U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act
of 1934
For the quarterly period ended March 31, 1998
[ ] Transition report under Section 13 or 15 (d) of the Exchange Act
For the Transition period from __________________ to _____________________
Commission file number 0-92402
ON STAGE ENTERTAINMENT, INC.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
NEVADA 88-0214292
- --------------------------------- -------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
4625 W. NEVSO DRIVE, LAS VEGAS, NEVADA 89103
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (ZIP CODE)
(702) 253-1333
----------------------------------------------
Issuer's Telephone Number, Including Area Code
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at April 1, 1998
- ----------------------------- ----------------------------
Common Stock, $0.01 par value 7,190,738
<PAGE>
ON STAGE ENTERTAINMENT, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE NO.
Part I. Financial Information
Item 1. Consolidated Financial Statements
Balance sheets......................................
Statements of operations............................
Statements of cash flows............................
Notes to financial statements.......................
Item 2. Management's Discussion and Analysis
Of Financial Condition and Results of Operations....
Part II. Other Information
Item 1. Exhibits and Reports on Form 8-K........................
Signatures.............................................................
Exhibit Index..........................................................
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
On Stage Entertainment, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
December 31, March 31,
1997 1998
----------------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents .................................................................. $ 2,323,559 $ 1,195,187
Accounts receivable, net ................................................................... 455,340 963,995
Inventory .................................................................................. 118,700 299,771
Deposits ................................................................................... 342,096 465,385
Prepaid and other assets ................................................................... 271,338 353,472
Pre-opening costs, net ..................................................................... -- 804,410
Notes receivable from stockholder ............................................................ 136,194 158,568
------------ ------------
Total current assets .............................................................. 3,647,227 4,240,788
------------ ------------
Property, equipment and leasehold improvements (Note 5) ......................................... 5,008,835 20,807,049
Less: Accumulated depreciation and amortization ................................................. (2,553,347) (2,706,258)
------------ ------------
Property, equipment and leasehold improvements, net .............................................. 2,455,488 18,100,791
------------ ------------
Cost in excess of net assets acquired, net of accumulated amortization
of $7,370 and $10,941 ........................................................................ 116,415 112,845
Direct acquisition costs ......................................................................... 258,133 100,557
Deferred financing costs, net of amortization of $3,699 (Note 5) ................................ -- 746,301
------------ ------------
$ 6,477,263 $ 23,301,282
============ ============
Liabilities and Stockholder's Equity
Current liabilities
Accounts payable and accrued expenses ........................................................ $ 880,286 $ 2,108,065
Accrued payroll and other liabilities ........................................................ 698,499 1,230,492
Current maturities of long-term debt ......................................................... 271,918 603,332
------------ ------------
Total current liabilities ....................................................... 1,850,703 3,941,889
------------ ------------
Long-term debt, less current maturities (Note 5) ................................................ 550,332 13,311,891
------------ ------------
Total liabilities and long-term debt .................................................. 2,401,035 17,253,780
------------ ------------
Commitments and contingencies (Note 4)
Stockholder's equity
Preferred stock, par value $1 per share, 1,000,000 shares
authorized; none issued and outstanding ................................................. -- --
Common stock, par value $0.01 per share; authorized 25,000,000
shares; 6,595,500 and 7,190,738 shares issued and outstanding .......................... 65,955 71,907
Additional paid-in-capital .................................................................. 7,340,013 9,834,061
Accumulated deficit ......................................................................... (3,329,740) (3,858,466)
------------ ------------
Total stockholder's equity ............................................................. 4,076,228 6,047,502
------------ ------------
$ 6,477,263 $ 23,301,282
============ ============
</TABLE>
<PAGE>
On Stage Entertainment, Inc. and Subsidiaries
Consolidated Statements of Operations
Three months ended
March 31,
--------------------------
1997 1998
--------------------------
(Unaudited) (Unaudited)
Net revenues (Note 5) ............................ $ 2,718,777 $ 6,205,371
Costs of revenues ................................ 1,902,888 3,917,328
----------- -----------
Gross profit ..................................... 815,889 2,288,043
Selling, general & administrative ................ 1,069,832 2,282,216
Depreciation and amortization .................... 147,241 188,621
----------- -----------
Operating loss ................................... (401,184) (182,794)
Interest expense, net ............................ 113,869 13,760
Other income ..................................... -- (35,599)
Subsidiary operations for period not owned (Note 5) -- 366,516
----------- -----------
Net loss before income taxes ..................... (515,053) (527,471)
Income taxes ..................................... 2,319 1,255
----------- -----------
Net loss ......................................... $ (517,372) $ (528,726)
=========== ===========
Loss per share ................................... $ (0.12) $ (0.08)
=========== ===========
Number of common shares outstanding .............. 4,486,515 6,714,548
=========== ===========
<PAGE>
On Stage Entertainment, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
Three months ended
March 31,
------------------------------
1997 1998
------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net loss .............................................................................. $ (517,372) $ (528,726)
-------------------------------
Adjustments to reconcile net loss to net cash used in operating activities:
Issuance of common stock to officer ................................................. 162,129 --
Depreciation and amortization ....................................................... 147,241 160,180
Increase (decrease) from changes in operating assets and
liabilities
Accounts receivable ............................................... 170,599 (508,655)
Inventory ......................................................... (6,967) (60,987)
Deposits .......................................................... (121,970) (123,289)
Offering costs .................................................... (162,728) --
Pre-opening costs ................................................. (112,457) (804,410)
Prepaid and other assets .......................................... (23,963) 75,382
Accounts payable and accrued expenses ............................. (6,623) 241,735
Accrued payroll and other liabilities ............................. (57,144) 531,993
Litigation settlement accrual ..................................... (100,000) --
-------------------------------
Total adjustments ................................................................... (111,883) (488,051)
-------------------------------
Net cash used in operating activities ........................................................ (629,255) (1,016,777)
-------------------------------
Cash flows from investing activities
Advances on note receivable from stockholder ................................... (103,235) (55,000)
Payments received on notes receivable from stockholder ......................... -- 32,626
Capital expenditures ........................................................... (93,517) (134,363)
Direct acquisition costs ....................................................... -- (488,298)
Payment for purchase of Gedco, USA, net of cash received (Note 5) .............. -- (12,116,556)
-------------------------------
Net cash used in investing activities ........................................................ (196,752) (12,761,591)
-------------------------------
Cash used in financing activities
Borrowings/repayments under line of credit ............................................. -- 250,000
Proceeds from long-term borrowing (Note 5) ............................................. -- 12,500,000
Repayment on long-term borrowing ....................................................... (25,597) (100,004)
Proceeds from bridge notes ............................................................. 875,000 --
-------------------------------
Net cash provided by financing activities .................................................... 849,403 12,649,996
-------------------------------
Net increase in cash and cash equivalents .................................................... 23,396 (1,128,372)
Cash and cash equivalents at beginning of period ............................................. 290,751 2,323,559
-------------------------------
Cash and cash equivalents at end of period ................................................... $ 314,147 $ 1,195,187
===============================
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest ............................................................................. $ 67,072 $ 22,923
Taxes ................................................................................ 2,319 1,255
===============================
</TABLE>
Supplemental schedule of non-cash investing and financing activities
During the three months ended March 31, 1997 and 1998, $0 and $442,997 of lease
assets and other obligation, principally pre-opening costs, were capitalized,
respectively.
<PAGE>
ON STAGE ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998
(1) Basis of Presentation
The financial statements included herein include the accounts of On Stage
Entertainment, Inc. (the "Company") and its subsidiaries, Legends in Concert,
Inc., a Nevada corporation; On Stage Marketing Inc., a Nevada corporation; On
Stage Theaters, Inc., a Nevada corporation; Wild Bill's California, Inc., a
Nevada corporation; Fort Liberty, Inc., a Nevada corporation; Blazing Pianos,
Inc., a Nevada corporation; King Henry's Inc., a Nevada corporation and
Interactive Events, Inc., a Georgia corporation (collectively, the
"Subsidiaries"). In the opinion of the Company's management, all adjustments
considered necessary for fair presentation have been reflected in the financial
statements. These adjustments are of a normal, recurring nature. Operating
results for the three months ended March 31, 1998, are not necessarily
indicative of those expected for the full year. Certain prior year amounts have
been adjusted and reclassified to conform to the 1997 presentation.
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and the rules and
regulations of the Securities and Exchange Commission. These consolidated
financial statements have been prepared under the presumption that users of the
interim consolidated financial information have either read or have access to
the Company's audited financial statements and footnotes thereto for the year
ended December 31, 1997, included in Form 10-KSB, filed on March 31, 1998 with
the Securities and Exchange Commission. Accordingly, footnote disclosures, which
would substantially duplicate the disclosures contained in the Company's
December 31, 1997 audited financial statements, have been omitted from these
interim consolidated financial statements. Certain information and footnote
disclosures normally included in consolidated financial statements prepared in
accordance with generally accepted accounting principles, have been condensed or
omitted pursuant to such instructions. Although the Company believes that the
disclosures are adequate to make the information presented not misleading, it is
suggested that these unaudited interim consolidated financial statements be read
in conjunction with the audited consolidated financial statements and the notes
thereto for the year ended December 31, 1997, included in Form 10-KSB, filed on
March 31, 1998.
(2) Subsequent Events
On April 23, 1998 the Company formed six (6) new Nevada subsidiaries. These
subsidiaries include: On Stage Productions, Inc., On Stage Merchandise, Inc., On
Stage Casino Entertainment, Inc., On Stage Events, Inc., On Stage Theaters North
Myrtle Beach, Inc., and On Stage Theaters Surfside Beach, Inc.
In March 1997, in connection with the Company's initial public offering of its
common stock, par value $0.01 per share ("Common Stock"), and redeemable
warrants to purchase Common Stock (the "IPO"), the Company agreed with its
Underwriter, Whale Securities Co., LP (the "Underwriter"), that it would neither
loan nor advance any sums to or on behalf of John W. Stuart, the Company's
Chairman, Chief Executive Officer and principal stockholder, other than those
sums advanced to Mr. Stuart from December 31, 1996 through the date of the IPO,
without the Underwriter's prior consent. On October 23, 1997 and subsequently on
November 17, 1997, the Company received authorization from the Underwriter to
advance Mr. Stuart an aggregate of $105,483 (including principal and interest)
and on March 25, 1998, the Company again received authorization from the
Underwriter to advance $150,000 for settlement of certain litigation pending
against Mr. Stuart related to his involvement in the Legends in Concert, Hawaii
show. As of May 5, 1998, the Company has advanced Mr. Stuart an aggregate of
$205,483 (the "Advance"), which Advance bears interest at a rate of 10% per
annum, matures one year from the date of the Advance and is evidenced by a
promissory note.
(3) Loss Per Share
On March 3, 1997, the FASB issued Statement of Financial Accounting Standard No.
128. Earnings per share (SFAS 128). This pronouncement provides a different
method of calculating earnings per share than is currently used in accordance
with APB 15, Earnings per Share. SFAS 128 provides for the calculation of Basic
and Diluted earnings per share. Basic earnings per share includes no dilution
and is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution of securities that could
share in the earnings of the entity, similar to fully diluted earnings per
share. Except where the provisions of the Securities and Exchange Commission's
Staff Accounting Bulletin No. 98 are applicable, potential dilutive securities
have been excluded in all years presented in the Statements of Operations when
the effect of their inclusion would be anti-dilutive.
<PAGE>
For the three months ended March 31, 1997, potential dilutive securities
representing 617,403 outstanding options and 212,500 outstanding warrants are
not included, since their effect would be anti-dilutive. For the three months
ended March 31, 1998, potential dilutive securities representing 563,953
outstanding stock options and 2,802,000 outstanding warrants are not included,
since their effect would be anti-dilutive.
(4) Commitments and Contingencies
The Company is a party to various legal proceedings in which the adverse parties
are seeking damages from the Company. While there can be no assurance that any
of the instituted or threatened lawsuits will be settled or decided in favor of
the Company, the management of the Company does not believe the final resolution
of these matters will have a material adverse effect upon the Company's
financial condition and results of operations.
(5) Business Acquisition
Gedco USA, Inc. Acquisition
On March 13, 1998, the Company completed its acquisition of certain assets from
Gedco USA, Inc. and its affiliates for a purchase price of $14,000,000,
consisting of $11,500,000 in cash and 595,238 shares of Common Stock valued at
$2,500,000 (the "Gedco Acqusition").
Included in the Gedco Acquisition were substantially all of the income producing
assets and associated real property of Orlando Entertains and LA Entertains,
consisting of King Henry's Feast, Blazing Pianos piano bar, the Fort Liberty
shopping complex that includes a Wild Bill's Dinner Theater, each of which is
located in greater Orlando, Florida, and a second Wild Bill's Dinner Thearter
located in Buena Park, California. Gerard O'Riordan, President of Gedco USA,
Inc., joined the Company as President of On Stage Theaters, Inc., a wholly
subsidiary of the Company that manages the acquired dinner theaters and piano
bar as well as other selected theaters.
The Company funded the cash portion of the purchase price and transaction fees
and expenses with $12.5 million of mortgage financing from Imperial Credit
Commercial Mortgage Investment Corp. ("ICCMIC"). ICCMIC has committed a total of
$20,000,000, of which $7,500,000 is remaining to finance the Company's future
real estate related acquisitions. In connection with the loan agreement entered
into between the Company and ICCMIC on March 13, 1998 (the "Loan Agreement"),
the Company granted ICCMIC the right to provide the Company with up to an
additional $30 million of similar mortgage financing. In connection with the
financing, the Company issued ICCMIC and Imperial Capital Group LLC (an
affiliate of ICCMIC), an aggregate of 575,000 warrants immediately exercisable
into Common Stock at an exercise price of $4.44. In addition, concurrent with
the ICCMIC financing, Mark Karlan, the President of ICCMIC, was named a member
of the Company's Board of Directors, filling a vacancy created by the
resignation of Kenneth Berg.
