiesce in, any such petition, action or proceeding; (ii)
apply for or acquiesce in the appointment of a receiver, assignee,
liquidator, sequestrator, custodian, trustee or similar officer for it or
for all or any part of its
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property; (iii) make an assignment for the benefit of creditors; or (iv)
be unable generally to pay its debts as they become due;
(g) an involuntary petition shall be filed or an action or
proceeding otherwise commenced seeking reorganization, arrangement or
readjustment of Borrower's or any Subsidiary's debts or for any other
relief under the federal Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency act or law, state or federal, now or hereafter
existing;
(h) a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for Borrower or any Subsidiary or for all or
any part of their property shall be appointed; or a warrant of attachment,
execution or similar process shall be issued against any part of the
property of Borrower or any Subsidiary;
(i) Borrower or any Subsidiary shall file a certificate of
dissolution under applicable state law or shall be liquidated, dissolved
or wound-up or shall commence or have commenced against it any action or
proceeding for dissolution, winding-up or liquidation, or shall take any
corporate action in furtherance thereof;
(j) all or any material part of the property of Borrower or any
Subsidiary shall be nationalized, expropriated or condemned, seized or
otherwise appropriated, or custody or control of such property or of
Borrower or any Subsidiary shall be assumed by any Public Authority or any
court of competent jurisdiction at the instance of any Public Authority,
except where contested in good faith by proper proceedings diligently
pursued where a stay of enforcement is in effect;
(k) for any reason other than the failure of Agent to take any
action available to it to maintain perfection of the Liens created in
favor of Agent or any Lender pursuant to the Loan Documents, any Loan
Document ceases to be in full force and effect or any Lien with respect to
any material portion of the Collateral intended to be secured thereby
ceases to be, or is not, valid, perfected and prior to all other Liens
(other than Permitted Liens) or is terminated, revoked or declared void;
(l) one or more final judgments for the payment of money aggregating
in excess of $25,000 (whether or not covered by insurance) shall be
rendered against Borrower which is not discharged in full or stayed within
thirty (30) days from the date of entry thereof;
(m) any loss, theft, damage or destruction of any item or items of
Collateral occurs which (i) materially and adversely affects the operation
of Borrower's business; or (ii) is material in amount and is not
adequately covered by insurance;
(n) there occurs any material adverse change in Borrower's property,
business, operation, or condition (financial or otherwise);
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(o) there is filed against Borrower any civil or criminal action,
suit or proceeding under any federal or state racketeering statute
(including, without limita tion, the Racketeer Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding (1) is not
dismissed within one hundred twenty (120) days, and (2) could result in
the confiscation or forfeiture of any material portion of the Collateral;
or
(p) a default shall occur under the Registration Rights Agreement.
10.2 Remedies. (a) If a Default or an Event of Default exists, Agent
may, without notice to or demand on Borrower restrict the amount of or refuse to
make Line of Credit Loans. If an Event of Default exists, Agent may, without
notice to or demand on Borrower, do one or more of the following, in addition to
the actions described in the preceding sentence, at any time or times and in any
order: (i) terminate this Agreement and (ii) declare any or all Obligations to
be immediately due and payable (provided however that upon the occurrence of any
Event of Default described in Subsections 10.1(f), 10.1(g), 10.1(h), or 10.1(i),
all Obligations shall automatically become immediately due and payable without
notice or demand of any kind); and pursue its other rights and remedies under
the Loan Documents and applicable law.
(b) If an Event of Default exists: (i) Agent shall have, in addition
to all other rights, the rights and remedies of a secured party under the UCC;
(ii) Agent may, at any time, take possession of the Collateral and keep it on
Borrower's premises, at no cost to Agent or any Lender, or remove any part of it
to such other place or places as Agent may desire, or Borrower shall, upon
Agent's demand, at Borrower's cost, assemble the Collateral and make it
available to Agent at a place reasonably convenient to Agent; and (iii) Agent
may sell and deliver any Collateral at public or private sales, for cash, upon
credit or otherwise, at such prices and upon such terms as Agent deems
advisable, in its sole discretion, and may, if Agent deems it reasonable,
postpone or adjourn any sale of the Collateral by an announcement at the time
and place of sale or of such postponed or adjourned sale without giving a new
notice of sale. Without in any way requiring notice to be given in the following
manner, Borrower agrees that any notice by Agent of sale, disposition or other
intended action hereunder or in connection herewith, whether required by the UCC
or otherwise, shall constitute reasonable notice to Borrower if such notice is
mailed by registered or certified mail, return receipt requested, postage
prepaid, or is delivered personally against receipt, at least five (5) days
prior to such action to Borrower's address specified in or pursuant to Section
12.8. If any Collateral is sold on terms other than payment in full at the time
of sale, no credit shall be given against the Obligations until Agent receives
payment, and if the buyer defaults in payment, Agent may resell the Collateral
without further notice to Borrower. In the event Agent seeks to take possession
of all or any portion of the Collateral by judicial process, Borrower
irrevocably waives: (a) the posting of any bond, surety or security with respect
thereto which might otherwise be required; (b) any demand for possession prior
to the commencement of any suit or action to recover the Collateral; and (c) any
requirement that Agent retain possession and not dispose of any Collateral until
after trial or final judgment. Borrower agrees that Agent and Lenders have no
obligation to preserve rights to the Collateral or marshal any Collateral for
the benefit of any Person. Agent is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, name, trade
secrets, trade names, trademarks, and advertising matter, or any similar
property, in
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completing production of, advertising or selling any Collateral, and Borrower's
rights under all licenses and all franchise agreements shall inure to Agent's
benefit. The proceeds of sale shall be applied first to all expenses of sale,
including attorneys' fees, and second, in whatever order Agent elects, to all
Obligations. Agent will return any excess to Borrower or such other Person as
shall be legally entitled thereto and Borrower shall remain liable for any
deficiency.
(c) If an Event of Default occurs, Borrower hereby waives all rights
to notice and hearing prior to the exercise by Agent of Agent's rights to
repossess the Collateral without judicial process or to replevy, attach or levy
upon the Collateral without notice or hearing.
(d) If Agent terminates this Agreement upon an Event of Default,
Borrower shall pay Agent and Lenders, upon the earlier of Agent's request
therefor or the repayment of the Obligations, a premium equal to the prepayment
premiums that would have been payable under Article 4 if the Loans had been
voluntarily prepaid by Borrower on that date.
(e) Agent and Lenders agree not to initiate proceedings against
Borrower under the Bankruptcy Code for a period of ninety (90) days after the
Closing Date. The foregoing (i) shall not prohibit Agent and Lenders from
participating in any such proceeding if not initiated by Agent or any Lender
during such period and (ii) shall not in any way impair or constrain the
exercise by Agent or any Lender of any of their other rights and remedies under
the Loan Documents, including, without limitation, the rights and remedies set
forth in paragraphs (a), (b), (c), and (d) of this Section.
ARTICLE 11 - TERM AND TERMINATION
11.1 Term and Termination. The term of this Agreement shall end on
October 9 1999 unless earlier terminated pursuant to Article 10. Upon the
effective date of termination of this Agreement for any reason whatsoever, all
Obligations (including, without limitation, all unpaid principal of, accrued
interest on and prepayment premiums or penalties, if any, with respect to the
Convertible Term Loan) shall become immediately due and payable. Notwithstanding
the termination of this Agreement, until all Obligations are paid and performed
in full, Agent and Lenders shall retain all their rights and remedies hereunder
(including, without limitation, Agent's security interest in and all rights and
remedies with respect to all then existing and after-arising Collateral).
ARTICLE 12 - MISCELLANEOUS
12.1 Cumulative Remedies; No Prior Recourse to Collateral. The
enumeration herein of Agent's and Lenders' rights and remedies is not intended
to be exclusive, and such rights and remedies are in addition to and not by way
of limitation of any other rights or remedies that Agent and Lenders may have
under the UCC or other applicable law. Agent shall have the right, in its sole
discretion, to determine which rights and remedies are to be exercised and in
which order. The exercise of one right or remedy shall not preclude the exercise
of any others, all of which shall be cumulative. Agent and Lenders may, without
limitation, proceed directly against Borrower to collect the Obligations without
any prior recourse to the Collateral.
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12.2 No Implied Waivers. No act, failure or delay by Agent or any
Lender shall constitute a waiver of any of its rights and remedies. No single or
partial waiver by Agent or any Lender of any provision of this Agreement or any
other Loan Document, or of breach or default hereunder or thereunder, or of any
right or remedy which Agent or any Lender may have, shall operate as a waiver of
any other provision, breach, default, right or remedy or of the same provisions,
breach, default, right or remedy on a future occasion. No waiver by Agent or any
Lender shall affect its rights to require strict performance of this Agreement.
12.3 Severability. If any provision of this Agreement shall be
prohibited or invalid, under applicable law, it shall be is ineffective only to
such extent, without invalidating the remainder of this Agreement.
12.4 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver. (a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICT OF LAWS PROVISIONS, PROVIDED THAT PERFECTION ISSUES WITH
RESPECT TO ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE MAY GIVE EFFECT TO
APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UNIFORM
COMMERCIAL CODE) OF THE STATE OF ILLINOIS.
(b) SUBJECT ONLY TO THE EXCEPTION IN THE NEXT SENTENCE, BORROWER,
AGENT, AND EACH LENDER HEREBY AGREE TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL
COURT OF THE NORTHERN DISTRICT OF ILLINOIS AND THE STATE COURTS OF ILLINOIS
LOCATED IN XXXX COUNTY, ILLINOIS AND WAIVE ANY OBJECTION BASED ON VENUE OR FORUM
NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN, AND AGREE THAT ANY
DISPUTE CONCERNING THE RELATIONSHIP BETWEEN OR AMONG ANY LENDER, AGENT, AND
BORROWER OR THE CONDUCT OF EITHER PARTY IN CONNECTION WITH THIS AGREEMENT OR
OTHERWISE SHALL BE HEARD ONLY IN THE COURTS DESCRIBED ABOVE. NOTWITHSTANDING THE
FOREGOING: (1) AGENT AND LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR
PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION AGENT DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE
COLLATERAL, REAL ESTATE, OR OTHER SECURITY FOR THE OBLIGATIONS AND (2) EACH OF
THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN
THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE THOSE JURISDICTIONS.