The components of the purchase price and its allocation to the assets and
liabilities are as follows:
Purchase Price:
Liabilities assumed ........................................ $ 986,044
Issuance of 595,238 restricted shares of common stock ..... 2,500,000
-----------
3,486,044
Costs of acquisition incurred .............................. 1,645,874
Cash paid ................................................ 11,500,000
-----------
$16,631,918
===========
The acquisition was accounted for as a purchase and the assets acquired
were recorded at a fair market value. The building and equipment are being
depreciated over twenty and three years, respectively, under the straight-line
method. The allocation of the purchase price was as follows:
Cash ....................................................... $ 383,444
Inventory .................................................. 120,084
Prepaid expenses ........................................... 157,516
Land ....................................................... 11,275,507
Building ................................................... 3,214,740
Equipment .................................................. 730,627
Deferred financing acquisition expenses .................... 750,000
-----------
$16,631,918
===========
<PAGE>
The assets acquired and liabilities assumed were transferred to either
the Company's wholly-owned subsidiary, On Stage Theaters, Inc., or a wholly
owned subsidiary of On Stage Theaters, Inc., concurrent with the acquisition.
The Company has elected to consolidate the operations of the assets
acquired in the Gedco Acquisition retroactively to January 1, 1998. Therefore,
the pre-acquisition gain of $366,516 has been added to the consolidated
statement of operations for the quarter ended March 31, 1998. The effect of this
consolidation of operations prior to acquisition was an increase in net sales of
approximately $3,099,071.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This document contains certain forward-looking statements that are
subject to risks and uncertainties. Forward-looking statements include certain
information relating to its outstanding litigation matters and the defenses
available to the Company, the seasonality of the Company's business, and
liquidity as well as information contained elsewhere in this Report where
statements are preceded by, followed by or include the words "believes,"
"expects," "anticipates" or similar expressions. For such statements, the
Company claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. The
forward-looking statements in this document are subject to risks and
uncertainties that could cause the assumptions underlying such forward-looking
statements and the actual results to differ materially from those expressed in
or implied by the statements.
The most important factors that could prevent the Company from
achieving its goals and cause the assumptions underlying the forward-looking
statements and the actual results of the Company to differ materially from those
expressed in or implied by those forward-looking statements include, but are not
limited to, those identified in pages 9-17 of Amendment No. 5 to the Company's
Registration Statement on Form SB-2 filed with the Commission on August 13, 1997
(Registration No. 333-24681), as well as the following: (i) The Company's
dependence on its flagship productions Legends in Concert, Wild Bill's Dinner
Extravaganza, Blazing Pianos, King Henry's Feast and its principal production
venues; (ii) The ability of the Company to successfully produce and market new
productions and to manage the growth associated with the any new productions;
(iii) Risks associated with the Company's acquisition strategy, including the
Company's ability to successfully identify, complete and integrate strategic
acquisitions; (iv) The Company's ability to obtain financing on commercially
reasonable terms; (v) The Company's ability to service its substantial
indebtedness; (vi) The competitive nature of the leisure and entertainment
industry and the ability of the Company to continue to distinguish its services;
(vii) Fluctuations in quarterly operating results and the highly seasonal nature
of the Company's business; (viii) The ability of the Company to reproduce the
performance, likeness and voice of various celebrities without infringing on the
publicity rights of such celebrities or their estates as well as its ability to
protect its intellectual property rights; (ix) The ability of the Company to
successfully manage the litigation pending against it and to avoid future
litigation; and (x) The results of operations which depend on numerous factors
including, but not limited to, the commencement and expiration of contracts, the
timing and amount of new business generated by the Company, the Company's
revenue mix, the timing and level of additional selling, general and
administrative expense and the general competitive conditions in the leisure and
entertainment industry as well as the overall economy.
Results of Operations
The following tables sets forth, the results of operations by operating
divisions for the period indicated:
<TABLE>
For the quarter ended March 31, 1997
----------------------------------------------------------------------------------------------------
Sub-Total
Casino Corporate Production Operating Corporate Total
Entertainment Events Merchandise Services Theaters Divisions Office Consolidated
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues................. $1,457,046 $ 625,050 $ 67,376 $ -- $ 569,305 $2,718,777 $ -- $2,718,277
Cost of revenues ............ 887,445 420,868 14,462 59,253 520,860 1,902,888 -- 1,902,888
--------------------------------------------------------------------------------------------------
Gross profit................. 569,601 204,182 52,914 (59,253) 48,445 815,889 -- 815,889
Selling, general &
administrative............. 53,758 152,287 -- -- 137,049 343,094 726,738 1,069,832
Depreciation & amortization . 30,583 -- -- -- 5,123 35,706 111,535 147,241
--------------------------------------------------------------------------------------------------
Operating income (loss) ..... 485,260 51,895 52,914 (59,253) (93,727) 437,089 (838,273) (401,184)
Interest expense, net ...... -- (144) -- -- -- (144) 114,013 --
--------------------------------------------------------------------------------------------------
Net income (loss) before
income taxes ............. 485,260 52,039 52,914 (59,253) (93,727) 437,233 (952,286) (515,053)
Income taxes................. -- 1,723 -- -- -- 1,723 596 2,319
--------------------------------------------------------------------------------------------------
Net income (loss) ........... $ 485,260 $ 50,316 $ 52,914 $ (59,253) $ (93,727) $ 435,510 $ (952,882) $ (517,372)
=================================================================================================
<PAGE>
For the quarter ended March 31, 1997
----------------------------------------------------------------------------------------------------
Sub-Total
Casino Corporate Production Operating Corporate Total
Entertainment Events Merchandise Services Theaters Divisions Office Consolidated
----------------------------------------------------------------------------------------------------
Net revenues................ $1,525,353 $ 539,798 $ 56,056 $ -- $4,084,164 $6,205,371 $ -- $6,205,371
Cost of revenues ........... 973,607 345,184 12,770 31,549 2,554,218 3,917,328 -- 3,917,328
--------------------------------------------------------------------------------------------------
Gross profit................ 551,746 194,614 43,286 (31,549) 1,529,946 2,288,043 -- 2,288,043
Selling, general &
administrative ........... 54,306 229,716 4,702 43,104 1,244,838 1,576,666 705,550 2,282,216
Depreciation &
amortization ............. 38,402 2,748 560 -- 69,863 111,573 77,048 188,621
--------------------------------------------------------------------------------------------------
Operating income (loss) .... 459,038 (37,850) 38,024 (74,653) 215,245 599,804 (782,598) (182,794)
Interest expense, net ...... -- (20) -- -- 6,815 6,795 6,965 13,760
Other income................ -- -- -- -- (35,599) (35,599) -- (35,599)
Subsidiary operations for
period not owned ......... -- -- -- -- 366,516 366,516 -- 366,516
--------------------------------------------------------------------------------------------------
Net income (loss) before
income taxes ............. 459,038 (37,830) 38,024 (74,653) (122,487) 262,092 (789,563) (527,471)
Income taxes................ -- -- -- -- -- -- 1,255 1,255
--------------------------------------------------------------------------------------------------
Net income (losses) ........ $ 459,038 $ (37,830) $ 38,024 $ (74,653) $ (122,487) $ 262,092 $ (790,818) $ (528,726)
=================================================================================================
</TABLE>
The following table sets forth, for the periods indicated, the percentage of the
Company's net revenues represented by operating Divisions income statement data:
<TABLE>
Three Months Ended March 31, 1997
-------------------------------------------------------------------------------------------
Sub-Total
Casino Corporate Production Operating Corporate Total
Entertainment Events Merchandise Services Theaters Divisions Office Consolidated
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues .................... 60.9 67.3 21.5 0.0 91.5 70.0 0.0 70.0
---------------------------------------------------------------------------------------
Gross profit ........................ 39.1 32.7 78.5 0.0 8.5 30.0 0.0 30.0
Selling, general & administrative ... 3.7 24.4 0.0 0.0 24.1 12.6 0.0 39.4
Depreciation & amortization ......... 2.1 0.0 0.0 0.0 0.9 1.3 0.0 5.4
---------------------------------------------------------------------------------------
Operating income (loss) ............. 33.3 8.3 78.5 0.0 (16.5) 16.1 0.0 (14.8)
Interest, net ....................... 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.1
---------------------------------------------------------------------------------------
Net income (loss) before ............ 33.3 0.0 78.5 0.0 (16.5) 0.0 0.0 (18.9)
Income taxes ........................ 0.0 0.3 0.0 0.0 0.0 0.1 0.0 0.1
---------------------------------------------------------------------------------------
Net income (loss) ................... 33.3% 8.3% 78.5% 0.0% (16.5)% 16.0% 0.0% (19.0%)
=======================================================================================
Three Months Ended March 31, 1998
-------------------------------------------------------------------------------------------
Net revenues......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues .................... 63.8 63.9 22.8 0.0 62.5 63.1 0.0 63.1
--------------------------------------------------------------------------------------
Gross profit ........................ 36.2 36.1 77.2 0.0 37.5 36.9 0.0 36.9
Selling, general & administrative ... 3.6 42.6 8.4 0.0 30.5 25.4 0.0 36.8
Depreciation & amortization ......... 2.5 0.5 1.0 0.0 1.7 1.8 0.0 3.0
--------------------------------------------------------------------------------------
Operating income (loss).............. 30.1 (6.5) 68.8 0.0 7.0 11.5 0.0 0.1
Interest, net ....................... 0.0 0.0 0.0 0.0 0.2 0.1 0.0 0.2
Other income ........................ 0.0 0.0 0.0 0.0 (0.9) (0.6) 0.0 (0.6)
Subsidiary operations for period
not owned ......................... 0.0 0.0 0.0 0.0 9.0 6.0 0.0 6.0
--------------------------------------------------------------------------------------
Net income (loss) before income
taxes .............................. 30.1 (7.0) 67.8 0.0 (3.0) 4.2 0.0 (8.5)
Income taxes ......................... 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------------------
Net income (loss) .................... 30.1% (7.0%) 67.8% 0.0 (3.0%) 4.2% 0.0% (8.5%)
======================================================================================
</TABLE>
<PAGE>
Net loss for the quarter ended March 31, 1998 was $528,726, as compared to a net
loss of $517,732 for the quarter ended March 31, 1997.
Quarter Ended March 31, 1997 versus Quarter Ended March 31, 1998
Net Revenues. Revenues increased by 128.3% to $6,205,000 for the quarter ended
March 31, 1998 compared to $2,718,000 for the quarter ended March 31, 1997. The
Company's revenue is derived from four principal operating divisions: Theaters,
Corporate Events, Merchandise, and Casino Entertainment.
Theaters revenues were approximately $4,084,000 for the quarter ended March 31,
1998 compared to $569,000 for the quarter ended March 31, 1997, an increase of
$3,515,000, or 617.4%. Contributing to this increase were increases of
approximately: (i) $566,000, attributable a full scale Legends show at the
Estrel Residence & Congress Hotel in Berlin, Germany, a resident Legends show at
the Christy Lane Theater in Branson, Missouri, a resident variety show at the
Sheraton Valley Forge Hotel in King of Prussia; and (ii) $3,099,000,
attributable to the consolidation of operations of the Gedco Acquisition,
retroactively to January 1, 1998. These increases were partially offset by
decreases of approximately: (a) $104,000, attributable to the discontinuation of
the Legends show on Premier Cruise Lines due to a sale of the vessels to a new
company; and (b) $46,000, attributable to the resident Legends show in Myrtle
Beach, South Carolina.
Corporate Events revenues were $540,000 for the quarter ended March 31, 1998
compared to $625,000 for the quarter ended March 31, 1997, a decrease of $85,000
or 13.6%. This decrease was mainly attributable to a reduction of $209,000, in
limited engagements which included the Legends Celebrity Series at the Empress
Casino in Joliet, Illinois, which ran in 1997 but not in 1998. These decreases
were partially offset by increases in revenues of approximately $124,000 from
other corporate events.
Merchandise revenues were approximately $56,000 for the quarter ended March 31,
1998 compared to $67,000 for the quarter ended March 31, 1997, a decrease of
$11,000 or 16.4%. This decrease was mainly attributable to a decrease in photo
revenues at the Fireside Restaurant & Playhouse, due to the discontinuation by
Fireside of merchandise sales during 1998.
Casino Entertainment revenues were approximately $1,525,000 for the quarter
ended March 31, 1998 compared to $1,457,000 for the quarter ended March 31,
1997, an increase of $69,000, or 4.7%. Contributing to this increase were
increases of approximately: (i) $120,000, attributable to the Camouflage Aux
Follies, at the Taj Mahal Hotel and Casino in Atlantic City, New Jersey, which
ran in 1998, but not in 1997; (ii) $39,000, attributable to the Legends show at
the Bally's Park Place in Atlantic City, New Jersey; and (iii) $66,000,
attributable to Fiesta! Fiesta!, at the Taj Mahal Hotel and Casino in Atlantic
City, New Jersey, which ran in 1998, but not in 1997. These increases were
partially offset by decreases of approximately: (a) $64,000, attributable to a
resident Legends show at the Imperial Palace in Las Vegas; and (b) $92,000,
attributable to An Evening at the Improv(R) Spectacular for Trump's Taj Majal in
Atlantic City, Where it ran from March 1997 through July 1997.
Costs of Revenues. Total costs of revenues were $3,917,000 for the quarter ended
March 31, 1998 compared to $1,903,000 for the quarter ended March 31, 1997, an
increase of $2,014,000, or 105.9%. Costs of revenues decreased to 63.1% of net
revenues for the quarter ended March 31, 1998, as compared to 70.0% for the
quarter ended March 31, 1997. This decrease in cost of sales as percentage of
revenues was primarily attributable to a change in the mix of the Company's
revenues due to the inclusion of the Gedco Acquisition revenues which have lower
costs of revenues (49.4%) than: Casino Entertainment (63.8%); Corporate Events
(63.9%); or Theaters (103.8%, exclusive of the Gedco USA, Inc. consolidation).
The increase in total costs of revenues was partially offset by a decrease in
costs of revenue (22.8%) in the Merchandise Division.
<PAGE>
Selling, General and Administrative. Selling, general and administrative costs
were approximately $2,282,000 for the quarter ended March 31, 1998 as compared
to $1,070,000 for the quarter ended March 31, 1997, an increase of $1,212,000,
or 113.3%. Selling, general and administrative costs decreased to 36.8% of net
revenues for the quarter ended March 31, 1998, as compared to 39.4% for the
quarter ended March 31, 1997. The increase in total cost was primarily
attributable to the inclusion of the Gedco Acquisition selling, general and
administrative expense, and increases in automobile expenses, insurance,
professional services, rent, advertising, and promotion and investor relations.
These decreases were partially offset by decreases in salaries and commissions.
Operating Loss. The Company's operating loss was approximately $183,000 for the
quarter ended March 31, 1998, compared to an operating loss of $401,000 for the
quarter ended March 31, 1997, an increase of $218,000, or 54%.
Depreciation and Amortization. Depreciation and amortization for the quarter
ended March 31, 1998 increased by $41,000, or 28.0%, as compared to the quarter
ended March 31, 1997. The increase was primarily due to capital additions to
current shows, new shows, goodwill amortization and an increase in assets as a
result of the Gedco Acquisition.
Interest Expense, Net. Interest expense for the quarter ended March 31, 1998
decreased by $100,000, or 88%, as compared to the quarter ended March 31, 1997.
The decrease was primarily due to a decrease in the average borrowing level for
the quarter ended March 31, 1998 as compared to the quarter ended March 31,
1997.
Other Income. Other income for the quarter ended March 31, 1998 was attributable
to a sign-on bonus received from a new supplier.
Income Taxes. The Company is a Nevada corporation with a substantial portion of
revenue and income derived in Nevada. There are no state or local income taxes
in Nevada. The Company accrued no federal income tax for the quarter ended March
31, 1998. Income taxes for the quarters ended March 31, 1997 and 1998, relate to
income taxes due in those states other than Nevada in which the Company conducts
business. At March 31, 1997 and 1998, the Company had federal net operating loss
carryforwards of approximately $1,174,847 and $3,024,097, respectively. Under
Section 382 of the Internal Revenue Code, certain significant changes in
ownership that the Company is currently undertaking may restrict the future
utilization of these tax loss carryforwards. The net deferred tax assets have a
100% valuation allowance, as management cannot determine if it is more likely
than not that the deferred tax assets will be realized.
Seasonality and Quarterly Results
The Company's business has been, and is expected to remain, highly seasonal,
with the majority of its revenue being generated during the months of April
through October. Part of the Company's business strategy is to increase sales in
tourist markets that experience their peak seasons from November through March,
so as to offset this seasonality in revenues. The Gedco Acquisition should also
help to decrease the seasonality of the Company's business since Gedco's revenue
has historically been less seasonal. The Company is exploring opportunities to
open shows in markets such as Florida and Arizona, domestically, and Australia,
South Africa, and Mexico, abroad, which the Company believes, could also help
mitigate the effect of this seasonality.
The following table sets forth the Company's net revenue for each of the last
nine quarters ended March 31, 1998:
Net Revenues ($ in thousands)
----------------------------------------------------
March 31, June 30, September 30, December 31,
----------------------------------------------------
Fiscal 1996 .......... $2,347 $4,266 $4,591 $3,074
Fiscal 1997 .......... $2,719 $3,979 $5,071 $3,957
Fiscal 1998 .......... $6,205 -- -- --
<PAGE>
Liquidity and Capital Resources
General
The Company has historically met its working capital requirements through a
combination of cash flow from operations, equity and debt offerings and
traditional bank financing. The Company anticipates, based on its proposed plans
and assumptions relating to its operations (including assumptions regarding the
anticipated timetable of its new show openings and the costs associated
therewith), that the Company's current cash, cash equivalent balances,
anticipated revenue from operations and its working capital line will be
sufficient to fund its current operations and contemplated capital requirements
over the next 18 months. However, the Company's acquisition strategy will
require additional debt and/or equity financing. In the event the Company's
plans or assumptions change, prove to be incorrect, or if balances and/or
anticipated revenues otherwise prove to be insufficient, the Company would need
to revise its expansion strategy (which revision could include the curtailment,
delay or elimination of certain of its anticipated productions or the funding of
such productions through arrangements with third parties, which would require it
to relinquish rights to a substantial portion of its revenues) and/or seek
additional financing prior to the end of such period.
For the quarter ended March 31, 1997, the Company used cash of $629,000 in
operations. As of March 31, 1997, the Company had approximately $314,000 in cash
and cash equivalents. For the quarter ended March 31, 1998, the Company used
cash of $1,017,000 in operations. As of March 31, 1998, the Company had
approximately $1,195,000 in cash and cash equivalents. The operating deficits
for both quarters were primarily attributable to business seasonality, and an
increase in selling, general and administrative costs.
The net cash used in investing activities for the quarter ended March 31, 1997
of $197,000, was primarily attributable to capital expenditures and direct
advances (which were subsequently written off at August 13, 1997) on notes
receivable to Mr. Stuart. The net cash used in investing activities for the
quarter ended March 31, 1998 of $12,762,000, was primarily attributable to
direct acquisition costs related to the Gedco Acquisition.
Net cash provided by financing activities for the quarter ended March 31, 1997
of $849,000, was primarily attributable to a series of debt and bank financings.
Net cash provided by financing activities for the quarter ended March 31, 1998
of $12,650,000, was primarily attributable to ICCMIC's funding of $12,500,000
for the Gedco Acquisition.
At March 31, 1997, the Company had a working capital deficit of approximately
$351,000, which resulted primarily from business seasonality, increased
operating expenses and advances paid to Mr. Stuart in the amount of
approximately $103,000. At March 31, 1998, the Company had working capital of
approximately $298,000, primarily attributable to an increase in pre-paid
tickets and monies received from the Gedco Acquisition.
Working Capital Line
In May 1997, First Security Bank of Nevada ("First Security") issued a line of
credit to the Company for up to $250,000. Borrowings under such facility bear
variable interest at 1.5% over the First Security Bank of Idaho's index (10% per
year as of the facility's inception) and are due on demand. On March 28, 1998,
First Security increased the line of credit from $250,000 to $1,000,000 and
extended the expiration date of the line to March 25, 1999. As of May 13, 1998,
the Company had drawn $715,000 on the line of credit.
<PAGE>
Capital Equipment Financing Commitment
On September 29, 1997, First Security Leasing Company, a Utah corporation,
approved the Company for a $500,000 capital lease line of credit, which was
subsequently increased to $1,000,000 on March 28, 1998. Advances under this
capital lease line incur interest at a rate of 9.75% per annum. The financing
commitment will expire on September 29, 1998. As of April 11, 1998, the Company
had drawn $832,000 on the capital lease line.
Mortgage Financing Commitment
On March 13, 1998, the Company entered into the Loan Agreement with ICCMIC
pursuant to which ICCMIC agreed to provide the Company with up to $20,000,000 of
mortgage financing. On the same date, the Company used $12,500,000 of said
facility to fund the cash portion of the Gedco Acquisition and related fees. In
connection with the Loan Agreement, the Company provided ICCMIC with the right
to provide the Company with up to an additional $30,000,000 of mortgage related
financing. In addition concurrent with the ICCMIC financing, Mark Karlan, the
President of ICCMIC, was named a member of the Company's Board of Directors,
filling a vacancy created by the resignation of Kenneth Berg.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Exhibits & Reports on Form 8-K
(a) Exhibits
The following documents are furnished as exhibits and numbered pursuant
to Item 601 of Regulation S-B.
4.1 Warrant Agreement between Imperial Credit Commercial Mortgage
Investment Corp., Imperial Capital Group LLC and the Registrant,
dated as of March 13,1998.
10.1 Loan Agreement by and between Imperial Credit Commercial Mortgage
Investment Corp. and Wild Bill's California, Inc., King Henry's,
Inc. and Fort Liberty, inc., dated as of March 13, 1998.
10.2 Guaranty Loan Agreement between Imperial Credit Commercial
Mortgage Investment Corp. and the Registrant, dated as of March
13, 1998.
(b) Reports on Form 8-K
On March 30, 1998, the Company filed a report on Form 8-K in which the Company
reported the terms of the Gedco Acquisition.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ON STAGE ENTERTAINMENT, INC.
Date: May 14, 1998 /s/ John W. Stuart
-------------------------------
John W Stuart, Chairman
and Chief Executive Officer
Date: May 14, 1998 /s/ Kiranjit S. Sidhu
------------------------------
Kiranjit S. Sidhu, Senior Vice
President Finance and
Administration, and Chief
Financial Officer
<PAGE>
EXHIBIT INDEX
4.1 Warrant Agreement between Imperial Credit Commercial Mortgage Investment
Corp., Imperial Capital Group LLC and the Registrant, dated as of March
13,1998.
10.1 Loan Agreement by and between Imperial Credit Commercial Mortgage
Investment Corp. and Wild Bill's California, Inc., King Henry's, Inc.
and Fort Liberty, inc., dated as of March 13, 1998.
10.2 Guaranty Loan Agreement between Imperial Credit Commercial Mortgage
Investment Corp. and the Registrant, dated as of March 13, 1998.
WARRANT AGREEMENT
Between
IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP.,
IMPERIAL CAPITAL GROUP, LLC
And
ON STAGE ENTERTAINMENT, INC.
Dated as of March 13, 1998
THE WARRANTS AND WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THE WARRANTS
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE WARRANTS
AND WARRANT SECURITIES, AS THE CASE MAY BE, MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, IN THE
ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT AND QUALIFICATION IN EFFECT
WITH RESPECT TO THE WARRANTS AND WARRANT SECURITIES, AS THE CASE MAY BE, UNDER
THE SECURITIES ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS OR (2) AN
EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION.
<PAGE>
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is dated as of the 13th day
of March, 1998, by and among ON STAGE ENTERTAINMENT, INC., a Nevada corporation,
IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP., a Maryland corporation
("ICCMIC") and IMPERIAL CAPITAL GROUP, LLC, a California limited liability
company ("ICLLC").
WHEREAS, the Company has agreed to grant to ICCMIC and ICLLC common
stock warrants in the form attached as Exhibit A hereto (the "Warrants") to
acquire shares of the Company's Common Stock, $.01 par value per share. This
Agreement sets forth certain rights and obligations of the Company and the
Holders with respect to the Warrants.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, representations, warranties and agreements contained in this
Agreement, the parties hereto agree as follows:
I. DEFINITIONS
Section I.1 Defined Terms. As used in this Agreement, the following
capitalized terms shall have the meanings respectively assigned to them below,
which meanings shall be applicable equally to the singular and plural forms of
the terms so defined.
"Common Stock" shall mean the common stock, par value $.01, of the
Company.
"Common Stock Equivalents" shall mean all options, warrants (including
the Warrants), convertible securities, securities and other rights (in each case
whether now existing or hereafter issued or arising) to acquire from the Company
shares of Common Stock (without regard to whether such options, warrants,
convertible securities, securities and other rights are then exchangeable,
exercisable or convertible in full, in part or at all), including without
limitation, those listed on Schedule A hereto.
"Company" shall mean On Stage Entertainment, Inc., a Nevada
corporation, and any permitted successor or assign.
"Dividend" means, as to any Person (as hereinafter defined), any
declaration or payment of any dividend (other than a stock dividend) on, or the
making of any pro rata distribution, loan, advance, or investment to or in, the
holder of any shares of capital stock of such Person.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, and any successor
provisions thereto.
"Exercise Price" shall have the meaning given in each Warrant. The
Exercise Price and the number of shares of Common Stock purchasable pursuant to
the Warrants shall be subject to adjustment from time to time as hereinafter set
forth in Article V hereof, provided, however, that no adjustment shall be made
unless by reason of the happening of any one or more of the events hereinafter
specified, the Exercise Price then in effect shall be changed by one percent or
more, but any adjustment that would otherwise be required to be made but for
this provision shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, together with any adjustment or
adjustments so carried forward, amounts to one percent or more, or immediately
prior to the exercise of any Warrants if prior thereto.
"Exercise Quantity" shall mean the number of shares of Common Stock,
determined from time to time taking into account all shares of Common Stock
theretofore issued upon exercise of the Warrants, required to be issued by the
Company to the Holders of the Warrants. Exercise Quantity shall have the meaning
given in each Warrant, and may be adjusted from time to time, pursuant to the
provisions of the Warrants and this Agreement.