(c) BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED
MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO BORROWER AT ITS ADDRESS SET FORTH IN
SECTION 12.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS
AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS, OR, AT AGENT'S
OPTION, BY SERVICE UPON
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CT CORPORATION SYSTEM, 000 XXXXXX XXXXXX, XXXXXXXXXXX, XXXXXXXX WHICH BORROWER
IRREVOCABLY APPOINTS AS BORROWER'S AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF
PROCESS WITHIN THE STATE OF ILLINOIS. IN ADDITION, AGENT AGREES TO PROMPTLY
FORWARD BY REGISTERED MAIL ANY PROCESS SO SERVED UPON SAID AGENT TO BORROWER AT
ITS ADDRESS SET FORTH IN SECTION 12.8. BORROWER HEREBY CONSENTS TO SERVICE OF
PROCESS AS AFORESAID.
(d) BORROWER, AGENT, AND EACH LENDER EACH HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR EITHER OF THEM IN RESPECT TO
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED, IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE. EACH OF BORROWER, AGENT, AND LENDERS HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT EITHER MAY FILE AN ORIGINAL COUNTERPART
OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) NOTHING IN THIS SECTION 12.4 SHALL AFFECT THE RIGHT OF AGENT OR
ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
THE RIGHT OF AGENT OR ANY LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST
Borrower OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
12.5 Survival of Representations and Warranties. All of Borrower's
representations, and warranties contained in this Agreement shall survive the
execution, delivery, and acceptance thereof by the parties, notwithstanding any
investigation by Agent, Lenders or their agents.
12.6 Other Security and Guaranties. Agent may, without notice or
demand and without affecting Borrower's obligations hereunder, from time to
time: (a) take from any Person and hold collateral (other than the Collateral)
for the payment of all or any part of the Obligations and exchange, enforce or
release such collateral or any part thereof; and (b) accept and hold any
endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations, or any other Person in any way obligated to pay all or
any part of the Obligations.
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12.7 Fees and Expenses. Borrower shall pay to Agent on demand all
costs and expenses that Agent and Lenders pay or incur in connection with the
negotiation, preparation, consummation, administration, enforcement, and
termination of this Agreement and the other Loan Documents, including, without
limitation: (a) attorneys' and paralegals' fees and disbursements of counsel to
Agent and Lenders; (b) costs and expenses (including attorneys' and paralegals'
fees and disbursements) for any amendment, supplement, waiver, consent, or
subsequent closing in connection with the Loan Documents and the transactions
contemplated thereby; (c) costs and expenses of lien and title searches; (d)
taxes, fees and other charges for recording the Mortgages, filing financing
statements and continuations, and other actions to perfect, protect, and
continue Agent's Liens; (e) sums paid or incurred to pay any amount or take any
action required of Borrower under the Loan Documents that Borrower fails to pay
or take; (f) costs of appraisals, inspections, and verifications of the
Collateral; (g) costs and expenses of preserving and protecting the Collateral;
(h) costs and expenses (including attorneys' and paralegals' fees and
disbursements) paid or incurred to obtain payment of the Obligations, enforce
Agent's Liens, sell or otherwise realize upon the Collateral, and otherwise
enforce the provisions of the Loan Documents, or to defend any claims made or
threatened against Agent or Lenders arising out of the transactions contemplated
hereby (including without limitation, preparations for and consultations
concerning any such matters); and (k) all fees payable to Agent as set forth in
Article 3 hereof. The foregoing shall not be construed to limit any other
provisions of the Loan Documents regarding costs and expenses to be paid by
Borrower. Notwithstanding the foregoing, Borrower shall not be responsible for
Agent's and Lenders' fees and expenses in excess of $50,000 for legal counsel in
connection with the closing of the transactions contemplated by this Agreement.
12.8 Notices. Except as otherwise provided herein, all notices,
demands and requests that either party is required or elects to give to the
other shall be in writing, or by a telecommunications device capable of creating
a written record, and any such notice shall become effective (a) upon personal
delivery thereof, including, but not limited to, delivery by overnight mail and
courier service, (b) four (4) days after it shall have been mailed by United
States mail, first class, certified or registered, with postage prepaid, or (c)
in the case of notice by such a telecommunications device, when properly
transmitted, in each case addressed to the party to be notified as follows:
If to Agent: Cameron Capital Ltd.
00 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00
Xxxxxxx
Attention: Nic Xxxxxxxx
Telecopy No. 441.295.9022
with a copy to: Xxxxxxxx & Xxxxxx
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx
Attention: Xxxxxxx X. Xxxx
Telecopy No. 303.628.4240
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If to Borrower: Country Star Restaurants, Inc.
00000 Xxxxx Xxxxxx Xxxx.
Xxx Xxxxxxx, Xxxxxxxxxx
Attention: Chief Operating Officer
Telecopy No. 310.268.2208
with a copy to: Xxxxxxxx Xxxx & Brandeis, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxx
Telecopy No. 212.223.6433
or to such other address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other com munication.
12.9 Indemnity. Borrower agrees to (i) reimburse Agent and Lenders
for any costs and expenses (including, without limitation, attorneys' and
paralegals' fees and expenses) incurred by Agent and Lenders in defending any
suit brought against it by Borrower or any other Person in connection with the
transactions contemplated by this Agreement, and (ii) indemnify and hold Agent
and Lenders and their respective officers, directors, employees, attorneys and
agents (collectively, the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever incurred by
the Indemnitees, whether direct, indirect or consequential, as a result of or
arising from or relating to any proceeding by any Person, whether threatened or
initiated, asserting any claim for legal or equitable remedy against any Person
under any statute or regulation (including, without limitation, any federal or
state securities or commercial laws or under any common law or equitable cause
or otherwise, including any liability and costs under Environmental Laws or
common law principles arising from or in connection with the past, present or
future operations of Borrower or its predecessors in interest, or the past,
present or future environmental condition of Borrower's property, the presence
of asbestos-containing materials at or on such property, or the Release or
threatened Release of any Contaminant from such property), in any way arising
from or in connection with the negotiation, preparation, execution, delivery,
enforcement, performance and administration of this Agreement or any other
document executed in connection herewith, provided that Borrower shall have no
obligation hereunder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of any Indemnitee seeking such
indemnification. To the extent that the indemnity set forth in this Section may
be unenforceable because it is violative of any law or public policy, Borrower
shall pay the maximum portion which it is permitted to pay under applicable law.
Any Indemnitee will promptly notify Borrower of the commencement of any legal
proceeding which may give rise to any indemnified liability under the foregoing
indemnity and shall permit Borrower to participate in the defense of such
Indemnitee in any such proceeding. The foregoing indemnity shall survive the
payment of the Obligations and the termination of this
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Agreement. All of the foregoing fees, costs and expenses shall be part of the
Obligations, payable upon demand, and secured by the Collateral.
12.10 Waiver of Notices. Unless otherwise expressly provided herein,
Borrower waives presentment, protest and notice of demand or dishonor and
protest as to any instrument, as well as any and all other notices to which it
might otherwise be entitled. No notice to or demand on Borrower which Agent or
Lender may elect to give shall entitle Borrower to any or further notice or
demand in the same, similar or other circumstances.
12.11 Binding Effect; Assignment; Disclosure. The provisions of this
Agreement shall be binding upon and inure to the benefit of the respective
representatives, successors and assigns of the parties hereto; provided,
however, that no interest herein may be assigned by Borrower without the prior
written consent of Agent. With respect to Borrower, successors and assigns shall
include, without limitation, any receiver, trustee or debtor-in-possession of or
for Borrower. The rights and benefits of Agent or any Lender hereunder shall, if
Agent and Lenders so agree, inure to any party acquiring any interest in the
Obligations or any part thereof.
12.12 Modification. This Agreement, together with the other Loan
Documents, is intended by Borrower, Agent, and Lenders to be the final,
complete, and exclusive expression of the agreement between them. This Agreement
supersedes any and all prior oral or written agreements relating to the subject
matter hereof. No modification, rescission, waiver, release, or amendment of any
provision of this Agreement shall be made, except by a written agreement signed
by Borrower and a duly authorized officer of each of Agent and Lenders.
12.13 Counterparts. This Agreement may be executed in any number of
counterparts, and by Agent, Lenders and Borrower in separate counterparts, each
of which shall be an original, but all of which shall together constitute one
and the same agreement.
12.14 Captions. The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
12.15 Right of Set Off. Each Lender is hereby authorized from time
to time to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender or any affiliate of such Lender to or for the credit
or the account of Borrower against any and all of the Obligations, whether or
not then due and payable.
12.16 Assignment of a Lender's Interest; Participating Lender's
Security Interests. Agent shall have the right at any time to assign (through
participation, outright assignment, or otherwise) to one or more financial
institutions all or a portion of its Loans owing to it as a Lender and its other
rights and obligations hereunder. If a third party shall at any time participate
with Agent in the Loans, Borrower hereby grants to such participating lender,
and Agent and such participating lender shall have and are hereby given, a
continuing Lien on and security interest in any money, securities and other
property of Borrower in the custody or possession of the participating
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lender, including the right of set-off, to the extent of the participating
lender's participation in the Obligations, and such participating lender shall
be deemed to have the same right of set-off to the extent of participating
lender's participation in the Obligations under this Agreement as it would have
if it were a direct lender. Each reference to "Lender" in this Agreement shall
be a reference to Lender's successors and assigns. Borrower shall only be
required to communicate with and make payments to Agent, on behalf of Lenders,
in connection with the making of and repayment of the Loans. Cameron shall be
the Agent under this Agreement and the other Loan Documents until Cameron (or
its successor) shall notify Borrower of the appointment of a successor Agent.
12.17 Appointment of Agent. Each Lender hereby designates and
appoints Cameron as its Agent under this Agreement and the other Loan Documents,
and each Lender hereby irrevocably authorizes the Agent to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers as are set forth herein or therein, together with
such other powers as are reasonably incidental thereto. The provisions of this
Section are solely for the benefit of the Agent and the Lenders, and Borrower
shall have no rights as a third party beneficiary of any of the provisions
hereof. In performing its functions and duties under this Agreement, the Agent
shall act solely as agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for any Borrower. The Agent may perform any of its duties under this
Agreement, or under the other Loan Documents, by or through its agents or
employees. The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement or in the other Loan Documents.
12.18 Investment Representations of each Lender. (a) Each Lender is
aware that no federal or state agency has passed upon the securities (the
"Securities") evidenced by and issuable in connection with the Warrants and the
Convertible Note or made any finding or determination concerning the fairness of
the investment evidenced thereby; (b) each Lender has had an opportunity to ask
questions of and receive answers from representatives of Borrower concerning the
terms and conditions of such investment (c) the Securities will be acquired for
each Lender's own account, for investment only and not with a view toward resale
or distribution in a manner which would require registration under the
Securities Act; (d) each Lender acknowledges that, until the "Registration
Statement" (as defined in the Registration Rights Agreement) is declared
effective by the SEC, there are substantial restrictions on the transferability
of the Securities as required pursuant to federal and state securities laws; (e)
each Lender agrees to be responsible for compliance with all conditions on
transfer imposed by any state blue sky or securities law; (f) each Lender is an
"accredited investor" as defined in Rule 501(a) under the Securities Act; (g)
each Lender is an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, and is a corporation, Massachusetts or similar
business trust or partnership not formed for the specific purpose of acquiring
the securities offered, with total assets in excess of $5,000,000; (h) each
Lender agrees to furnish any additional information requested to assure
compliance with applicable federal and state securities laws in connection with
the purchase and sale of the Securities; and (f) each Lender acknowledges that
each certificate representing any Securities shall be stamped with a restrictive
legend substantially in the form of Exhibit E attached hereto.
[Signature Page Immediately Follows]
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IN WITNESS WHEREOF, the parties have entered into this Agreement as
of the date first above written.
COUNTRY STAR RESTAURANTS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------
Title: Chief Executive Officer
CAMERON CAPITAL LTD.,
as Agent and as a Lender
By: /s/ X. Xxxxxxxx
----------------------------
Title: Chief Executive Officer
[Signature Page to Loan and Security Agreement]
-49-
EXHIBIT A
to
Loan and Security Agreement
between
Cameron Capital Ltd.,
as Agent for Lenders
and
Country Star Restaurants, Inc.
CONVERTIBLE NOTE
[Attached]
CONVERTIBLE NOTE
$4,000,000 February 12, 1997
FOR VALUE RECEIVED, the undersigned, COUNTRY STAR RESTAURANTS, INC., a
Delaware corporation ("Borrower" or the "Corporation"), HEREBY IRREVOCABLY
PROMISES TO PAY to the order of CAMERON CAPITAL LTD., a Bermuda corporation
(together with its successors and assigns, "Holder"), the principal sum of FOUR
MILLION AND 00/100 DOLLARS ($4,000,000) together with interest on the principal
balance hereof at the rates provided below from the date such principal is
advanced until payment in full thereof.
This Convertible Note is the Convertible Note referred to in, and is
entitled to the benefit of, the Loan and Security Agreement dated as of February
12, 1997 between Borrower and Holder (as amended, restated, supplemented, or
otherwise modified from time to time, the "Loan Agreement"), which Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof and to which reference is hereby made for a more complete
statement of the terms and conditions under which the loan evidenced hereby was
made and is to be repaid. Any capitalized terms used herein, unless otherwise
defined herein, shall have the meanings given to such terms in the Loan
Agreement.
1. Payment of Principal. The entire principal balance of this Convertible
Note shall be payable in immediately available funds on October 9, 1999;
provided, however, that notwithstanding the foregoing, the principal balance
hereof shall be payable in full upon acceleration as provided in the Loan
Agreement. Such principal payment shall be accompanied by a premium calculated
in the same manner as the prepayment premium as set forth in Section 4.
2. Interest. Borrower further promises to pay Holder interest on the
average daily outstanding principal amount hereof, on June 30 and December 31 of
each year, commencing on December 31, 1997, in arrears, at a rate of seven
percent (7%) per annum. Effective immediately upon the occurrence of an Event of
Default, the principal balance hereof and, to the extent permitted by applicable
law, any interest thereon not paid when due, shall bear interest payable upon
Holder's demand therefor at a rate which is ten percent (10.0%) in excess of the
rate otherwise payable under this Convertible Note.
3. Interest Payments After Default; Premium Payable if Registration Not
Effected.
a. Interest After Default. Following the occurrence of an Event of
Default and in addition to any other remedies Holder may have hereunder or under
the Loan Agreement, Borrower shall pay interest on the principal balance hereof
and, to the extent permitted by applicable law, any interest thereon not paid
when due, upon Holder's demand therefor from time to time at any time or, if no
such demand has been made, in accordance with the schedule set forth in Section
2 above.
b. Premium if Registration Not Effected. In the event the
Registration Statement required to be filed by the Company pursuant to the
Registration Rights Agreement of even date
between the Borrower and the Holder is not filed with the Securities and
Exchange Commission (the "Commission") on or before May 1, 1997, or declared
effective by the Commission on or before June 30, 1997, the Borrower shall, for
each month or portion thereof that said Registration Statement is not filed or
declared effective, as the case may be, in addition to the interest payable on
the Convertible Note, pay the Holder a premium equal to three percent (3%) of
the face amount of the Convertible Note, payable monthly in advance, commencing
May 2, 1997 or July 1, 1997 as the case may be. The premium to be paid, if any,
shall constitute liquidated damages for the Borrower's failure to cause the
Registration Statement to be filed or to become effective. The parties agree
that the foregoing damages are reasonable and that the anticipated damages for
the failure of the Borrower to effect such registration are uncertain in amount
and difficult to be proved. The premium shall be payable by wire transfer of
immediately available funds unless the Holder agrees to accept part or all of
the payment of the premium in Common Stock. In such event, the Borrower shall
issue to the Holder such number of fully paid and non-assessable shares of
Common Stock as shall have an aggregate average closing bid price (as reported
by The Nasdaq Stock Market) for the five (5) consecutive trading days prior to
the date such premium is payable equal in amount to the cash payment of the
premium which the Borrower and the Holder have elected to pay in kind.
4. Prepayments. Borrower may prepay the principal balance hereof in
immediately available funds in whole or in part at any time upon ten (10)
business days' prior written notice. During such ten (10) day period, Holder
may, in its sole discretion, in lieu of receiving such prepayment, convert this
Convertible Note in accordance with the terms hereof. Each prepayment of
principal shall be accompanied by payment of all accrued but unpaid interest on
the principal balance hereof to the date of prepayment. Any prepayment of less
than all of the outstanding principal hereunder shall be applied to the
installments of principal hereunder in the inverse order of maturity. Each
prepayment shall also be accompanied by a substitute Convertible Note duly
executed by Borrower in the same form as this Convertible Note, except that the
principal amount of such substitute Convertible Note shall reflect the reduced
principal amount under this Convertible Note. Upon receipt of such prepayment
from Borrower and such substitute Convertible Note, Holder will surrender this
Convertible Note to Borrower.
5. Computation of Interest; Method of Payments. Accrued interest charges
hereunder shall be computed on the basis of a year of 360 days for the actual
number of days elapsed. If any payment of principal or interest hereunder shall
become due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in connection with
such payment.
Both principal and interest hereunder are payable in lawful money of the
United States of America to Holder at The Bank of Bermuda International, New
York, New York for credit to The Bank of Bermuda Limited, Hamilton Bermuda (or
to such other accounts as Holder may direct Borrower) by wire transfer in
immediately available funds prior to noon Atlantic standard time (AST) on the
date such payments are due, or as otherwise provided herein or in the Loan
Agreement; provided, however, that Holder may elect, in its sole discretion, to
receive payment for part or all of any accrued interest hereunder in shares of
Common Stock, in lieu of immediately available
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funds, in such number of shares to be determined based upon the average closing
bid price (as reported by the Nasdaq Stock Market) of the Common Stock for the
five (5) consecutive trading days immediately prior to the date that such
interest is payable.
6. Other Charges. In addition to the interest charges described herein,
the Loan Agreement provides for the payment by Borrower of various other charges
and fees as set forth more fully in the Loan Agreement.
7. Acceleration. Upon and after the occurrence of an Event of Default,
this Convertible Note may, in accordance with the terms of the Loan Agreement,
and without demand, notice or legal process of any kind, be declared and
immediately shall become due and payable.
8. Certain Waivers by Borrower. Demand, presentment, protest and notice of
nonpayment and protest, notice of intention to accelerate maturity, notice of
acceleration of maturity and notice of dishonor are hereby waived by Borrower.
9. Permissible Rates of Interest. In no contingency or event whatsoever
shall interest charged hereunder, however such interest may be characterized or
computed, exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that Holder has received interest
hereunder in excess of the highest rate applicable hereto, Holder shall apply
such amounts in accordance with Section 3.2 of the Loan Agreement.
10. Conversion Rights.
a. Right to Convert. Part or all of the principal amount of this
Convertible Note may be converted, at the option of the Holder, at any time
after ninety (90) days from the date hereof and before it is paid in full in
accordance herewith, and without the payment of any additional consideration
thereof, into the number of fully paid, nonassessable shares of common stock,
$.001 par value per share, of the Corporation (the "Common Stock"), as is
determined by dividing the principal amount of this Convertible Note requested
by the Holder to be converted into Common Stock (as adjusted for stock splits,
stock dividends, combinations and similar recapitalizations affecting this
Convertible Note) by the lesser of (i) $1.33 (the "Fixed Conversion Price"), or
(ii) Eighty Percent (80%) of the average closing bid price (as reported by The
Nasdaq Stock Market) of the Common Stock for the five (5) consecutive trading
days immediately prior to the Date of Conversion, as defined below in Section
10.b.(ii) (such value is hereinafter referred to as the "Formula Conversion
Price"). Notwithstanding the foregoing, in no event shall the Convertible Note
be convertible into a cumulative aggregate number of shares of Common Stock in
excess of 3,000,000 (as adjusted for stock splits, reverse splits and similar
recapitalizations affecting such shares, the "Maximum Number of Shares"). In the
event the Holder of the Convertible Note (i) subsequent to having converted the
Convertible Note into the Maximum Number of Shares or (ii) upon the conversion
of the Convertible Note such that the number of shares of Common Stock issuable
upon conversion of the Convertible Note (without giving effect to the preceding
sentence) would exceed the Maximum Number of Shares, submit a written notice to
the Corporation
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demanding redemption ("Notice of Redemption") of the principal and accrued
interest remaining after the conversion of the Convertible Note into the Maximum
Number of Shares, the Corporation shall redeem such remaining principal balance
and accrued interest for a price equal to such principal and accrued interest
plus a premium calculated in the same manner as the prepayment premium described
in Section 4 (the "Redemption Amount"). The Corporation shall pay such
Redemption Amount to the Holder within fifteen (15) calendar days of the date of
the Notice of Redemption, against delivery of the Convertible Note.
b. Mechanics of Conversion.