<PAGE>
"Fair Value" as of a particular date shall mean the last sale price of
the Common Stock as reported on a national securities exchange or on the NASDAQ
National Market System or SmallCap Market, or, if a last sale reporting
quotation is not available for the Common Stock, the average of the bid and
asked prices of the Common Stock as reported by NASDAQ or on the NASD's OTC
Bulletin Board Service, or if not so reported, as listed in the National
Quotation Bureau, Inc.'s "Pink Sheets." If such quotations are unavailable, or
with respect to other appropriate security, property, assets, business or
entity, "Fair Value" shall mean the fair value of such item as determined by
mutual agreement reached by the Holder and the Company or, in the event the
parties are unable to agree, an opinion of an independent investment banking
firm or firms in accordance with the procedures set forth in the immediately
succeeding three paragraphs. Notwithstanding the foregoing, if as part of the
consideration in a transaction in which the Company acquires, directly or
indirectly, all or substantially all of the assets or capital stock or other
evidence of ownership of the equity of a Person, the Company issues shares of
Common Stock as to which, for purposes of recording acquisition goodwill only,
generally accepted accounting principles require the Company to record the value
of the Common Stock so issued at a value that otherwise would not be Fair Value
hereunder, such acquisition goodwill will be added to the value recorded for
such shares of Common Stock to determine Fair Value for the issuance of such
shares of Common Stock hereunder.
In the case of any event which gives rise to a requirement that the
Company and the Holder mutually determine "Fair Value" pursuant to this
Agreement, the Company shall be responsible for initiating the process by which
Fair Value shall be determined as promptly as practicable, but in any event
within sixty (60) days following such event and if the procedures contemplated
herein in connection with determining Fair Value have not been complied with
fully, then any such determination of Fair Value for an), purpose of this
Agreement shall be deemed to be preliminary and subject to adjustment pending
full compliance with such procedures. Upon the occurrence of an event requiring
the determination of Fair Value, the Company shall give the Holder(s) of the
Warrants notice of such event, and the Company and the Holders shall engage in
direct good faith discussions to arrive at a mutually agreeable determination of
Fair Value.
In the event the Company and the Holder(s) (as hereinafter defined) are
unable to arrive at a mutually agreeable determination within thirty (30) days
of the notice, the Company and the Holder(s) of the Warrants (who, if more than
one, shall agree among themselves by a majority) shall each retain a separate
independent investment banking firm of national reputation. Such firms shall
jointly determine the Fair Value of the security, property, assets, business or
entity, as the case may be, in question and deliver their opinion in writing to
the Company and to such Holder within thirty (30) days of their retention. In no
event shall the marketability, or lack thereof, or lack of registration of a
security be a factor in determining the "Fair Value" of such security.
If such firms cannot jointly make each determination within such 30-day
period, then, unless otherwise directed by agreement of the Company and the
Holder(s) of a majority or more of the Warrants, such firms, in their sole
discretion, shall choose another independent investment banking firm of the
Company or such Holder(s), which firm shall make such determination and render
such an opinion. In either case, the determination so made shall be conclusive
and binding on the Company and such Holder(s). The fees and expenses of all
investment banking firms retained pursuant to this provision shall be borne by
the Company.
"Funding Failure" shall mean the failure of ICCMIC to fund at least $3
million of Additional Loans (as defined in the Loan Agreement) pursuant to and
in accordance with Section 11 of the Loan Agreement, other than because of a
breach by ICCMIC of its obligation, if any, to fund such Additional Loans.
"Holder" or "Holders" shall mean the Persons(s) then registered as the
owners of the Warrants or Warrant Securities, as the case may be, on the books
and records of the Company.
"Loan Agreement" shall mean that certain Loan Agreement made as of this
13th day of March, 1998, by and among Wild Bills California Inc., a Nevada
corporation, Blazing Piano's, Inc., a Nevada corporation, King Henry's, Inc., a
Nevada corporation and Fort Liberty, Inc., a Nevada corporation, and ICCMIC, as
lender.
"Person" shall mean any individual, corporation, partnership, limited
liability company, association, joint-stock company, trust, estate,
unincorporated organization, joint venture, court or governmental or political
subdivision or agency thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder, and any successor provisions
thereto.
<PAGE>
"Subsidiary" of any Person means (I) a corporation, association or
other business entity of which more than 50% of the total voting power of all
classes of the outstanding voting stock is owned, directly or indirectly, by
such Person or by one or more other Subsidiaries of such Person or by such
Person and one or more Subsidiaries thereof, (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or one or more Subsidiaries of such Person (or any combination thereof)
and (iii) any other Person not described in clauses (I) and (ii) above and
designated by the Board of Directors of such Person as a Subsidiary in which
such Person, or one or more other Subsidiaries of such Person or such Person and
one or more other Subsidiaries thereof, directly or indirectly, owns 50%
ownership and the power, pursuant to a written contract or agreement, to direct
the policies and management of the financial and other affairs thereof.
"Warrant Securities" shall mean the shares of Common Stock (or other
securities representing Common Stock) purchasable or purchased from time to time
under the Warrants, subject to modification and adjustment as provided in
Article V hereof.
II. WARRANTS
The Company hereby grants to ICCMIC, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, a
Warrant substantially in the form attached as Exhibit A initially exercisable to
purchase an aggregate of 325,000 shares of common stock for an initial Exercise
Price of $4.44 per share. The Company hereby grants to ICLLC, for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, a Warrant substantially in the form attached as Exhibit A hereto
initially exercisable to purchase an aggregate of 250,000 shares of Common Stock
at an Exercise Price of Common Stock for an initial Exercise Price of $4.44 per
share. The Company further agrees that in the event that a Funding Failure shall
occur, the Company, within five days of the occurrence of such Funding Failure,
shall grant to ICCMIC an additional Warrant substantially in the form attached
as Exhibit A hereto initially exercisable to purchase an aggregate of 25,000
shares of Common Stock at an exercise price equal to the Fair Value per share on
the date of any such grant (such number of shares and exercise price being
subject to adjustment at any time prior to issuance in accordance with the terms
of Article V hereof). Holder and any subsequent Holder of the Warrants and of
Warrants Securities shall have the rights and obligations provided for in the
Warrants and in this Agreement.
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants as follows:
(a) The execution and delivery of this Agreement and the Warrants have
been duly and properly authorized by all requisite corporate action of the
Company and its board of directors, and no consent other than that of Whale
Securities Co., L.P., which consent has been obtained is required as a
prerequisite to the validity, enforceability and performance of this Agreement
and the Warrants that has not been obtained. The Company has the full legal
right, power and authority to execute and deliver this Agreement and the
Warrants and to perform its obligations hereunder and thereunder. When issued
and delivered pursuant to this Agreement, the Warrants will have been duly
executed. issued and delivered and will constitute valid and legally binding
obligations of the Company and the Holder will be entitled to the benefits
provided herein and therein.
(b) The Company is not a party to or otherwise subject to any contract
or agreement which restricts or otherwise affects its right or ability to
execute and deliver this Agreement or the Warrants or to perform any obligation
hereunder or thereunder (including, without limitation, issuance of the Warrant
Securities) except for those for which a consent or approval has been obtained.
Neither the execution or delivery of this Agreement or the Warrants, nor
compliance therewith (including without limitation, issuance of the Warrant
Securities), will conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default under, or result in any violation of,
or result in the creation of any material lien upon any assets or properties of
the Company under, or require any consent, approval, or other action by, notice
to or filing with any court or government agency or division pursuant to the
Articles of Incorporation or By-laws of the Company, as currently in effect any
decree or order of any court or regulatory authority, any award of any
arbitrator, or any material agreement, instrument or law to which the Company is
subject or by which it or its assets or properties are bound.
<PAGE>
(c) As of the date of this Agreement, without giving effect to the
transaction between the Company and Gedco USA, Inc. (and certain affiliates
thereof) and the issuances contemplated hereby the authorized capital stock of
the Company consists of 25,000,000 shares of Common Stock, 6,584,480 of which
are currently issued and outstanding, and 1,000,000 shares of Preferred Stock,
none of which has been designated or which is currently issued or outstanding.
Other than the Warrants and as listed on Schedule A, there are no subscriptions,
Common Stock Equivalents, preemptive rights or other rights of any kind
outstanding for the purchase of, nor any securities convertible into or
exchangeable for, any Common Stock or Common Stock Equivalents. The Company has
reserved for issuance a sufficient number of shares of Common Stock to permit
the exercise in full of all of the outstanding Common Stock Equivalents,
including without limitation the Warrants, and for any Common Stock Equivalents
or shares of Common Stock which are issuable, but which have not been issued,
pursuant to any equity incentive, stock option, restricted stock or similar
plan.
(d) All of the outstanding shares of Common Stock have been duly and
validly authorized and issued, are fully paid and non-assessable and were issued
in compliance with all applicable federal and state securities law registration
requirements (including, without limitation, any requirements pursuant to
Section 5 of the Securities Act), or pursuant to valid exemptions therefrom.
(e) Schedule A contains a true and correct list of all outstanding
Common Stock Equivalents and the exercise or conversion price thereof. Neither
the issuance or the exercise of the Warrants will result in any change in the
exercise or conversion price or the number of shares issuable upon the exercise
of any of the outstanding Common Stock Equivalents.
(f) There are no restrictions upon the voting or transfer of any shares
of the Common Stock pursuant to the Company's Articles of Incorporation, Bylaws
or other governing documents or any agreement or other instrument to which the
Company is a party or by which the Company is bound. There are no voting,
trusts, proxies or any other agreements or understandings with respect to the
voting of the capital stock of the Company to which the Company is a party or of
which it knows, should reasonably know or has received notice.
(g) The Company has filed all of the SEC Reports required to be filed
by it. The SEC Reports and the Registration Statement (i) were each prepared in
accordance with, and at the time of filing complied with, the requirements of
all applicable rules and regulations and (ii) did not at the time they were
filed contain any untrue statement of material fact or omit to state a material
fact required to be stated therein, or necessary in order to make the statement
therein, in the light of the circumstance under which they were made, not
misleading. Each of the financial statements (including, in each case, any
related notes thereto) contained in the SEC Reports has been prepared in
accordance with generally accepted accounting principals consistently applied,
and each presents fairly the financial position of the Company at the respective
dates thereof and the consolidated results of its operations and changes in cash
flow for the periods indicated, except that the unaudited interim official
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount. "SEC Reports" means
all forms, reports, statements and documents required to be filed by the Company
with the SEC since August 14, 1 998, The "Registration Statement" means the
Registration Statement on Form SB-2 initially filed by the Company on April 7,
1997, as amended.
IV. COVENANTS
IV.1 Covenants of the Company. The Company hereby covenants and agrees
that, during the term of this Agreement, for so long as any Warrants are
outstanding unless Holders of outstanding Warrants issued to the Purchasers and
evidencing two-thirds of the Warrants then outstanding agree otherwise in
writing:
(a) Each of the Warrant Securities issued and delivered upon the
exercise of the Warrants and payment of the Exercise Price will be duly and
validly authorized and issued, will be fully paid and non-assessable, and will
not be subject to any unpaid tax of the Company or any lien imposed on or
created by the Company, whether respecting their issuance to and purchase by the
Holder of the Warrants or otherwise. The Company will take all such actions as
may be necessary to assure that all such Warrant Securities may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which Warrant Securities
may be listed.
(b) The Company shall not take any action, including, without
limitation, amending its articles of incorporation or through a reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, to avoid or seek to avoid the
observance or performance of any of the terms of the Warrant or impair the
ability of the Holder(s) to realize the full intended economic value thereof,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of Holders against impairment.
<PAGE>
(c) Upon the request of any Holder, the Company will at any time during
the period a Warrant is outstanding acknowledge in writing, in form satisfactory
to such Holder, the continuing validity of such Warrant and the obligations of
the Company thereunder and hereunder.
(d) The Company shall reserve and at all times keep available for
issuance an authorized number of shares of Common Stock or other Warrant
Securities sufficient to permit the full and immediate exercise of the Warrants
and the full and immediate exercise, exchange and conversion of all other
securities, options, warrants and other rights issued or granted by the Company.
(e) The Company shall not permit the par value of its Common Stock to
exceed, at any time, the Exercise Price and shall take all such actions as may
be necessary or appropriate to ensure that it does not do so.
(f) As soon as practicable, the Company shall, upon request deliver to
any Holder(s) of the Warrants and the Warrant Securities copies, if such
documents are filed with the Securities and Exchange Commission (the "SEC") or
other governmental agency or division or other regulatory authority, of (i) all
annual, quarterly and monthly financial statements made available by the Company
to its shareholders, (ii) all reports, notices and proxy or information
statements sent or made available generally by the Company to its shareholders,
and (iii) all regular and periodic reports and all registration statements,
prospectuses and other information filed by the Company with the SEC, relevant
state authorities or any securities exchange, securities quotation system or
other self-regulatory organization.
(g) The Company shall cooperate with the Holder(s) of the Warrants and
the Warrant Securities in supplying such information as may be reasonably
necessary for the Holder(s) to complete and file any information or other
reporting forms from time to time required by the Commission, relevant state
authorities or any securities exchange, securities quotation system or other
self-regulatory organization, including, without Stations information pertaining
to or required for the availability of any exemption from the securities laws
for the sale, transfer or other disposition of the Warrants or any of the
Warrant Securities.
IV.2 Listing on the Securities Exchange. The Company shall, at its
expense, list on any securities exchange or NASDAQ where it lists its Common
Stock, and maintain and increase when necessary such listing of all outstanding
Warrant Securities so long as any shares of Common Stock shall be so listed. The
Company shall also so list on each securities exchange or NASDAQ, and will
maintain such listing of, any other securities which the Holder(s) shall be
entitled to receive upon the exercise thereof if at the time any securities of
the same class shall be listed on such securities exchange or NASDAQ by the
Company.