(i) No fractional shares of Common Stock shall be issued upon
conversion of this Convertible Note. In lieu of any fractional share to which
the Holder would otherwise be entitled, the Corporation shall round up to the
nearest whole share. In order to convert the Convertible Note into shares of
Common Stock, the Holder shall surrender the Convertible Note, either by
overnight courier or 2-day courier, to the office of the Corporation or its
transfer agent for the Convertible Notes, if any, and shall give written notice
to the Corporation at such office that the Holder elects to convert the same,
the principal amount of the Convertible Note so converted and a calculation of
the Conversion Price (with an advance copy of the notice by facsimile);
provided, however, that the Corporation shall not be obligated to issue
certificates evidencing shares of Common Stock issuable upon such conversion
unless the Convertible Note is delivered to the Corporation or its transfer
agent as provided above, or the Holder notifies the Corporation or its transfer
agent that the Convertible Note has been lost, stolen or destroyed and executes
an agreement satisfactory to the Corporation to indemnify the Corporation from
any loss incurred by it in connection with the Convertible Note.
(ii) The Corporation shall use its best efforts to issue and
deliver, within three (3) business days after delivery to the Corporation or its
transfer agent of such Convertible Note or such agreement of indemnification, to
the Holder of this Convertible Note at the address of the Holder on the books of
the Corporation, a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled as aforesaid. The date on
which notice of conversion is received by the Corporation (the "Date of
Conversion") shall be deemed to be the date of conversion, provided this
Convertible Note which may be converted is received by the Corporation or its
transfer agent, as the case may be, within three (3) business days thereafter
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date. If the
Convertible Note to be converted is not received by the Corporation or its
transfer agent within three (3) business days after the Date of Conversion, the
notice of conversion shall become null and void. In addition, if the Convertible
Note should be converted in part only, the Corporation shall, upon surrender of
this Convertible Note, issue, execute and deliver a new Convertible Note
representing the balance of the Convertible Note not so converted.
c. Restriction on Conversion. In no event shall the Holder of this
Convertible Note be entitled to convert the Convertible Note to the extent such
conversion would result in such Holder's beneficially owning more than five
percent (5%) of the outstanding shares of the Corporation's Common Stock. For
these purposes, beneficial ownership shall be defined and
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calculated in accordance with Rule 13d-3, promulgated under the Securities
Exchange Act of 1934, as amended.
11. Corporate Events.
a. Notices of Record Date. In the event of (i) any declaration by
the Corporation of a record date of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution (other than any record date declared in
connection with regularly scheduled dividend dates for the Corporation's 6%
Cumulative Convertible Series A Preferred Stock) or (ii) any capital
reorganization of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation, any merger or consolidation of the
Corporation and any other entity or person, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to the Holder of the Convertible Note at least ten (10) days prior to the
record date specified therein, a notice specifying (A) the date on which any
such record date is to be declared for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (C) the time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) become eligible to receive securities or
other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution or winding up.
b. Corporate Changes. The Fixed Conversion Price shall be
appropriately adjusted to reflect any stock dividend, stock split or share
combination of the Common Stock. If the Corporation shall, during the five (5)
consecutive trading-day period applicable in determining the Formula Conversion
Price for any shares of Common Stock, affect any stock dividend, stock split or
share combination, then for purposes of calculating the Formula Conversion Price
applicable to such conversion, the closing bid price for the Common Stock for
any trading day prior to such action which falls in such five (5) trading-day
period shall be adjusted to a price per share giving effect to such action. In
the event of a merger, reorganization, recapitalization or similar event of or
with respect to the Corporation (a "Corporate Change") (other than a Corporate
Change in which all or substantially all of the consideration received by the
holders of the Corporation's equity securities upon such Corporate Change
consists of cash or assets other than securities issued by the acquiring entity
or any affiliate thereof), the Convertible Note shall be assumed by the
acquiring entity and thereafter the Convertible Note shall be convertible into
such class and type of securities as the Holder would have received had the
Holder converted the Convertible Note immediately prior to such Corporate
Change, as appropriately adjusted to equitably reflect the Conversion Price and
any stock dividend, stock split or share combination of the Common Stock after
such corporate event, and in any such case appropriate provisions shall be made
with respect to the rights and interests of the Holder of the Convertible Note
to the end that the provisions hereof (including, without limitation, provisions
for the adjustment of the Conversion Price and of the number of shares issuable
upon conversion of the Convertible Note) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities thereafter
deliverable upon the exercise hereof.
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12. Spin Offs, Liquidating Distributions. In the event that the
Corporation shall make any distribution of its assets upon or with respect to
its capital stock, as a liquidating or partial liquidating dividend, or other
than as a dividend payable out of earnings or any surplus legally available for
dividends under the laws of the state of incorporation of the Corporation, the
Holder of the Convertible Note shall, upon the exercise of his right to convert
after the record date for such distribution or, in the absence of a record date,
after the date of such distribution, receive, in addition to the shares of
Common Stock so converted, the amount of such assets (or, at the option of the
Corporation, a sum equal to the value thereof at the time of distribution as
determined by the Board of Directors in its sole discretion) which would have
been distributed to the Holder if he had exercised his right to convert
immediately prior to the record date for such distribution or, in the absence of
a record date, immediately prior to the date of such distribution.
13. Reservation of Stock Issuable Upon Conversion. Subject to the
limitation on the number of shares issuable upon conversion of the Convertible
Note set forth in Section 10(a) above, the Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock solely for the purpose of effecting the conversion of the Convertible
Note, such number of its shares of Common Stock as shall from time to time be
sufficient to affect the conversion of the entire outstanding principal balance
of this Convertible Note; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to affect the conversion
of the entire outstanding principal balance of this Convertible Note, the
Corporation will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
14. Voting Rights. The Holder of this Convertible Note will not have any
voting rights, except as for the portions of this Convertible Note that have
been converted in accordance herein.
15. Notices. All notices, consents, waivers, and other communications
under this Convertible Note must made in accordance with the terms of Section 12
of the Loan Agreement.
16. Invalidity of Certain Provisions. Whenever possible, each provision of
this Convertible Note shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Convertible Note shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Convertible Note.
17. Incorporation by Reference of Certain Provisions of the Loan
Agreement. All of the representations, warranties, covenants, promises and other
agreements of the parties set forth in the Loan Agreement are incorporated by
reference herein. Any Event of Default under the Loan Agreement shall be an
event of default hereunder.
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THIS CONVERTIBLE NOTE SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS AND
DECISIONS AND NOT THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, the undersigned has executed this Convertible Note on
behalf of the Corporation on the day first written above.
COUNTRY STAR RESTAURANTS, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxxx, President
ATTEST:
/s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Xxxxxx X. Xxxxxxxx, Secretary
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EXHIBIT B
to
Loan and Security Agreement
between
Cameron Capital Ltd.,
as Agent for Lenders
and
Country Star Restaurants, Inc.
REGISTRATION RIGHTS AGREEMENT
[Attached]
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
February 12, 1997, is between Country Star Restaurants, Inc., a Delaware
corporation (the "Company"); and Cameron Capital Ltd. ("Cameron") and the other
parties who may execute and deliver counterpart signature pages to this
Agreement from time to time (who are referred to collectively with Cameron as
the "Investors").
RECITALS
A. The Investors have agreed to lend certain monies to the Company
pursuant to that certain Loan and Security Agreement dated as of February 12,
1997 (the "Loan Agreement") provided that, among other things, certain
registration rights are granted to the Investors.
B. Pursuant to the Loan Agreement, the Company: (i) has issued to Cameron
a Common Stock purchase warrant (the "Cameron Warrant") and a Term Loan Note
that is convertible into Common Stock (the "Convertible Note"); and (ii) is
obligated to issue additional Common Stock purchase warrants to Investors making
additional advances under the Loan Agreement (together with the Cameron Warrant,
the "Warrants").
C. The Company deems it desirable to grant certain securities registration
rights to the Investors in order to induce the Investors to lend it certain
monies pursuant to the Loan Agreement.
AGREEMENT
In consideration of the premises and the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. In addition to the capitalized terms defined elsewhere in
this Agreement, the following capitalized terms shall have the following
meanings when used in this Agreement:
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock of the Company.
"Holders" means the holders of Registrable Shares who are parties to
this Agreement or successors or assigns or subsequent holders of the Registrable
Shares.
"Person" means a natural person, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or other entity, or a governmental
entity or any department, agency or political subdivision thereof.
"Registrable Shares" means, at any time, any shares of Common Stock
issued or issuable upon conversion of the Convertible Note or exercise of the
Warrants, and any shares of Common Stock issued as, or issued or issuable
directly or indirectly upon the conversion or exercise of other securities
issued as, a dividend or other distribution with respect to or in replacement of
the Convertible Note, Warrants or other Registrable Shares; provided, however,
that Registrable Shares shall not include any shares the sale of which has been
registered pursuant to the Securities Act or which have been sold to the public
pursuant to Rule 144, promulgated under the Securities Act. For purposes of this
Agreement, a Person will be deemed to be a holder of Registrable Shares whenever
such Person has the right to acquire such Registrable Shares (by conversion,
exercise or otherwise), whether or not such acquisition has actually been
effected.
"Registration Expenses" has the meaning ascribed to it in Section
2.6 of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
2. Securities Act Registration.
2.1. Registration of Registrable Shares. The Company shall register under
the Securities Act, at the Company's expense, all of the shares of Common Stock
issuable upon the conversion in full of the Convertible Note and upon exercise
of all of the Warrants (the "Registrable Shares") and in connection therewith
shall file a registration statement with respect to the Registrable Shares (the
"Registration Statement") with the Commission on or before the earlier of (i) 15
days after the Company files its annual report on Form 10-K or 10-KSB, and (ii)
May 1, 1997. The Company shall cause the Registration Statement to become
effective by no later than June 30, 1997. Notice of effectiveness of the
Registration Statement shall be furnished promptly to the Investors. The Company
shall maintain the effectiveness of the Registration Statement and from time to
time will amend or supplement such Registration Statement and the prospectus
contained therein as and to the extent necessary to comply with the Securities
Act. The effectiveness of the Registration Statement shall be maintained with
respect to the Registrable Shares until the later to occur of the second
anniversary of the date of the respective Warrants and Convertible Note or such
date as all of the Registrable Shares may be sold during any one period of three
(3) consecutive months pursuant to Rule 144 under the Securities Act or
otherwise without registration.
2.2. Amendments. The Company shall prepare and file with the Commission
such amendments and supplements to the Registration Statement and the prospectus
used in connection with such Registration Statement necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement.
2.3. Notice. The Company shall notify each seller of Registrable Shares
covered by the Registration Statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or
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incomplete in light of the circumstances then existing, and at the request of
any such seller, prepare and furnish to such seller a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such shares, such
prospectus shall not include any untrue statement of a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in light of the circumstances then existing.