<PAGE>
V. ANTIDILUTION
V.1 Covenant. For a period of three (3) years (five (5) years for John
Stuart, members of his family, trusts for the benefit of any of them, or any of
their respective affiliates) after the date hereof, the Company shall not in any
manner (i) issue or sell any shares of its Common Stock (other than shares of
Common Stock issued pursuant to and in accordance with the Company's stock and
equity incentive plans, set forth in Schedule A, attached hereto and
incorporated herein by this reference, each as in effect on the date hereof, the
shares of Common Stock issued upon the exchange, exercise and conversion of
Common Stock Equivalents issued and outstanding as of the date hereof as set
forth in Schedule A, shares of Common Stock issued upon the exchange, exercise
and conversion of any other Common Stock Equivalent where the aggregate amount
received or receivable by the Company as consideration for the issue, sale or
grant of such Common Stock Equivalent, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exchange,
exercise or conversion thereof, is at least equal to Fair Value as determined at
the time of such issuance or sale) and shares of Common Stock issued pursuant to
any stock dividend for less than Fair Value as determined at the time of such
issuance or sale, or (ii) grant (whether directly or by assumption in a merger
or otherwise) any rights to subscribe for or to purchase Common Stock
Equivalents, or issue or sell (whether directly or by assumption in a merger or
otherwise) Common Stock Equivalents (in each case other than Common Stock
Equivalents granted or issued pursuant to and in accordance with the Company's
stock and equity incentive plans set forth in Schedule A, each as in effect on
the date hereof), where the price per share for which Common Stock is issuable
upon exercise, conversion or exchange of such Common Stock Equivalents
(determined by dividing (x) the aggregate amount received or receivable by the
Company as consideration for the issue, sale or grant of such Common Stock
Equivalents, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise, conversion or exchange thereof,
by (y) the total maximum number of shares of Common Stock issuable upon the
exercise, conversion or exchange of all such Common Stock Equivalents) shall be
less than the Fair Value (after taking into account any consideration received
by the Company with respect to the exercise or conversion of any Common Stock
Equivalents) on the date of such issue, sale or grant, whether or not the rights
to exercise, exchange or convert thereunder are immediately exercisable.
V.2 Record Date. In case at any time the Company shall take a record of
the holders of the Common Stock for the purpose of entitling them to receive a
dividend or other distribution payable in shares of Common Stock or Common Stock
Equivalents, then such record date shall be deemed to be the date of the issue
or sale of the shares of the Common Stock deemed to have been issued or sold
upon the declaration of such dividend or of such other distribution or the date
of the granting of such right of subscription or purchase, as the case may be.
V.3 Certain Dividends. In case the Company shall pay a dividend or make
any other distribution upon any stock of the Company payable in: Common Stock,
Common Stock Equivalents, other shares of its capital stock, assets, rights,
warrants or options (excluding (i) dividends or distributions payable in cash
out of the current year's or retained earnings of the Company, (ii)
distributions relating to subdivisions and combinations covered by Section 5.04,
(iii) distributions relating to reclassifications, changes, consolidations,
mergers, sales or conveyances covered by Section 5.05 and (iv) rights, warrants
or options to purchase or subscribe for shares of Common Stock or Common Stock
Equivalents covered by Section 5.01), then in each such case (A) the Exercise
Price shall be adjusted so that the same shall equal the price determined by
multiplying the Exercise Price in effect immediately prior to the record date
mentioned below by a fraction, the numerator of which shall be (x) the total
number of shares of Common Stock then outstanding multiplied by the Fair Value
per share of Common Stock on the record date mentioned below, less (y) the Fair
Value as of such record date of said shares of stock, evidences of indebtedness
or assets so paid or distributed or of such rights, warrants or options, and the
denominator of which shall be the total number of shares of Common Stock then
outstanding multiplied by the Fair Value per share of Common Stock on the record
date mentioned below, and (B) the Exercise Quantity shall be adjusted to equal
the number obtained by dividing (x) the Exercise Price in effect immediately
prior to such dividend or distribution multiplied by the Exercise Quantity
immediately prior to such dividend or distribution by (y) the Exercise Price
resulting from the adjustment made pursuant to clause (A) above. Such
adjustments shall be made whenever any such dividend is paid or such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or
distribution.
In the event that the Company shall make a dividend or any other
distribution upon the stock of the Company payable in stock of a subsidiary or
securities convertible into or exercisable for such stock, then in lieu of an
adjustment in the Exercise Price, the Holder of this Warrant, upon the exercise
thereof at any time after such distribution, shall be entitled to receive from
the Company, such subsidiary or both, as the Company shall determine, the stock
or other securities to which such Holder would have been entitled if such Holder
had exercised such Warrant immediately prior thereto, all subject to further
adjustment as provided in this Section 5; provided, however, that no adjustment
in respect of dividends or interest on such stock or other securities shall be
made during the term of this Warrant upon the exercise of this Warrant.
<PAGE>
V.4 Subdivision or Combination of Shares. In case the Company shall at
any time subdivide its outstanding shares of Common Stock into a greater number
of shares, the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced and the number of Warrant Securities
purchasable hereunder shall be proportionately increased. In case the
outstanding shares of the Common Stock of the Company shall be combined into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased, but in no event to greater than
the aggregate Exercise Price of all Warrant Securities in effect on the date
hereof, and the number of Warrant Securities purchasable hereunder shall be
proportionately reduced.
V.5 Reorganization, Merger, etc. In case of any capital reorganization,
reclassification or similar transaction involving the capital stock of the
Company (other than as provided in Section 5.04), any consolidation, merger or
business combination of the Company with another corporation, or the sale or
conveyance of all or substantially all of its assets to another corporation,
shall be effected in such a way that holders of the Common Stock shall be
entitled to receive stock, securities or assets (including, but not limited to,
cash) with respect to or in exchange for shares of the Common Stock, then, prior
to and as a condition of such reorganization, reclassification, consolidation,
merger, business combination, sale or conveyance, lawful and adequate provision
shall be made whereby the Holder shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions specified in this
Warrant and in lieu of the Warrant Securities immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby,
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of Common Stock
equal to the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby.
In any such case, appropriate provision shall be made with respect to the rights
and interests of the Holder to the end that the provisions hereof (including,
without limitation, provisions for adjustment of the Exercise Price and of the
number of Warrant Securities purchasable upon the exercise of this Warrant and
for the registration of the Warrant Securities to the extent provided herein
shall thereafter be applicable, as nearly as may be possible, in relation to any
stock, securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger, business combination,
sale or conveyance unless prior to or simultaneously with the consummation
thereof the survivor or successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume by a written, valid and binding instrument (which instrument
shall be sent to each registered Holder before or subsequent to such
consummation), the obligation to deliver to such Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to receive, and containing the express assumption by such
successor corporation of the due and punctual performance and observance of all
of the provisions of this Agreement to be performed and observed by the Company
and of all liabilities and obligations of the Company hereunder. The provisions
of this Section 5.05 shall similarly apply to successive reorganizations,
recapitalizations, consolidations, mergers, business combinations, sales,
conveyances or similar transactions.
V.6 Purchase of Common by the Company. If the Company at any time or
from time to time after the date hereof shall, directly or indirectly, including
through a Subsidiary or otherwise, purchase, redeem or otherwise acquire (a
"Repurchase") any of its Common Stock or Common Stock Equivalents at a price per
share (in the case of Common Stock Equivalents, assuming conversion or exercise
thereof in full, and adding to the price payable any amount payable in
connection with the exercise or conversion thereof) greater than the Fair Value,
then the Exercise Price upon each such Repurchase shall be adjusted to the price
determined by multiplying the Exercise Price in effect immediately prior thereto
by a fraction (1) the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to the such Repurchase plus the number of
shares of Common Stock issuable upon the exercise or conversion of any Common
Stock Equivalents then exercisable or convertible minus the number of shares of
Common Stock which the aggregate consideration for total repurchased Common
Stock would purchase at the Fair Value; and (2) the denominator of which shall
be the number of shares of Common Stock outstanding immediately after such
Repurchase plus the number of shares of Common Stock issuable upon the exercise
or conversion of any Common Stock Equivalents then exercisable or convertible.
Upon any such adjustment of the Exercise Price, the Exercise Quantity shall be
adjusted to equal the number obtained by dividing (x) the Exercise Price in
effect immediately prior to such Repurchase by the Exercise Quantity immediately
prior to such Repurchase by (y) the Exercise Price resulting from the adjustment
made pursuant hereto.
V.7 Exceptions to Adjustment. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of the
Exercise Price or the number of shares issuable hereunder in the case of the
issuance of the Warrants or Warrant Securities.
<PAGE>
V.8 Treasury Shares. The number of shares of the Common Stock
outstanding at any time shall not include shares owned or held by or for the
account of the Company or any of its subsidiaries, and the disposition (but not
the cancellation) of any such shares shall not be considered an issue or sale of
the Common Stock for the purposes of Article V.
V.9 Company to Prevent Dilution. In case at any time or from time to
time conditions arise by reason of action taken by the Company or any of its
subsidiaries, which are not adequately covered by the provisions of this Article
V, or which might materially and adversely affect the exercise rights of the
registered Holders, the Board of Directors of the Company shall appoint a firm
of independent certified public accountants, which may be the firm regularly
retained by the Company, which shall give their opinion upon the adjustment if
any, necessary with respect to the Exercise Price, on a basis consistent with
the standards established in the other provisions of this Article V, so as to
preserve, without dilution, the exercise rights of the registered Holders. Upon
receipt of such opinion, the Board of Directors of the Company shall forthwith
make the adjustments described therein.
V.10 Adjustment Notices to Holder. Upon any increase or decrease in the
number of Warrant Securities purchasable upon the exercise of this Warrant or
upon any adjustment in the Exercise Price, then, and in each such case, the
Company shall promptly deliver written notice thereof to each Holder, which
notice shall state the increased or decreased number of Warrant Securities
purchasable upon the exercise of this Warrant setting forth in reasonable detail
the method of calculation and the facts upon which such calculations are based.
Such notice shall also contain a certificate of the Company's President or Chief
Financial Officer as to the correctness of such adjustments and calculations and
to the effect that such adjustments and calculation have been made in accordance
with the terms hereof.
VI. REGISTRATION RIGHTS
VI.1 Piggyback Registration Right. From and after January 1, 1999, and
so long as any Warrant or Warrant Securities are outstanding, if the Company
proposes to register any shares of Common Stock under the Securities Act or any
applicable state securities laws on a form which permits inclusion " of warrant
shares (whether such registration is being made on behalf of the Company and/or
on behalf of any of its security holders), the Company shall give prompt notice
to the Holder and will include in such registration (the "Piggyback
Registration"), subject to the allocation provisions discussed in Sections 6.03
and 6.04, all Warrant Securities with respect to which the Company has received
written requests for inclusion within 30 days after such notice is given by the
Company.
VI.2 Expenses. In all Piggyback Registrations, the Company will pay the
expenses related to registration of the Warrant Securities; provided, however,
the Holder shall pay the underwriting commissions related to the registration of
the Warrant Securities.
VI.3 Cut-Backs.
(a) If a Piggyback Registration is an underwritten primary registration
on behalf of the Company and the managing underwriter advises the Company in
writing that in the underwriter's opinion the number of securities to be
included in such registration exceeds the number that can be sold in such
offering, at a price reasonably related to fair value, the Company will allocate
the securities to be included as follows: first, the securities the Company
proposes to sell on its own behalf, and second, pro rata on the basis of the
number of shares of common Stock owned among the Holders of Warrant Securities
and the other Persons selling in such registration.
(b) If a Piggyback Registration is initiated as an underwritten
secondary registration on behalf of holders of the Company's securities, and the
managing underwriter advises the Company in writing that in the underwriter's
opinion the number of securities to be included in such registration exceeds the
number that can be sold in such offering, at a price reasonably related to fair
value, the Company will allocate the securities to be included as follows: pro
rata on the basis of the number of shares of Common Stock owned among the
Holders of Warrant Securities and the other Persons selling in such
registration.
VI.4 Selection of Underwriter. If any Piggyback Registration is
underwritten, the selection of investment bank(s) and manager(s) and the other
decisions regarding the underwriting arrangements for the offering will be made
by the Company provided that such underwriter is of nationally recognized
standing, including, without limitation, Whale Securities Co., L.P.
<PAGE>
VI.5 Sale of Warrants to Underwriters. Notwithstanding anything herein
or in any Warrant to the contrary, in lieu of exercising a Warrant prior to or
simultaneously with the filing or the effectiveness of any registration
statement, the Holder may sell the Warrant to the underwriter of the offering
being registered if such underwriter consents thereto and if such underwriter
undertakes to exercise such Warrant before making any distribution pursuant to
such registration statement and to include the Warrant Securities among the
securities being offered pursuant to such registration statement. The Company
agrees to use its best efforts to cause the Warrant Securities to be issued
within such time as will permit the underwriter to make and complete the
distribution contemplated by the underwriting.