2.4. Prospectus. The Company shall furnish to the Investors such number of
copies of a prospectus in conformity with the requirements of the Securities
Act, and such other documents as may reasonably be requested in order to
facilitate the disposition of the Registrable Shares owned by the Investors.
2.5. Blue Sky. The Company shall register and qualify the securities
covered by such Registration Statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Investors;
provided, however, that the Company shall not be required in connection
therewith, or as a condition thereto, to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act.
2.6. Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Agreement, including, but not limited to,
all registration and filing fees, fees and expenses and compliance with federal,
state and foreign securities laws, printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Company and its
independent certified public accountants, underwriters (excluding discounts and
commissions attributable to the Registrable Shares included in such
registration) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), will be borne by the Company. In
addition, the Company will pay its internal expenses (including, but not limited
to, all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance obtained by the Company and the expenses and
fees for listing the securities to be registered on each securities exchange or
quotation system.
2.7. Other Matters. (a) The Company shall provide a transfer agent and
registrar for all Registrable Shares to be registered hereunder and a CUSIP
number of all Registrable Shares, in each case not later than the effective date
of such registration.
(b) The Company will use its best efforts to cause the Registrable Shares
to be duly approved for listing on The Nasdaq Stock Market on or prior to the
effectiveness of the Registration Statement.
(c) The Company will use its best efforts to maintain the listing of its
Common Stock on The Nasdaq Stock Market, for at least a sixty (60) month period
commencing on the Effective Date.
(d) The Company will make and keep public information regarding the
Company available as those terms are understood and defined in Rule 144 under
the Securities Act, at all times from and after the Effective Date;
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(e) The Company will file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Securities Exchange Act.
3. Indemnification.
3.1. Indemnification by the Company. In the event that the Company
registers under the Securities Act any of the Registrable Shares held by the
Investors, the Company shall indemnify and hold harmless the Investors and each
underwriter (if any) of such shares (including any broker or dealer through whom
any of the shares may be sold) and each person, if any, who controls any of the
Investors or any such underwriter within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Securities Exchange Act from and against
any and all losses, claims, damages, expenses or liabilities, joint or several,
to which they or any of them become subject under the Securities Act or the
Securities Exchange Act or otherwise, and, except as hereinafter provided, shall
reimburse the Investors and each of the underwriters and each such controlling
person, if any, for any legal or other expenses reasonably incurred by them or
any of them in connection with investigating or defending any actions whether or
not resulting in any liability, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or in the prospectus (or the Registration Statement or
prospectus as from time to time amended or supplemented by the Company) or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such untrue statement or omission was
made in such Registration Statement or prospectus in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by that specific Investor (insofar as indemnification of that specific
Investor is concerned) or any underwriter (insofar as indemnification of any
such underwriter is concerned) relating thereto expressly for use therein.
Promptly after receipt by the Investors or any underwriter or any person
controlling any of them, as the case may be, of notice of a claim to which the
foregoing indemnification applies, the Investors or such other persons shall
notify the Company in writing of the commencement thereof, and, subject to the
provisions hereinafter stated, the Company shall assume the defense of such
action (including the employment of counsel, who shall be counsel satisfactory
to the Investors or such underwriter or controlling person, as the case may be,
and the payment of expenses) insofar as such action shall relate to any alleged
liability in respect of which indemnity may be sought against the Company. The
Investors or any underwriter or any such controlling persons shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof but the fees and expenses of such counsel shall not be at the
expense of the Company unless: (i) the employment of such counsel has been
specifically authorized by the Company, (ii) the Company has failed to assume
the defense and employ counsel, or (iii) the named parties of any such action,
suit or proceeding (including any impleaded parties) include both the person or
persons seeking indemnification (the "indemnified person") and the Company and
such indemnified person shall have been advised by its counsel that
representation of the indemnified person and the Company by the same counsel
would be inappropriate under applicable standards of professional conduct
(whether or not such representation by the same counsel has been proposed) due
to actual or potential differing interests between them (in which case the
Company shall not have the right to assume the defense of such action, suit or
proceeding on behalf of such indemnified person). The Company shall not be
liable to indemnify any person for any settlement by such person of any such
action effected without the Company's consent.
4
3.2. Indemnification by the Investors. Each Investor, severally and not
jointly, shall indemnify the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Securities Exchange Act, against all
losses, claims, damages, expenses or liabilities or actions to which they or any
of them become subject under the Securities Act or the Securities Exchange Act
or otherwise, and shall reimburse the Company, its officers and directors and
each such controlling person, if any, for any legal or other expenses reasonably
incurred by them or any of them in connection with investigating or defending
any actions whether or not resulting in any liability, insofar as such losses,
claims damages, expenses, liabilities or actions arise out of or are based upon
any information relating to that specific Investor furnished by or on behalf of
that specific Investor in writing specifically for inclusion in such
Registration Statement. Notwithstanding the above, the liability of each
Investor under this Section 3.2 shall not exceed the proceeds (net of
underwriting discounts or commissions) received by that Investor upon the sale
of the Registrable Shares.
3.3 Payment. Any losses, claims, damages, liabilities and reasonable
expenses for which an indemnified party is entitled to indemnification under
Sections 3.1 and 3.2 of this Agreement shall be paid by the indemnifying party
to the indemnified party as such losses, claims, damages, liabilities and
expenses are incurred.
4. Representations, Warranties and Covenants of the Company. The Company
hereby incorporates by reference all of its representations, warranties and
covenants as set forth in the Loan Agreement.
5. Representations and Warranties of the Investors. Each of the Investors
hereby incorporates by reference all of its respective representations,
warranties and covenants as set forth in the Loan Agreement.
6. Brokers. The Company hereby agrees to indemnify each Investor and holds
each Investor harmless from any liability for any brokers' or finders' fee with
respect to this Agreement or the transactions contemplated hereby for which the
Company is responsible.
7. Waiver, Amendment. Neither this Agreement nor any provisions hereof
shall be modified, changed, discharged or terminated except by an instrument in
writing, signed by the party against whom any waiver, change, discharge or
termination is sought.
8. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, their respective successors and assigns,
and no other person shall have any right or obligation hereunder. Neither this
Agreement nor any right, remedy, obligation or liability arising hereunder or by
reason hereof shall be assignable by the Company without the prior written
consent of the other party and any assignment in violation hereof shall be void.
This Agreement, and all of each Investor's rights, remedies, obligations or
liabilities arising hereunder or by reason hereof, may be assigned by that
specific Investor.
5
9. Governing Law; Choice of Forum. This Agreement shall be interpreted and
the rights and liabilities of the parties hereto determined in accordance with
the internal laws (as opposed to the conflict of laws provisions) of the state
of Illinois. The parties hereto hereby agree to the exclusive jurisdiction of
the United States District Court of the Northern District of Illinois and the
State Courts of Illinois located in Xxxx County, Illinois and waive any
objection based on venue or forum non conveniens with respect to any action
instituted therein, and agree that any dispute concerning the relationship
between the Investors on the one hand and the Company on the other hand or the
conduct of any party in connection with this Agreement or otherwise shall be
heard only in the courts described above.
10. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
11. Multiple Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
will constitute one and the same instrument. However, in enforcing any party's
rights under this Agreement it will be necessary to produce only one copy of
this Agreement signed by the party to be charged.
12. Notices. All notices, consents, waivers, and other communications
under this Agreement must made in accordance with the terms of Section 12 of the
Loan Agreement.
13. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns.
14. Effect of Company's Noncompliance. Failure by the Company to comply
with any of the above provisions shall constitute a default under the Loan
Agreement.
[Signature Page Immediately Follows]
6
This Agreement has been executed by the parties below to be effective as
of the date set forth on the first page of this Agreement.
COUNTRY STAR
RESTAURANTS, INC.
By:______________________________
Name:____________________________
Title:___________________________
INVESTORS:
CAMERON CAPITAL LTD.
By:______________________________
Name:____________________________
Title:___________________________
_________________________________
Name of Investor
By:______________________________
Name:____________________________
Title:___________________________
[Signature Page to Registration Rights Agreement]
EXHIBIT C
to
Loan and Security Agreement
between
Cameron Capital Ltd.,
as Agent for Lenders
and
Country Star Restaurants, Inc.
WARRANT
[Attached]
THIS WARRANT AND THE SHARES OF COMMON STOCK OF COUNTRY STAR RESTAURANTS, INC. TO
BE ISSUED UPON ANY EXERCISE OF THE WARRANT HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR
TRANSFER UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT, OR
IN THE OPINION OF COUNSEL, SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS IS NOT REQUIRED.
WARRANT
to Purchase Shares
of
Common Stock
of
COUNTRY STAR RESTAURANTS, INC.
___________ , 1997
This certifies that, for value received, Cameron Capital Ltd. ("CC") and
any subsequent transferee of this Warrant (each, a "Holder") is entitled to
purchase, subject to the provisions of this Warrant, from Country Star
Restaurants, Inc., a Delaware corporation (the "Issuer"), at any time or from
time to time on or after the date hereof and on or before_______, 2002 (the
"Expiration Date"), ________________ Thousand (_________) fully paid and
nonassessable shares of common stock (the "Common Stock"), of the Issuer at an
exercise price of Sixty Two and One-Half Cents ($.625) per share, subject to
adjustment pursuant to the terms hereunder (the "Exercise Price") (such shares
of Common Stock and other securities issued and issuable upon exercise of this
Warrant sometimes are referred to herein as the "Warrant Shares").
Section 1. Definitions.Capitalized terms not otherwise defined herein
shall have the meanings assigned to them in the Loan and Security Agreement (the
"Loan Agreement") dated February 12, 1997 between and among CC, the Issuer and
other parties who from time to time execute the Loan Agreement.
Section 2. Exercise of Warrant.
(a) Subject to the provisions hereof, this Warrant may be exercised,
in whole or in part, but not as to a fractional share, at any time or from
time to time on or after the date hereof and on or before the Expiration
Date, by presentation and surrender hereof to the Issuer at the address
which, in accordance with the provisions of Section 9 hereof, is then
effective for notices to the Issuer, with the Election to Purchase Form
annexed hereto as Schedule One, duly executed and accompanied by payment
to the Issuer as further set forth below in this Section 2, for the
account of the Issuer, of the Exercise Price for the number of Warrant
Shares specified in such form. If this Warrant should be exercised in part
only, the Issuer shall, upon surrender of this Warrant, execute and
deliver a new Warrant evidencing the rights of the Holder hereof to
purchase the balance of the Warrant Shares purchasable hereunder. The
Issuer shall maintain at its principal place of business a register for
the registration of this Warrant and registration of transfer of this
Warrant. The Exercise Price for the number of Warrant Shares specified in
the Election to Purchase Form shall be payable in United States Dollars by
certified or official bank check payable to the order of the Issuer or by
wire transfer of immediately available funds to an account specified by
the Issuer for that purpose.
(b) Certificates representing Warrant Shares shall bear the
following restrictive legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act").
They may not be offered or transferred by sale, assignment, pledge
or otherwise unless (i) a registration statement for the securities
under the Securities Act is in effect or (ii) the corporation has
received an opinion of counsel, which opinion is satisfactory to the
corporation, to the effect that such registration is not required
under the Securities Act."
(c) Notwithstanding any provisions herein to the contrary, if the
Fair Market Value (hereinafter defined) of one share of Common Stock is
greater than the Exercise Price (at the date of calculation as set forth
below), in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being canceled) by surrender of this Warrant at
the principal office of the Issuer together with the properly endorsed
Notice of Exercise and notice of such election in which event the Issuer
shall issue to the Holder a number of shares of Common Stock computed
using the following formula:
2
X = [Y(A-B)]/A
Where X = the number of shares of Common Stock to be issued
to the Holder
Y = the number of shares of Common Stock purchasable
under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the
Warrant being canceled (at the date of such
calculation)
A = the Fair Market Value of one share of the
Issuer's Common Stock (at the date of such
calculation)
B = Exercise Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, Fair Market Value of one share of
Common Stock shall be the average closing bid price (as reported by The
Nasdaq Stock Market) of the Issuer's Common Stock for the five (5)
consecutive trading days ending on the trading day immediately preceding
the date of the Election to Purchase.
Section 3. Reservation of Shares; Preservation of Rights of Holder. The
Issuer hereby agrees that there shall be reserved for issuance and/or delivery
upon exercise of this Warrant, such number of Warrant Shares as shall be
required for issuance or delivery upon exercise of this Warrant. The Warrant
surrendered upon exercise shall be canceled by the Issuer. After the Expiration
Date, no shares of Common Stock shall be subject to reservation in respect of
this Warrant. The Issuer further agrees (i) that it will not, by amendment of
its Certificate of Incorporation or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observation or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by the Issuer,
(ii) promptly to take such action as may be required of the Issuer to permit the
Holder to exercise this Warrant and the Issuer duly and effectively to issue
shares of its Common Stock or other securities as provided herein upon the
exercise hereof, and (iii) promptly to take all action required or provided
herein to protect the rights of the Holder granted hereunder against dilution.
Without limiting the generality of the foregoing, should the Warrant Shares at
any time consist in whole or in part of shares of capital stock having a par
value, the Issuer agrees that before taking any action which would cause an
adjustment of the Exercise Price so that the same would be less than the then
par value of such Warrant Shares, the Issuer shall take any corporate action
which may, in the opinion of its counsel, be necessary in order that the Issuer
may validly and legally issue fully paid and nonassessable shares of such Common
Stock at the Exercise Price as so adjusted. The Issuer further agrees that it
will not establish a par value for its Common Stock while this Warrant is
outstanding in an amount greater than the Exercise Price.
3
Section 4. Exchange, Transfer, Assignment or Loss of Warrant. Any
attempted transfer of this Warrant, the Warrant Shares or any new Warrant not in
accordance with this Section shall be null and void, and the Issuer shall not in
any way be required to give effect to such transfer. No transfer of this Warrant
shall be effective for any purpose hereunder until (i) written notice of such
transfer and of the name and address of the transferee has been received by the
Issuer, and (ii) the transferee shall first agree in a writing deposited with
the Secretary of the Issuer to be bound by all the provisions of this Warrant.
Upon surrender of this Warrant to the Issuer by any transferee authorized under
the provisions of this Section 4, the Issuer shall, without charge, execute and
deliver a new Warrant registered in the name of such transferee at the address
specified by such transferee, and this Warrant shall promptly be canceled. The
Issuer may deem and treat the registered holder of any Warrant as the absolute
owner thereof for all purposes, and the Issuer shall not be affected by any
notice to the contrary. Any Warrant, if presented by an authorized transferee,
may be exercised by such transferee without prior delivery of a new Warrant
issued in the name of the transferee.
Upon receipt by the Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Issuer will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute a separate contractual obligation on the
part of the Issuer, whether or not the Warrant so lost, stolen, destroyed or
mutilated shall be at any time enforceable by anyone.
Section 5. Rights of Holder. Neither a Holder nor his transferee by devise
or the laws of descent and distribution or otherwise shall be, or have any
rights or privileges of, a stockholder of the Issuer with respect to any Warrant
Shares, unless and until certificates representing such Warrant Shares shall
have been issued and delivered thereto.
Section 6. Adjustments in Exercise Price and Warrant Shares. The Exercise
Price and Warrant Shares shall be subject to adjustment from time to time as
provided in this Section 6.
(a) If the Issuer is recapitalized through the subdivision or
combination of its outstanding shares of Common Stock into a larger or
smaller number of shares, the number of shares of Common Stock for which
this Warrant may be exercised shall be increased or reduced, as of the
record date for such recapitalization, in the same proportion as the
increase or decrease in the outstanding shares of Common Stock, and the
Exercise Price shall be adjusted so that the aggregate amount payable for
the purchase of all Warrant Shares issuable hereunder immediately after
the record date for such recapitalization shall equal the aggregate amount
so payable immediately before such record date.
(b) If the Issuer declares a dividend on Common Stock, or makes a
distribution to holders of Common Stock, and such dividend or distribution
is payable or made in Common Stock or securities convertible into or
exchangeable for Common Stock, or rights to purchase Common Stock or
securities convertible into or exchangeable for Common
4
Stock, the number of shares of Common Stock for which this Warrant may be
exercised shall be increased, as of the record date for determining which
holders of Common Stock shall be entitled to receive such dividend or
distribution, in proportion to the increase in the number of outstanding
shares (and shares of Common Stock issuable upon conversion of all such
securities convertible into Common Stock) of Common Stock as a result of
such dividend or distribution, and the Exercise Price shall be adjusted so
that the aggregate amount payable for the purchase of all the Warrant
Shares issuable hereunder immediately after the record date for such
dividend or distribution shall equal the aggregate amount so payable
immediately before such record date.
(c) If the Issuer declares a dividend on Common Stock (other than a
dividend covered by subsection (b) above) or distributes to holders of its
Common Stock, other than as part of its dissolution or liquidation or the
winding up of its affairs, any shares of its capital stock, any evidence
of indebtedness or any cash or other of its assets (other than Common
Stock or securities convertible into or exchangeable for Common Stock),
the Holder shall receive notice of such event as set forth in Section 8
below.
(d) In case of any consolidation of the Issuer with, or merger of
the Issuer into, any other corporation (other than a consolidation or
merger in which the Issuer is the continuing corporation and in which no
change occurs in its outstanding Common Stock), or in case of any sale or
transfer of all or substantially all of the assets of the Issuer, or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Issuer, except where the Issuer is the surviving
entity and no change occurs in its outstanding Common Stock), the
corporation formed by such consolidation or the corporation resulting from
such merger or the corporation which shall have acquired such assets or
securities of the Issuer, as the case may be, shall execute and deliver to
the Holder simultaneously therewith a new Warrant, satisfactory in form
and substance to the Holder, together with such other documents as the
Holder may reasonably request, entitling the Holder thereof to receive
upon exercise of such Warrant the kind and amount of shares of stock and
other securities and property receivable upon such consolidation, merger,
sale, transfer, or exchange of securities, or upon the dissolution
following such sale or other transfer, by a holder of the number of shares
of Common Stock purchasable upon exercise of this Warrant immediately
prior to such consolidation, merger, sale, transfer, or exchange. Such new
Warrant shall contain the same basic other terms and conditions as this
Warrant and shall provide for adjustments which, for events subsequent to
the effective date of such written instrument, shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 6. The above provisions of this paragraph (d) shall similarly
apply to successive consolidations, mergers, exchanges, sales or other
transfers covered hereby.
(e) If the Issuer shall, at any time before the expiration of this
Warrant, sell all or substantially all of its assets and distribute the
proceeds thereof to the Issuer's stockholders, the Holder shall, upon
exercise of this Warrant have the right to receive, in lieu of the shares
5
of Common Stock of the Issuer that the Holder otherwise would have been
entitled to receive, the same kind and amount of assets as would have been
issued, distributed or paid to the Holder upon any such distribution with
respect to such shares of Common Stock of the Issuer had the Holder been
the holder of record of such shares of Common Stock receivable upon
exercise of this Warrant on the date for determining those entitled to
receive any such distribution. If any such distribution results in any
cash distribution in excess of the Exercise Price provided by this Warrant
for the shares of Common Stock receivable upon exercise of this Warrant,
the Holder may, at the Holder's option, exercise this Warrant without
making payment of the Exercise Price and, in such case, the Issuer shall,
upon distribution to the Holder, consider the Exercise Price to have been
paid in full and, in making settlement to the Holder, shall obtain receipt
of the Exercise Price by deducting an amount equal to the Exercise Price
for the shares of Common Stock receivable upon exercise of this Warrant
from the amount payable to the Holder.
(f) If an event occurs which is similar in nature to the events
described in this Section 6, but is not expressly covered hereby, the
Board of Directors of the Issuer shall make or arrange for an equitable
adjustment to the number of Warrant Shares and the Exercise Price.
(g) The term "Common Stock" shall mean the Common Stock of the
Issuer as the same exists at February 12, 1997 or as such stock may be
constituted from time to time, except that for the purpose of this Section
6, the term "Common Stock" shall include any stock of any class of the
Issuer which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Issuer and which is not subject to
redemption by the Issuer.
(h) The Issuer shall retain a firm of independent public accountants
of recognized standing (who may be any such firm regularly employed by the
Issuer) to make any computation required under this Section 6, and a
certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 6.
(i) Whenever the number of Warrant Shares or the Exercise Price
shall be adjusted as required by the provisions of this Section 6, the
Issuer forthwith shall file in the custody of its secretary or an
assistant secretary, at its principal office, and furnish to each Holder
hereof, a certificate prepared in accordance with paragraph (h) above,
showing the adjusted number of Warrant Shares and the adjusted Exercise
Price and setting forth in reasonable detail the circumstances requiring
the adjustments.
(j) Notwithstanding any other provision, this Warrant shall be
binding upon and inure to the benefit of any successors and assigns of the
Issuer.