VI.6 Procedures. Whenever the Company is required to include Warrant
Securities in a registration statement, the Company will, as expeditiously as
possible:
(i) furnish to counsel for any Holder of Warrant
Securities copies of all documents proposed to be filed in connection
with such registration;
(ii) furnish to each Holder of Warrant Securities
such number of copies of the registration statements, each amendment
and supplement thereto, the prospectus included in the registration
statement (including each preliminary prospectus), and such other
documents, as such Holder may reasonably request in order to facilitate
the public sale or other disposition of the Warrant Securities so
registered;
(iii) use reasonable efforts to register or qualify
all the Warrant Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as the
Holder of such Warrant Securities shall reasonably request, and do any
and all other acts and things which may be necessary under such
securities or blue sky laws to enable such Holder to consummate the
public sale or other disposition in such jurisdiction of the Warrant
Securities covered by such registration statement; provided, however,
that the Company shall not be required to (a) qualify to do business as
a foreign corporation in any jurisdiction wherein it would not
otherwise be required to qualify but for this subparagraph, (b) subject
itself to taxation in any such jurisdiction, or (c) consent to general
service of process in any such jurisdiction;
(iv) notify each Holder of Warrant Securities at any
time when a prospectus relating to their Warrant Securities covered by
such registration statement 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 contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and at the request of any such
Holder, prepare a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of the Warrant Securities
covered by such registration statement or such prospectus will not
contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(v) make available for inspection by any Holder of
Warrant Securities and any underwriter, attorney, accountant or other
agent retained by any such Holder, all financial and other records,
pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to provide access to
all nonconfidential information reasonably requested by any such
Holder, underwriter, attorney, accountant or agent in connection with
such registration statement.
<PAGE>
VI.7 Indemnification.
(a) Indemnification by the Company. In the event of any registration of
any Warrant Securities under the Securities Act, the Company, to the extent
permitted by law, shall indemnify and hold harmless the Holder of such Warrant
Securities included therein, each underwriter (as defined in the Securities
Act), each other person and entity who participates in the offering of such
Securities, and each other person and entity, if any, who controls (within the
meaning of the Securities Act) such Holder, underwriter or participating Person
(collectively "Offering Participants"), against any losses, claims, damages or
liabilities, joint or several, to which such Offering Participant may become
subject under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (1) any alleged untrue statement of any material
fact contained, on the effective date thereof, in any registration statement
under which such Warrant Securities were registered under the Securities Act,
any preliminary prospectus or final prospectus contained therein, or any summary
prospectus issued in connection with any Warrant Securities being registered, or
any amendment or supplement thereto (collectively "Offering Documents"), (2) any
alleged omission to state in any such document a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(3) any alleged violation by the Company of the Securities Act, the Exchange
Act, any state securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities law in connection with
the offering covered by such registration statement, and shall reimburse each
such Offering Participant for any legal or other expenses reasonably incurred by
such Offering Participant in connection with investigating or defending any such
loss, damage, liability or action; provided, however, that the Company shall not
be liable to the extent that any such loss, claim, damage or liability arises
out of or is based upon any alleged untrue statement or alleged omission made in
such Offering Document in reliance upon and in conformity with written or oral
information furnished to the Company by such Holder, specifically for use
therein.
(b) Indemnification by Holder. Each Holder, by acceptance of a Warrant,
severally and not jointly, shall indemnify and hold harmless each other holder
of securities included in a registration statement, the Company, its directors
and officers, and each other Offering Participant (collectively, "Other
Participants") against any losses, claims, damages, or liabilities, joint or
several, to which any such Other Participants may become subject under the
Securities Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (1). any alleged untrue statement of any material fact contained,
on the effective date thereof, in any Offering Document, or (2) any alleged
omission to state in any such document a material fact required to be stated
therein or necessary to make the statements therein not misleading, in either
case to the extent, and only to the extent, that such alleged untrue statement
or alleged omission was made in reliance upon and in conformity with written or
oral information furnished to the Company by such Holder specifically for use
therein, and then in the case of indemnification hereunder other than under the
Securities Act only to the extent that such alleged untrue statements or alleged
omissions by such Holder were not based on the authority of an expert as to
which such Holder had no reasonable ground to believe, and did not believe. that
the statements made on the authority of such expert were untrue or that there
was an omission to state a material fact. Notwithstanding the foregoing
provisions of this Subsection (b), no Holder shall be required to pay under such
provisions an amount in excess of the proceeds (net of underwriter discounts)
received by such Holder in payment for the Warrant Securities sold by him in
such offering.
(c) State Securities Laws. Indemnification similar to that specified in
Sections 7.07(a) and (b) shall be given by the Company and each Holder (with
such modifications as shall be appropriate) covered by any registration or other
qualification of Securities under any federal or state securities law or
regulation other than the Securities Act with respect to any such registration
or other qualification effected pursuant to this Agreement.
(d) Not Limited By Investigation. The indemnification provided for
under this Section 7.07 will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director or controlling Person of such indemnified party and will survive the
transfer of Warrant Securities.
<PAGE>
VII. TRANSFER OF WARRANTS AND WARRANT SECURITIES
VII.1 Transfer. Except as set forth in Section 7.02 below, the Warrants
and all rights thereunder are transferable, in whole or in part, on the books of
the Company to be maintained for such purpose, upon surrender of such Warrant at
the office of the Company maintained for such purpose, together with a written
assignment of such Warrant duly executed by the Holder hereof or its agent or
attorney and payment of funds sufficient to pay any stock transfer taxes payable
upon the making of such transfer. The Company may (but shall not be obligated
to) treat the bearer of a Warrant endorsed in blank for transfer as the absolute
owner of such Warrant for all purposes and the Company shall not be affected by
any notice to the contrary. Upon such surrender and payment, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denominations specified in such instrument of assignment,
and this Warrant shall promptly be canceled. The transferred Warrant, if
properly assigned in compliance herewith, may be exercised by an assignee for
the purchase of shares of Common Stock without having a new Warrant issued. The
Company will not close its stock transfer books against a transfer of the
Warrants or any exercise of the Warrants. Any such transfer or exercise tendered
while such stock transfer books shall be closed shall be deemed effective
immediately prior to such closure.
Subject to Section 7.02 below, the Warrants may be divided or combined
with other Warrants upon presentation at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder thereof or its agent or
attorney. Subject to compliance with this, as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
The Company shall pay all expenses, taxes (other than income taxes or
transfer taxes, if any, of the transferee) and other charges incurred by the
Company in the performance of its obligations in connection with the
preparation, issue and delivery of Warrants under this Section. The Company
agrees to maintain at its aforesaid office books for the registration and
transfer of the Warrants. Notwithstanding any provision to the contrary
contained herein, the Warrants and the Warrant Securities shall be transferable
only in compliance with the provisions of the Securities Act and applicable
state securities laws in respect of the transfer of any Warrant or any Warrant
Securities.
VII.2 Transfer Restrictions. Neither this Warrant Agreement, the
Warrants nor the Warrant Securities, when issued, has been registered under the
Securities Act or under the securities laws of any state. Neither this
Agreement, the Warrants nor the Warrant Securities. when issued, may be
transferred: (a) if such transfer would constitute a violation of any federal or
state securities laws or a breach of the conditions to any exemption from
registration thereunder and (b) unless and until one of the following has
occurred: (i) registration of the Warrants or the Warrant Securities, as the
case may be, under the Securities Art, and such registration or qualification as
may be necessary under the securities law of any state, have become effective,
(ii) the Holder has delivered an opinion of counsel or other evidence reasonably
satisfactory to the Company that such registration or qualification is not
required or (iii) such transfer would be permitted under Rule 144 under the
Securities Act.
Each certificate for Warrant Securities issued upon exercise of a
Warrant and each certificate issued to a subsequent transferee, unless at the
time of exercise such Warrant Securities are registered under the Securities
Act, shall bear a legend substantially in the following form (and any additional
legends required by applicable law) on the face thereof;
THE WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THE WARRANTS
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE WARRANT SEC MAY NOT
BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED,
WHETHER OR NOT FOR CONSIDERATION, IN THE ABSENCE OF (1) AN EFFECTIVE
REGISTRATION STATEMENT AND QUALIFICATION IN EFFECT WITH RESPECT TO THE
WARRANT SECURITIES UNDER THE SECURITIES ACT AND UNDER ANY APPLICABLE
STATE SECURITIES LAWS OR (2) AN EXEMPTION FROM SUCH REGISTRATION AND
QUALIFICATION.
VII.3 Replacement of Instruments. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any certificate or instrument evidencing any
Warrants or Warrant Securities, and (a) in the case of loss, theft or
destruction, upon receipt by the Company of indemnity reasonably satisfactory to
it (provided that, if the owner of the same is a commercial bank or an
institutional lender or investor, its own agreement of indemnification shall be
deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and
cancellation thereof, the Company, at its expense, will execute register and
deliver, in lieu thereof, a new certificate or instrument for (or covering the
purchase of) an equal number of Warrants or Warrant Securities.
<PAGE>
VIII0 MISCELLANEOUS
VIII.1 Term. Except as otherwise expressly provided in this Agreement
or the Warrants, this Agreement shall expire seven (7) years after the date
hereof, provided that the Company's obligations to honor an exercise of the
Warrants given prior to such expiration or to perform any obligation continue
and survive notwithstanding the expiration of this Agreement.
VIII.2 No Waiver Under Other Agreements. The terms and provisions
contained in this Agreement are not intended and shall not be construed to
waive, modify, repeal, stay, diminish or otherwise impair or affect in any
manner whatsoever any right or remedy of Holder or the Holder(s) under the
Company's Articles of Incorporation, By-laws or similar agreements, or any other
agreements between the Company and/or its affiliates and Holder or any right or
remedy at law or in equity.
VIII.3 Reliance. Each party to this Agreement shall be entitled to rely
upon any notice, consent, certificate, affidavit, statement, paper, document,
writing or other communication reasonably believed by that party to be genuine
and to have been signed, sent or made by the proper Person or Persons.
VIII.4 Notice. All notices and other communications provided for or
permitted hereunder shall be made in writing and be by hand-delivery or
certified mail, return receipt requested, or by telecopy:
(a) if to ICCMIC to:
Imperial Credit Commercial Mortgage Investment Corp.
11601 Wilshire Blvd.
Suite 2080
Los Angeles, California 90025
Fax: 310-231-1281
Attention: President
if to ICLLC to:
Imperial Capital, LLC
150 S. Rodeo Drive
Suite 100
Beverly Hills, California 90212
Fax: 310-246-3672
Attention: President
or to a subsequent Holder of Warrants or Warrant Securities issued pursuant to
the exercise of the Warrants, at the most current address given by such Holder
to the Company in writing; or
(b) if to the Company:
On Stage Entertainment, Inc.
4625 W. Nevso Drive
Las Vegas, Nevada 89103
Fax: 702-257-2367
Attention: President
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; four business days after
being deposited in the mail, postage prepaid, if mailed, when receipt is
acknowledged, if telecopied, or the next business day, if timely delivered to an
air courier guaranteeing overnight delivery.
VIII.5 Enforcement. The Company acknowledges that the Holders may
proceed to exercise or enforce any right, power, privilege, remedy or interest
that they may have under this Agreement or applicable law without notice, except
as otherwise expressly provided herein, without pursuing, exhausting or
otherwise exercising or enforcing any other right, power, privilege, remedy or
interest that they may have against or in respect of any other party, or any
other Person or thing, and without regard to any act or omission of such party
or any other Person.
VIII.6 Equitable Relief. Each party acknowledges and agrees that it
would be impossible to measure in money the damage in the event of a breach of
any of the terms and provisions of this Agreement by any party hereto, and that,
in the event of any such breach, there may not be an adequate remedy at law,
although the foregoing shall not constitute a waiver of any of the party's
rights, powers, privileges and remedies against or in respect of a breaching
party, any other person or thing under this Agreement or applicable law. It is
therefore agreed that, in addition to all other such rights, powers, privileges
and remedies that it may have, each party shall be entitled to injunctive
relief, specific performance or such other equitable relief as such party may
request to exercise or otherwise enforce any of the terms and provisions of this
Agreement and to enjoin or otherwise restrain any act prohibited thereby.
<PAGE>
VIII.7 Interpretation; Heading Severability.
(a) The parties acknowledge and agree that since each party and its
counsel have reviewed and negotiated the terms and provisions of this Agreement
and have contributed to its revision, the normal rule of construction to the
effect that any ambiguities are resolved against the drafting party shall not be
employed in the interpretation of this Agreement, and its terms and provisions
shall be construed fairly as to all parties hereto and not in favor of or
against any party, regardless of which party was generally responsible for the
preparation of this Agreement.
(b) 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.
(c) In the event that any term or provision of this Agreement shall be
finally determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by a governmental authority having jurisdiction and
venue, determination shall not impair or otherwise affect the validity, legality
or enforceability: (I) by or before that authority of the remaining terms and
provisions of this Agreement, which shall be enforced as if the superseded,
invalid, illegal or otherwise unenforceable term or provision were modified to
the extent required to permit such provision to be not superseded, invalid,
illegal or unenforceable, or (ii) by or before any other authority or any of the
terms and provisions of this Agreement.
(d) If any period of time specified in this Agreement expires on a day
that is not a Business Day, that period shall be extended to and expire on the
next succeeding Business Day.
VIII.8 Survival of Covenants. Each of the covenants and other
agreements of the parties contained in this Agreement shall be absolute and,
except as otherwise expressly provided, unconditional, shall survive the
execution and delivery of this Agreement and shall continue in full force and
effect until the term of this Agreement has expired, and thereafter with respect
to events occurring prior thereto.
VIII.9 No Required Exercise. No term or provision of the Warrants or
this Agreement is intended to require, nor shall any such term or provision be
construed as requiring, any Holder of the Warrants to exercise or sell the
Warrants.