(k) No adjustment in the Exercise Price in accordance with the
provisions of this Section 6 need be made if such adjustment would amount
to a change in such Exercise Price
6
of less than $.01; provided however, that the amount by which any
adjustment is not made by reason of the provisions of this paragraph (k)
shall be carried forward and taken into account at the time of any
subsequent adjustment in the Exercise Price.
(l) If an adjustment is made under this Section 6 and the event to
which the adjustment relates does not occur, then any adjustments in
accordance with this Section 6 shall be readjusted to the Exercise Price
and the number of Warrant Shares which would be in effect had the earlier
adjustment not been made.
Section 7. Taxes on Issue or Transfer of Common Stock and Warrant. The
Issuer shall pay any and all documentary stamp or similar issue or transfer
taxes payable in respect of the issue or delivery of shares of Common Stock or
other securities on the exercise of this Warrant. The Issuer shall not be
required to pay any tax which may be payable in respect of any transfer of this
Warrant or in respect of any transfers involved in the issue or delivery of
shares or the exercise of this Warrant in a name other than that of the Holder
and the person requesting such transfer, issue or delivery shall be responsible
for the payment of any such tax (and the Issuer shall not be required to issue
or deliver said shares until such tax has been paid or provided for).
Section 8. Notice of Adjustment. So long as this Warrant shall be
outstanding, (a) if the Issuer shall propose to pay any dividends or make any
distribution upon the Common Stock, or (b) if the Issuer shall offer generally
to the holders of Common Stock the right to subscribe to or purchase any shares
of any class of Common Stock or securities convertible into Common Stock or any
other similar rights, or (c) if there shall be any proposed capital
reorganization of the Issuer in which the Issuer is not the surviving entity,
recapitalization of the capital stock of the Issuer, consolidation or merger of
the Issuer with or into another corporation, sale, lease or other transfer of
all or substantially all of the property and assets of the Issuer, or voluntary
or involuntary dissolution, liquidation or winding up of the Issuer, or (d) if
the Issuer shall give to its stockholders any notice, report or other
communication respecting any significant or special action or event, then in
such event, the Issuer shall give to the Holder, at least ten (10) days prior to
the relevant date described below, a notice containing a description of the
proposed action or event and stating the date or expected date on which a record
of the Issuer's stockholders is to be taken for any of the foregoing purposes,
and the date or expected date on which any such dividend, distribution,
subscription, reclassification, reorganization, consolidation, combination,
merger, conveyance, sale, lease or transfer, dissolution, liquidation or winding
up is to take place and the date or expected date, if any is to be fixed, as of
which the holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities or other property deliverable upon such
event.
Section 9. Notice. Any notice to be given or to be served upon any party
in connection with the Warrant must be in writing and will be deemed to have
been given and received upon confirmed receipt, if sent by facsimile, or two (2)
days after it has been submitted for delivery by
7
Federal Express or an equivalent carrier, charges prepaid and addressed to the
following addresses with a confirmation of delivery:
If to the Issuer, to:
Country Star Restaurants, Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxx X. Xxxxxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy simultaneously by like means to:
Xxxxxxxx Xxxx & Brandeis, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Holder, to:
Cameron Capital Ltd.
00 Xxxxxxxxx Xxxx
Xxxxxxxx XX 00
Xxxxxxx
Xxxx.: Nic Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy simultaneously by like means to:
Xxxxxxxx & Xxxxxx
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn.: Xxxxxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may, at any time by giving notice to the other party, designate any
other address in substitution of an address established pursuant to the
foregoing to which such notice will be given.
8
Section 10. Registration Rights. This Warrant and the Warrant Shares are
and shall remain subject to the Registration Rights Agreement dated January __,
1997 between and among CC, the Issuer and other parties who from time to time
execute the Registration Rights Agreement.
Section 11. Governing Law; Choice of Forum. (a) This Warrant shall be
interpreted and the rights and liabilities of the parties hereto determined in
accordance with the internal laws (as opposed to the conflict of laws
provisions) of the State of Illinois.
(b) Holder and Issuer hereby agree to the exclusive jurisdiction of
the United States District Court of the Northern District of Illinois and the
State Courts of Illinois located in Xxxx County, Illinois and waive any
objection based on venue or forum non conveniens with respect to any action
instituted therein, and agree that any dispute concerning the relationship
between Holder and Issuer or the conduct of either party in connection with this
Warrant or otherwise shall be heard only in the courts described above.
Dated: _______________, 1997
COUNTRY STAR RESTAURANTS, INC.
By:____________________________
Name:__________________________
Title:_________________________
ATTEST:
___________________________________
, Secretary
[Signature Page to Warrant to Purchase Shares of Common Stock
of Country Star Restaurants, Inc.]
9
Schedule One
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise this Warrant and to
purchase ______ shares of Country Star Restaurants, Inc. Common Stock issuable
upon the exercise of this Warrant, and requests that certificates for such
shares be issued in the name of:
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Address)
________________________________________________________________________________
(United States Social Security or other taxpayer
identifying number, if applicable)
and, if different from above, be delivered to:
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Address)
and, if the number of Warrant Shares so purchased are not all of the Warrant
Shares issuable upon exercise of this Warrant, that a Warrant to purchase the
balance of such Warrant Shares be registered in the name of, and delivered to,
the undersigned at the address stated below.
Date: __________ __, _____
Name of Registered Owner:_______________________________________________________
________________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
Signature:______________________________________________________________________
10
Exhibit D
CAMERON CAPITAL LTD.
LOANS
TO
COUNTRY STAR RESTAURANTS, INC.
LIST OF CLOSING DOCUMENTS(1)
February 3, 1997
A. Principal Loan and Security Documents
1. Loan and Security Agreement (the "Loan Agreement") among Country Star
Restaurants, Inc., a Delaware corporation ("Borrower"), and Cameron
Capital Ltd. ("Cameron"), as agent ("Agent") for the lenders from time to
time party thereto ("Lenders").
Exhibits
Exhibit A - Term Loan Note
Exhibit B - Registration Rights Agreement
Exhibit C - Warrant
Exhibit D - List of Closing Documents
Exhibit E - Restrictive Legend
Schedules
Schedule 5.3 - Locations of Collateral
Schedule 7.2 - Permitted Liens
Schedule 7.4 - Trade Names
Schedule 7.5 - Affiliates
Schedule 7.11 - Real Property and Leases
Schedule 7.12 - Proprietary Rights
Schedule 7.14 - Litigation
Schedule 7.16 - Labor Contracts and Disputes
Schedule 7.17 - Environmental Matters
Schedule 7.21 - Employee Benefit Plans
Schedule 7.26 - Bank Accounts
Schedule 7.29 - Transactions with Affiliates
----------
(1) This List of Closing Documents does not include payment of fees or amounts
due any party or third person in connection herewith, including title
insurance fees, filing fees and fees payable pursuant to Subsection 9.1(d)
of the Loan and Security Agreement listed as Item 1. Capitalized terms
used and not otherwise defined herein have the meanings given such terms
in the Loan and Security Agreement.
2. Convertible Note executed by Borrower and made payable to the order of
Cameron in the original principal amount of $4,000,000.
3. Use of Proceeds Schedule delivered by Borrower to Agent, listing the
amounts and payees for the Line of Credit Loans made on the Closing Date.
B. Personal Property Security Documents
4. Trademark Security Agreement executed by Borrower granting Agent a
security interest in all of Borrower's trademarks, trade names and service
marks as security for the Obligations.
5. Pledge Agreement executed by Borrower in favor of Agent, evidencing the
pledge of 51% of the issued and outstanding membership interests in
Country Star Las Vegas, LLC ("CSLV") as security for the Obligations,
together with:
a. Pledge Instruction to CSLV from Borrower; and
b. Initial Transaction Statement executed by CSLV.
C. Miscellaneous Personal Property Documents
6. Insurance Certificates and loss payable endorsements in favor of Agent
with respect to the insurance policies held by the Borrower.
D. Real Property Security Documents
7. Leasehold Mortgages or Deeds of Trust executed on behalf of the Borrower,
as mortgagor, in favor of Agent, as mortgagee, relating to the Borrower's
leasehold interest in the real properties located at:
a. 0000 Xxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxx 00000;
b. 0000 Xxx Xxxxx Xxxx. Xxxxx, Xxx Xxxxx, Xxxxxx 00000; and
c. 0000 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxxxxxx Xxxx Walk No. 195,
Xxxxxxxxx Xxxx, Xxxxxxxxxx 00000.
(collectively, the "Real Property").
8. Landlord's Waiver and Consent in favor of Agent from each lessor of the
Real Property.
9. Title Insurance Policies issued by Ticor Title Insurance Company relating
to the Leasehold Mortgages or Deeds of Trust identified above.
E. Organizational and Other Corporate Documents.
2
10. Certificate of Incorporation, together with all amendments thereto, if
any, for the Borrower, certified by the Secretary of State of the State of
Delaware.
11. Certificates of Good Standing for the Borrower issued by the Secretary of
State of the States of Delaware, California, Nevada, and Georgia.
12. Certificate signed by the Secretary of Borrower, certifying among other
things: (i) that the Certificate of Incorporation of the Borrower have not
been amended since the date of the certified Certificate of Incorporation
referenced above for such entity; (ii) the accuracy and currency of the
By-laws of the Borrower attached thereto; (iii) the attached resolutions
of the Board of Directors of the Borrower approving and authorizing the
execution, delivery and performance of the documents to which the Borrower
is a party; and (iv) where applicable, the names, incumbency and
signatures of the officers of the Borrower executing the documents
referred to in this List of Closing Documents and/or in clause (iii)
above.
13. Certificate of the Chief Executive Officer and the Chief Financial Officer
of the Borrower, certifying that the conditions specified in Subsection
9.1(a) of the Loan Agreement have been fulfilled, as required pursuant to
Subsection 9.1(b).
14. Certificate of the President and Chief Financial Officer of the Borrower
pursuant to Section 9.2(a) of the Loan Agreement, certifying (i) the
correctness of certain representations and warranties contained in the
Loan Agreement and (ii) the absence of any Event of Default.
F. Search Reports and UCC Filings
15. Copies of pre-filing UCC lien search reports of filings against the
Borrower and in the filing offices identified below:
a. Secretary of State of State of California;
b. Secretary of State of Florida;
c. Clerk of Superior Court of Xxxxxx County, Georgia and the Georgia
Clerks' Cooperative Authority(2); and
d. Secretary of State of State of Nevada.