VIII.10 Binding Effect. This Agreement shall be binding upon and
enforceable against the parties hereto and their respective successors and
assigns.
VIII.11 No Waiver by Action. The failure or delay of a party at any
time or times to require performance of, or to exercise its rights with respect
to, any term or provision of this Agreement (except as otherwise expressly
provided herein) shall not affect its right at a later time to enforce any such
provision.
VIII.12 Waiver, Modification; Amendment. This Agreement may only be
modified or amended if the Company and the Holders of not less than two-thirds
of all unissued Warrant Securities agree in writing to such modification or
amendment. Each and every waiver of and consent to any departure from any term
or provision hereof (except as otherwise provided herein) shall be in writing
and signed by the Holders of not less than two-thirds of all unissued Warrant
Securities. Notwithstanding the foregoing, no modification, amendment or waiver
of any term or provision hereof with respect to the Exercise Price, the Exercise
Quantity, any terms of Article V hereof, any of the terms of this Section 8.12
or which purports, or has the effect of, shortening the term of any Warrant or
limiting the right or ability of a Holder thereof to exercise a Warrant shall be
enforceable against a Holder unless such Holder specifically approves, in
writing, such modifications, amendment or modification.
VIII.13 Entire Agreement. This Agreement and the Warrants contain the
entire agreement of the parties and supersede all other representations,
warranties, agreements and understandings, oral and otherwise, among the parties
hereto with respect to the Warrants, except as otherwise provided herein.
VIII.14 No Inconsistent Agreement or Rights. The Company shall not
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders in this Agreement.
<PAGE>
VIII.15 Governing Law: Consent to Jurisdiction: Waiver Trial. THIS
AGREEMENT, THE WARRANTS AND THE WARRANT SECURITIES AND ALL AMENDMENTS,
SUPPLEMENTS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEVADA
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY
SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS
SITTING IN THE STATE OF NEVADA AND AGREES AND CONSENTS THAT SERVICES OF PROCESS
MAY BE MADE UPON IT IN ANY LEGAL PROCEEDINGS RELATING HERETO BY ANY MEANS
ALLOWED UNDER NEVADA OR FEDERAL LAW. THE COMPANY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. THE COMPANY AND ICCMIC AND ICLLC EACH HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE SECURITIES OR ANY OTHER
AGREEMENTS RELATING TO THE SECURITIES OR ANY DEALINGS BETWEEN THEM RELATING TO
THE SUBJECT MATTER OF THIS TRANSACTION. NOTWITHSTANDING ANYTHING TO THE CONTRARY
HEREIN, THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE WARRANTS, THE
WARRANT SECURITIES OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING THERETO.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed as of the day and year first above written.
THE COMPANY:
ON STAGE ENTERTAINMENT, INC.
By: _______________________________
Name:
Title:
IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT
CORP.
By: _______________________________
Name:
Title:
IMPERIAL CAPITAL GROUP, LLC
By: _______________________________
Name:
Title:
<PAGE>
EXHIBIT A
to
Warrant Agreement
Form of Warrant
<PAGE>
Exhibit A to Warrant Agreement
THE WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER
ANY STATE SECURITIES LAWS. THE WARRANT SECURITIES MAY NOT BE OFFERED SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR
CONSIDERATION, IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATE AND
QUALIFICATION IN EFFECT WITH RESPECT TO THE WARRANT SECURITIES UNDER THE
SECURITIES ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS OR (2) AN
EXEMPTION FROM SUCH QUALIFICATION AND REGISTRATION.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO THE
TERMS AND PROVISIONS OF A WARRANT AGREEMENT, DATED AS OF MARCH 13,1998, BETWEEN
ON STAGE ENTERTAINMENT, INC., IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT
CORP. AND IMPERIAL CAPITAL GROUP, LLC (AS THE SAME MAY BE SUPPLEMENTED,
MODIFIED, AMENDED, EXTENDED OR RESTATED FROM TIME TO TIME (THE "WARRANT
AGREEMENT")). AMONG OTHER THINGS, THE WARRANT AGREEMENT CONTAINS PROVISIONS FOR
RESTRICTIONS ON TRANSFER AND FOR REGISTRATION RIGHTS. COPIES OF THE WARRANT
AGREEMENT ARE AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY.
COMMON STOCK PURCHASE WARRANT
MARCH 13,1998
Capitalized terms used and not otherwise defined in this Warrant shall have the
meanings respectively assigned to them in the Warrant Agreement referred to in
the legend below.
ON STAGE ENTERTAINMENT, INC., a Nevada corporation (the "Company"), having its
executive offices at 4625 W. Nevso Drive, Las Vegas, Nevada 89103, does hereby
certify and agree that, for good and valuable consideration (the existence,
sufficiency and receipt of which are hereby acknowledged by the Company), [Name
of Holder], a ________________________, its successor, and assigns ("Holder"),
hereby is entitled to purchase from the Company, during the term set forth in
Section I hereof, up to an aggregate amount of _______ shares, as adjusted from
time to time pursuant to the terms of this Warrant and the Warrant Agreement
(the "Exercise Quantity"), of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, par value $.01 per share, of the Company
(the "Common Stock"), all upon the terms and provisions and subject to
adjustment of such Exercise Quantity as provided in the Warrant Agreement and
this Common Stock Purchase W t (the "Warrant"). The exercise price per share of
Common Stock for which this Warrant is exercisable shall be FOUR DOLLARS AND
FORTY FOUR CENTS ($4.44), as adjusted from time to time pursuant to the terms of
this Warrant and the Warrant Agreement (the "Exercise Price").
1 Term of the Warrant. The term of this Warrant commences as of the
date hereof, and shall expire at 5:00 P.M., Pacific time, on March 13, 2003.
2 Exercise of Warrant.
(a) This Warrant may be exercised by the Holder of this
Warrant at any time during the term hereof, in whole or in part, from time to
time (but not for fractional shares, unless this Warrant is exercised in whole),
by presentation and surrender of this Warrant to the Company, together with the
annexed Exercise Form duly completed and executed and payment in the aggregate
amount equal to the Exercise Price multiplied by the number of shares of Common
Stock being purchased. At the option of Holder, payment of the Exercise Price
may be made either by (i) certified check payable to the order of the Company,
or (ii) surrender of certificates then held representing, or deduction from the
number of shares issuable upon exercise of this Warrant of that number of shares
which has an aggregate Fair Value determined in accordance with the Warrant
Agreement on the date of exercise equal to the aggregate Exercise Price for all
shares to be purchased pursuant to this Warrant or (iii) by any combination of
the foregoing methods. Upon the Company's receipt of this Warrant, the completed
and signed Exercise Form and the requisite payment, the Company shall promptly
issue and deliver (or promptly cause to be delivered) to the exercising Holder
stock certificates representing the number of shares of Common Stock purchased.
In the event, of a partial exercise of this Warrant, the Company shall promptly
issue and deliver to the Holder a new Warrant at the same time such stock
certificates are delivered, which new Warrant shall entitle the Holder to
purchase the balance of the Exercise Quantity not purchased in that partial
exercise and shall otherwise be upon the same terms and provisions as this
Warrant.
<PAGE>
(b) In the event the Holder of this Warrant desires that any
or all of the stock certificates to be issued upon the exercise hereof be
registered in a name or names other than that of the Holder of this Warrant, the
Holder must (i) so request in writing at the time of exercise if the transfer is
not a registered transfer, (ii) provide to the Company an opinion of counsel
reasonably satisfactory to the Company to the effect that the proposed transfer
may be effected without registration under the Securities Act, and (iii) pay to
the Company funds sufficient to pay all stock transfer taxes (if any) payable in
connection with the transfer and delivery of such stock certificates.
(c) Upon the due exercise by the Holder of this Warrant,
whether n whole or in part, the Holder (or any other person to whom a stock
certificate is to be so issued) shall be deemed for all purposes to have become
the Holder of record of the shares of Common Stock for which this Warrant has
been so exercised, effective immediately prior to the close of business on the
date this Warrant, the completed and signed Exercise Form and the requisite
payment were duly delivered to the Company, irrespective of the date of actual
delivery of certificates representing such shares of Common Stock so issued.
3 Surrender of Warrant; Expenses.
(a) Whether in connection with the exercise, registration of
transfer or replacement of this Warrant, surrender of this Warrant shall be made
to the Company during normal business hours on a business day (unless the
Company otherwise permits) at the executive offices of the Company located at On
Stage Entertainment, Inc., 4625 W. Nevso, Las Vegas, Nevada 89103, Fax:
702-257-2367, Attention: President, or to such other office or duly authorized
representative of the Company as from time to time may be designated by the
Company by written notice given to the Holder of this Warrant.
(b) The Company shall pay all costs and expenses incurred in
connection with the exercise of this Warrant, including the costs of
preparation, execution and delivery of Warrants and stock certificates.
4 Warrant Register; Exchange; Transfer; Loss.
(a) The Company at all times shall maintain at its executive
offices an open register for all Warrants, in which the Company shall record the
name and address of each Person to whom a Warrant has been issued or
transferred, the number of shares of Common Stock or other securities
purchasable hereunder and the corresponding purchase prices.
(b) This Warrant may be exchanged for two or more warrants
entitling the identical Holder hereof to purchase the same aggregate Exercise
Quantity at the same Exercise Price per share and otherwise having the same
terms and provisions as this Warrant. The identical Holder may request such an
exchange by surrender of this Warrant to the Company, together with a written
exchange request specifying the desired number of warrants and allocation of the
Exercise Quantity purchasable under the existing Warrant.
(c) This Warrant may be transferred only in accordance with
the provisions of Article VII of the Warrant Agreement, in whole or in part, by
the Holder or any duly authorized representative of such Holder. A transfer may
be registered with the Company by submission to it of this Warrant, together
with the annexed Assignment Form duly completed and executed, and if the
transfer is not a registered transfer, an opinion of counsel reasonably
satisfactory to the Company. Within five (5) business days after the Company's
receipt of this Warrant and the Assignment Form so completed and executed, the
Company will issue and deliver to the transferee a new Warrant representing the
portion of the Exercise Quantity transferred at the same Exercise Price per
share and otherwise having the same terms and provisions as this Warrant, which
the Company will register in the new Holder's name.
(d) Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant, and (a) in the case of loss, theft or destruction,
upon receipt by the Company of indemnity reasonable satisfactory to it (provided
that, if the owner of the same is a commercial bank or an institutional lender
or investor, its own agreement of indemnity shall be deemed to be satisfactory),
or (b) in the case of mutilation, upon surrender and cancellation thereof, the
Company, at its expense, will execute, register and deliver, in lieu thereof, a
new certificate or instrument for (or covering the purchase of) this Warrant.
(e) The Company will not close its books against the transfer
of this Warrant or any of the Warrant Securities in any manner which interferes
with the timely exercise of this Warrant. The Company will from time to time
take all such action as may be necessary to assure that the par value per share
of the unissued Common Stock acquirable upon exercise of this Warrant is at all
times equal or less than the Exercise Price then in effect.
<PAGE>
5 Rights and Obligations of the Company and the Holder. The Company and
the Holder of this Warrant are entitled to the rights and are bound by the
obligations set forth in the Warrant Agreement, all of which rights and
obligations are hereby incorporated by reference herein. This Warrant shall not
entitle its Holder to any rights of a shareholder in the Company (other than as
provided in the Warrant Agreement and Section 2(c) of this Warrant).
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized representative and its corporate seal, if any, to be
impressed hereupon and attested to by its Secretary or Assistant Secretary.
ON STAGE ENTERTAINMENT, INC.
a Nevada corporation
By: _______________________________
Name:
Title:
Attest:
- ---------------------------
Name:
Secretary or Assistant Secretary
<PAGE>
EXERCISE FORM
The undersigned hereby irrevocably elects to exercise, pursuant to the
terms of the Warrant Agreement, the Warrant represented by this Warrant
Certificate to the extent of purchasing shares of Common Stock of ON STAGE
ENTERTAINMENT, INC., and encloses herewith payment of the aggregate Exercise
Price for all shares so purchased.
Name:
Address:
Signature:
Dated:
Notice: The signature on this Exercise Form must correspond with the name as it
appears upon the face of this Warrant Certificate in every particular way,
without alteration or enlargement or any change whatever.
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, hereby sells, assigns and transfers, in accordance with
the Warrant Agreement, unto
(Please type name or print name in block letters)
(Address of transferee)
the right to purchase shares of Common Stock of ON STAGE ENTERTAINMENT, INC.
Represented by this Warrant Certificate to the extent of _______ shares of
Common Stock of ON STAGE ENTERTAINMENT, INC. as to which such right is
exercisable and does hereby irrevocably constitute and appoint
_______________________ attorney, to transfer the same on the books of the
Company with full power of substitution in the premises.
- ------------------------------
Signature
Dated: _________________, ______
Notice: The signature on this Assignment Form must correspond with the name as
it appears upon the face of this Warrant Certificate in every particular way,
without alteration or enlargement or any change whatever.
Exhibit 10.1
LOAN AGREEMENT
by and between
IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP.,
as Lender
and
WILD BILLS CALIFORNIA, INC.,
KING HENRY'S, INC. and FORT LIBERTY, INC.
as Borrowers
Date: As of March 11, 1998
<PAGE>
Exhibit 10.1
LOAN AGREEMENT
This Loan Agreement is made as of this 11th day of March, 1998, by and between
WILD BILLS CALIFORNIA, INC., a Nevada corporation, KING HENRY'S, INC., a Nevada
corporation, and FORT LIBERTY, INC., a Nevada corporation (collectively,
"Borrowers"), and IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP., a
Maryland corporation ("Lender").