16. Copies of pre-filing search reports of fixture filings against the
Borrower in the filing offices identified below:
a. Recorder of Los Angeles County, California;
b. Clerk of Circuit Court of Orange County, Florida;
c. Clerk of Superior Court of Xxxxxx County, Georgia; and
d. Recorder of Xxxxx County, Nevada.
----------
(2) A central database indexing report, not a filing office.
3
17. Copies of pre-closing tax and judgment lien (state and federal) search
reports of filings against the Borrower and in the filing offices
identified below:
a. Recorder of Los Angeles County, California;
b. Clerk of Circuit Court of Orange County, Florida;
c. Clerk of Superior Court of Xxxxxx County, Georgia; and
d. Secretary of State of Nevada and Recorder of Xxxxx County, Nevada.
18. Copies of pre-closing lien search reports of filings against CSLV in the
filing offices identified below:
a. UCC lien search reports from the Secretary of State of Nevada and
the Recorder of Xxxxx County, Nevada;
b. Searches of UCC fixture filings from the Recorder of Xxxxx County,
Nevada; and
c. Tax lien and judgment lien (state and federal) filings with the
Secretary of State of Nevada and the Recorder of Xxxxx County,
Nevada.
19. UCC-1 Financing Statements filed against Borrower as Debtor listing Agent
as Secured Party in the filing offices identified below:
a. Secretary of State of State of California;
b. Secretary of State of Florida;
c. Clerk of Superior Court of Xxxxxx County, Georgia; and
d. Secretary of State of State of Nevada.
20. UCC Fixture Filings filed against Borrower as Debtor listing Agent as
Secured Party in the filing offices identified below:
a. Recorder of Los Angeles County, California;
[b. Clerk of Circuit Court of Orange County, Florida;]
c. Clerk of Superior Court of Xxxxxx County, Georgia; and
d. Recorder of Xxxxx County, Nevada.
21. Post-filing UCC lien search reports of filings in the filing offices
identified in items 19 and 20 above.
G. Legal Opinion
22. Opinion of Xxxxxxxx Xxxx & Brandeis, LLP, counsel to the Borrower,
addressed to the Agent.
H. Related Documents
23. Warrant to Purchase Shares of Common Stock of Country Star Restaurants,
Inc.
4
24. Registration Rights Agreement by and between Country Star Restaurants,
Inc. and the other parties signatories thereto.
25. Waiver of Xxxxxxxxxx Xxxx & Xxxx with respect to any fees due in
connection with the transactions contemplated by the Loan Agreement.
26. Consulting Agreements by and between Country Star Restaurants, Inc. and,
respectively, Xxxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxxxx.
27. Notice of effectiveness of Xx. Xxxxxxxxx'x Consulting Agreement.
28. Undated resignation letters from each of Borrower's board members.
29. Letter from counsel to the Borrower, addressed to the Agent, advising the
Agent under Section 7.28 of the Loan Agreement that the Borrower may be
obligated to pay a brokerage commission to X.X. Xxxxxxx Securities, Inc.
30. Certificate representing 4,000 shares of Borrower's Series B Preferred
Stock, duly endorsed or accompanied by a letter of transmittal or stock
power, to be delivered by Cameron in exchange for the Convertible Note.
31. Letter agreement between Cameron and the Borrower terminating Section 3 of
the October 9, 1996 Subscription Agreement.
32. Certificate registered in the name of Cameron representing 365,522 shares
of Borrower's Common Stock.
I. Post-Closing Matters
33. Letter from Cameron to Borrower as to assignment or participation and
appointment of successor Agent, if necessary.
34. Form D filed by the Borrower with the U.S. Securities and Exchange
Commission and relating to the issuance of Cameron Stock to Cameron.
35. Add lenders to Borrower's insurance policies as additional loss payees and
insureds, as required by Section 8.5 of Loan Agreement.
36. Notify the NASD's Market Surveillance Department (0-000-000-0000) at least
10 minutes prior to issuing press release.
37. Issue press release announcing the recapitalization (note: The Nasdaq
Stock Market requires prompt disclosure of materials events - see Rule
4120 and IM-4120-1 of The Nasdaq Stock Market).
5
38. File Form 8-K with SEC and Nasdaq disclosing change in control under Item
2 (due 15 days after change in control).
6
EXHIBIT E
to
Loan and Security Agreement
between
Cameron Capital Ltd.,
as Agent for Lenders
and
Country Star Restaurants, Inc.
RESTRICTIVE LEGEND
Each certificate representing any Securities shall be stamped with a
restrictive legend substantially in the form of the following:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act").
They may not be offered or transferred by sale, assignment, pledge or
otherwise unless (i) a registration statement for the securities under
the Securities Act is in effect or (ii) the corporation has received
an opinion of counsel, which opinion is satisfactory to the
corporation, to the effect that such registration is not required
under the Securities Act.
LOAN AND SECURITY AGREEMENT
BETWEEN
CAMERON CAPITAL LTD
AND
COUNTRY STAR RESTAURANTS, INC.
SCHEDULE 5.3
LOCATION OF COLLATERAL
A: Executive Offices 00000 Xxxxx Xxxxxx Xxxx.
Xxxxx 000
Xxx Xxxxxxx, XX 00000
B) Facilities and Locations
Not owned by borrower:
1. Country Star Hollywood
Lessor: MCA & Universal Studios
0000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxx Xxxx, XX 00000
2. Country Star Hollywood - Warehouse
Lessor: Xxxx Bazonian
0000 Xxxxxxxxxx Xxxx.
X. Xxxxxxxxx, XX 00000
3. Country Star Atlanta
Lessor: Xxxxx Xxxx
0000 Xxxxxxxxx Xxxx, XX
Xxxxxxx, XX 00000
Lender: Dime Savings Bank of New York
EAB Plaza, Xxxx Xxxxx
00xx Xxxxx
Xxxxxxxxx, XX 00000
4. Country Star Las Vegas
Lessor: Xxxxxx X. Close, Jr.
0000 Xxx Xxxxx Xxxx., Xxxxx
Xxx Xxxxx, XX 00000
COUNTRY STAR RESTAURANTS, INC.
PERMITTED LIENS
SCHEDULE 7.2
ATLANTA
A. Mercury Construction $190,000.00 (approx) Bonded
B. Todays Custom Furniture $92,703.82 Bonded
X. Xxxxxxx Brass $8,868.02 Bonded
D. Pinnacle Construction $240,000.00 (approx)
LAS VEGAS
A. GB Xxxxxxxx Net $180,000.00
COUNTRY STAR RESTAURANTS, INC.
TRADE NAMES
SCHEDULE 7.4
Trademark Registration Date Registration No.
--------- ----------------- ---------------
COUNTRY STAR January 26, 1971 906,886
COUNTRY STAR July 18, 1995 1,906,211
COUNTRY STAR and Design January 9, 1996 1,947,489
COUNTRY STAR April 16, 1996 1,967,853
COUNTRY STAR and Design August 20,1996 1,994,709
DESIGN August 27, 1996 1,997,347
Trademark and Service Xxxx Applications
None, except:
Trademark Registration Date Registration No.
--------- ----------------- ---------------
RATTLESNAKE BARBEQUE SAUCE June 24, 1994 74/541828
COUNTRY STAR September 23, 1994 74/577440
COWBOY MAGIC June 30, 1995 74/695979
COWBOY SALT July 7, 1995 74/699555
RODEO OUTLAW July 21, 1995 74/703926
BRIMSTONE October 6, 1995 74/002183
IT AIN'T COUNTRY 'TILL IT COOKS May 23, 1996 75/108862
AMERICAN MUSIC GRILL June 13, 1996 75/118348
COUNTRY STAR RESTAURANTS, INC.
AFFILIATES
SCHEDULE 7.5
No Affiliates Exist other than Country Star Las Vegas, LLC.
COUNTRY STAR RESTAURANTS, INC.
REAL PROPERTY AND LEASES
SCHEDULE 7.11
1) Company owns no Real Property
2) All leases of Real Property are listed on Schedule 5.3
3) There are no sub-leases
4) Leases as follows:
1) Micros - Atlanta
2) Postage Meters - Pitney Xxxxx
3) Phones - Toshiba (through Aloha)
4) Copiers - Toshiba
5) Facsimile machines - Toshiba
6) Computers - Dell through Sanwa Leasing
7) Van Lease - Hollywood Ford Motor
8) Sign - Hollywood/Las Vegas - Ad Art
COUNTRY STAR RESTAURANTS, INC.
LITIGATION
SCHEDULE 7.14
CLAIMED
-------
1. Today's Custom Furniture $98,000.00
2. Showbiz Entertainment $33,000.00
3. Xxxxxxxxxx Xxxxx Wrongful termination
4. Lazarus Lighting $14,000.00
(owed $9300 - money in
construction escrow
Atlanta)
COUNTRY STAR RESTAURANTS, INC.
ENVIRONMENTAL MATTERS
SCHEDULE 7.17
No Environmental Matters Exist.
COUNTRY STAR RESTAURANTS, INC.
LABOR CONTRACTS AND DISPUTES
SCHEDULE 7.16
There are no Labor contracts or related disputes.
COUNTRY STAR RESTAURANTS, INC.
EMPLOYEE BENEFIT PLANS
SCHEDULE 7.21
No Employee Benefit Plan Exists.
COUNTRY STAR RESTAURANTS, INC.
BANK ACCOUNTS
SCHEDULE 7.26
Bank Account Account Number
------------ --------------
Imperial Bank 4167800006
0000 X. Xx Xxxxxxx Xxxx. 0000000000
Xxxxxxxxx, XX 00000 09-098-224
00-000-000
00-000-000
00-000-000
00-000-000
00-000-000
Citibank 38712402
00 Xxxxx Xx., 00xx Xxx.
P.O. Box 0000
Xxxx Xxxxxx Xxxxxxx
Xxx Xxxx, XX 00000
First Trust of California 94820472
Xxx Xxxxxxxxxx Xx., 0xx Xxx.
Xxx Xxxxxxxxx, XX 00000
First Security 010-205-7621
0000 X. Xxxxxxx Xxx. 010-205-8040
Xxx Xxxxx, XX 00000
Wachovia Bank 000-00-000
Main Xxxxxx 000-00-000
Xxxxxxx, XX 00000
SCHEDULE 7.29
COUNTRY STAR RESTAURANTS, INC.
Transactions with Affiliates
1. Employment Agreement with Xxxxxx X. Xxxxxxxx dated as of
July 1, 1996
2. Employment Agreement with Xxxxx X. Xxxxxxxxx dated as of
July 1, 1996
3. $59,500 Loan to Xxxxx X. Xxxxxxxxx as of January 2, 1996