RECITALS
A. Concurrently with the recordation of the mortgage securing the Loan (as
hereinafter defined) to King Henry's, Inc., King Henry's, Inc. is
acquiring certain property commonly known as 8984 International Drive,
Orlando, Florida and legally described on Exhibit A-1 (the "King Henry's
Real Property").
B. Concurrently with the recording of the leasehold trust deed securing the
Loan to Wild Bills California, Inc., Wild Bills California, Inc. is
acquiring a leasehold interest in certain property commonly known as 7600
Beach Blvd., Buena Park, California and legally described on Exhibit A-2
(the "Wild Bills Real Property").
C. Concurrently with the recordation of the mortgage securing the Loan to
Fort Liberty, Inc., Fort Liberty, Inc. is acquiring certain property
commonly known as 5260 West Irlo Branson Highway, Kissimmee, Florida and
legally described on Exhibit A-3 (the "Fort Liberty Real Property").
D. The parties comprising Borrowers have applied to Lender for loans (each, a
"Loan" and collectively, the "Loans") in the following maximum amounts,
and Lender has agreed to make the Loan on the terms and conditions
contained herein:
Borrower Loan Amount
--------------------------- -----------
King Henry's Inc. $5,000,000
Fort Liberty, Inc. $6,600,000
Wild Bills California, Inc. $ 900,000
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:
<PAGE>
1. DEFINED TERMS. The following terms as used herein shall have the following
meanings:
Affiliated Party: (i) With respect to any Person, any other Person (x) in
which such first Person, directly or indirectly, owns greater than a twenty
percent (20%) interest (whether economic or voting), (y) which directly or
indirectly owns greater than a twenty percent (20%) interest (whether
voting or economic) in such first Person or (z) which, directly or
indirectly, is in control of, is controlled by, or is under common control
with such first Person; (ii) without limiting clause (i) hereof, with
respect to any Person that is a partnership, each of its constituent
general or limited partners; and (iii) without limiting clause (i) hereof,
with respect to any Person that is a corporation, each of its officers,
directors and, unless its stock is publicly traded on the New York Stock
Exchange or American Stock Exchange or through the network of the National
Association of Securities Dealers, shareholders. For the purposes of this
definition, "control" and "controlled" with respect to a Person means the
power, directly or indirectly, either to direct or cause the direction of
the management and policies of such Person, whether through the ownership
of voting securities or equity interests, by contract or otherwise.
Agreement: This Loan Agreement, as originally executed or as may be
hereafter supplemented or amended from time to time in writing.
Appraisal: An appraisal report prepared by a member of a national appraisal
organization that is certified in the state in which the property being
appraised by it is located and that has adopted the Uniform Standards of
Professional Appraisal Practice (USPAP) established by the Appraisal
Standards Board of the Appraisal Foundation. The appraiser shall use
assumptions and limiting conditions established by Lender, and the
appraisal shall be in conformity with Lender's appraisal guidelines. Unless
specifically provided in this Agreement, no Appraisal shall include any
"going concern value" or goodwill relating to the business conducted from
the applicable Project.
Assignment of Leases: The assignment of leases and rents described in
Section 2.2(c) of this Agreement and executed by the applicable Borrower,
as assignor, and recorded or to be recorded in the Official Records of the
county where the applicable Real Property is located, contemporaneously
with the recordation of the applicable Deed of Trust or Mortgage, as
originally executed or as may be hereafter supplemented or amended from
time to time in writing.
Blazing Piano's Security Agreement: A security agreement executed by
Blazing Piano's, Inc., a Nevada corporation which is an affiliate of
Borrowers, granting Lender a security interest in certain personal property
as additional security for the Loans.
Building Laws: All federal, state and local laws, regulations, ordinances
and requirements applicable to the development and operation of a Project,
including without limitation all access, building, zoning, planning,
subdivision, fire, traffic, safety, health, labor, discrimination,
environmental, air quality, wetlands, shoreline, and flood plain laws,
regulations and ordinances, including, without limitation, all applicable
requirements of the Fair Housing Amendments Act of 1988 (as amended), the
Americans with Disabilities Act of 1991, and all orders or decrees of any
court adopted or enacted with respect thereto applicable to such Project.
California Lease: That certain Master Ground Lease dated as of January 1,
1990 by and between Spiegel Enterprises, a California general partnership,
and Mecca Leisure (CAL), Inc. (Wild Bills California, Inc.'s predecessor in
interest).
Debt Service Coverage Ratio: For any calendar quarter, the ratio of (i) 25%
of the EBITDA for the four immediately prior calendar quarters (excluding
from EBITDA, for this purpose only, all nonrecurring items occurring on or
before December 31, 1997 as set forth in Schedule 1 attached hereto and
made part hereof), to (ii) the aggregate amount of principal and interest
payable under all the Loans for such quarter.
Deed of Trust: The leasehold deed of trust, security agreement and fixture
filing described in Section 2.2 of this Agreement, executed by Wild Bills
California, Inc., as trustor, and recorded or to be recorded in Orange
County, California, as applicable, as originally executed or as may be
hereafter supplemented or amended from time to time in writing.
Default: Any event which, if it were to continue uncured, would, with
notice or lapse of time or both, constitute an Event of Default.
Default Rate: The default interest rate specified in a Note.
<PAGE>
EBITDA: For a given period, the sum of the following for On Stage
Entertainment, Inc. ("OSE"): (a) Net Income for such period, (b) the amount
deducted by OSE in determining Net Income for such period, representing (i)
Interest Expense of OSE; plus (ii) the amount deducted, in determining Net
Income for such period, of all federal, state and local income taxes
(whether paid in cash or deferred) of OSE; plus (iii) depreciation of
assets of OSE, plus (iv) amortization.
Environmental Indemnity: Each indemnity agreement delivered by a Borrower
to Lender contemporaneously herewith with respect to a given Project and
described in Section 2.2(g) of this Agreement, as originally executed or as
may be hereafter supplemented or amended from time to time in writing.
ERISA: Employee Retirement Income Security Act of 1974, as amended, and the
regulations promulgated thereunder from time to time.
Event of Default: The meaning set forth in Section 7.1.
Fort Liberty Improvements: The Improvements associated with the Fort
Liberty Project.
Fort Liberty Real Property: The real property described on Exhibit A-3.
Fort Liberty Tenant Leases: All leases, licenses or other occupancy
arrangements for premises in or portions of the Fort Liberty Real Property
other than the On Stage Lease for the Fort Liberty Real Property.
GAAP: Generally accepted accounting principles according to U.S. accounting
(FASB) standards, consistently applied.
Governmental Approvals: The meaning set forth in Section 4.11 of this
Agreement.
Governmental Authority: Any federal, state, county or municipal government,
or political subdivision thereof, any governmental or quasi-governmental
agency, authority, board, bureau, commission, department, instrumentality,
or public body, or any court, administrative tribunal, or public utility.
Ground Lessor: The ground lessor under the California Lease (currently
Spiegel Enterprises, a California general partnership).
Guarantee(s): The Guarantees being executed concurrently herewith by King
Henry's Inc., Fort Liberty, Inc., Blazing Piano's, Inc., Wild Bills
California, Inc. and OSE.
Impound Account: The meaning set forth in Section 3.1.
Improvements: The buildings, parking and other structures, other permanent
improvements and Personal Property located on each respective parcel of
Land.
include or including: Including but not limited to.
Indemnitor: On Stage Entertainment, Inc. and the Borrowers collectively.
Internal Revenue Code: The Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder from time to time.
knowledge: When used to modify a representation or warranty, actual
knowledge or such knowledge as a reasonable person under the circumstances
should have, including such inquiry and investigation as a reasonable and
diligent person would conduct. Lender acknowledges Borrowers recently
purchased the Projects, and that the knowledge of each Borrower may be less
extensive than if such Borrower had owned the applicable Project for a
longer period of time.
Land: The land legally described in Exhibits A-1, A-2, A-3 and A-4 attached
hereto.
Laws: Collectively, all federal, state and local laws, statutes, codes,
ordinances, orders, rules and regulations, including judicial opinions or
precedential authority in the applicable jurisdiction.
Loan Documents: This Agreement, the documents and instruments listed in
Section 2.2 of this Agreement, and all the documents given to Lender from
time to time to evidence, secure or guarantee the Loan.
Loan Maturity: March 31, 2008.
<PAGE>
Loan Opening Date: The date of the initial disbursement of the Loan.
Mortgage: Each mortgage, security agreement and fixture filing described in
Section 2.2 of this Agreement, executed by a Borrower as mortgagor in favor
of Lender as mortgagee and recorded or to be recorded in the county where
the applicable Land is located, as originally executed or as may be
hereafter supplemented or amended from time to time in writing.
Net Income: For any period, the aggregate of all amounts which, in
accordance with GAAP, would be included in determining net income on the
financial statements of OSE for such period (excluding, however, all
amounts in respect of any extraordinary items and all items of revenue to
the extent that cash with respect thereto is not expected to be received
within one year of the date on which such revenue is included in income).
Note: Each note relating to a Project described in Section 2.2 of this
Agreement, as originally executed and as may be hereafter supplemented or
amended from time to time in writing.
On Stage Lease: For each Project, a lease to On Stage Theaters, Inc. in
form and substance satisfactory to Lender.
OSE: On Stage Entertainment, Inc.
Permitted Exceptions: Those matters listed in Exhibit B hereto to which the
respective interests of each Borrower in the respective Real Property may
be subject and any such other title exceptions or objections, if any, as
Lender, or its counsel, may approve in advance in writing.
Person: Any person or entity, including an individual, trustee,
corporation, partnership, trust, limited liability company, unincorporated
organization, governmental agency or otherwise.
Personal Property: All goods, materials, supplies, chattels, furniture,
fixtures, equipment and machinery now or later to be attached to, placed in
or on, or used in connection with the use, enjoyment, occupancy or
operation of all or any part of the Land and Improvements, whether stored
on the Land or elsewhere, including all costumes, props, sets, stage
lighting, sound equipment, tables, chairs, plates, silverware, glasses,
mugs, cups, serving bowls, kitchen equipment, bar equipment, inventory and
articles of personal property and accessions thereof and renewals,
replacements thereof and substitutions therefor.
Project: The Land, Improvements and Personal Property associated with each
separate real property described in Exhibits A-1, A-2 and A-3.
Rating Agency: Each of Standard & Poor's Ratings Services, a division of
McGraw-Hill Companies, Inc., Moody's Investors Service, Inc., Duff and
Phelps Credit Rating Co. and Fitch Investors Service, L.P., or any other
nationally-recognized credit rating agency which has been approved by
Lender.
Real Property: That portion of a Project constituting real property
(including that portion of the Land in which a Borrower has a leasehold
estate).
Secondary Market Transaction: The meaning set forth in Section 10.14.
Servicer: The entity, if any, selected by Lender to service the Loans.
Survey: Each certain ALTA/ACSM survey of the Land and Improvements
associated with a given Project.
Term: The term of the Loans.
Title Insurer: First American Title Insurance Company, or for each Project
such other title insurance company licensed in the State where the Project
is located as may be approved by Lender in connection with the Loan.
Warrant Agreement: That certain Warrant Agreement of even date herewith
between Lender and OSE.
Defined terms may be used in the singular or the plural. When used in the
singular preceded by "a", "an", or "any", such term shall be taken to
indicate one or more members of the relevant class. When used in the
plural, such term shall be taken to indicate all members of the relevant
class.
<PAGE>
2. TERMS OF LOAN AND DOCUMENTS.
2.1 Agreement to Borrow and Lend. Subject to all of the terms, provisions and
conditions set forth in this Agreement, Lender agrees to make and each
Borrower agrees to accept the applicable Loan described in the Recitals of
this Agreement. Each Borrower agrees to pay all indebtedness evidenced and
secured by the Loan Documents for the Loan to such Borrower in accordance
with the terms thereof.
2.2 Loan Documents. In consideration of Lender's entry into this Agreement and
Lender's agreement to make the Loans, Borrowers agree that they will, in
sufficient time for review by Lender and its counsel prior to the Loan
Opening Date, execute and deliver or cause to be executed and delivered to
Lender the following documents and instruments in form and substance
acceptable to Lender:
(a) A promissory note payable to the order of Lender in the following
original principal amounts:
Borrower Loan Amount
--------------------------- -----------
King Henry's Inc. $ 5,000,000
Fort Liberty, Inc. $ 6,600,000
Wild Bills California, Inc. $ 900,000
-----------
Total of Loans: $12,500,000
===========
(b) A first mortgage or deed of trust, security agreement and fixture
filing on Borrower's fee or leasehold, as applicable, estate in the
property securing the applicable Loan, subject only to the Permitted
Exceptions;
(c) An assignment of leases and rents that together provide for the
assignment to Lender of all rents and all leases, licenses,
concessions and other similar agreements relating to or connected with
the Project, each of which shall be a present first priority absolute
assignment of all present and future leases of all or any part of the
Project described therein, all lease guarantees and all rents and
other sums payable thereunder (provided the applicable Borrower may
collect and retain rents until an Event of Default has occurred);
(d) A security agreement granting Lender a security interest in all
personal property, tangible and intangible, owned or hereafter
acquired by the applicable Borrower including bank accounts, accounts
receivable, all impound or reserve accounts required in the Loan
Documents, and all books, records, computer tapes, discs and memory
storage facilities, information stored by electronic media,
trademarks, tradenames and other intangible property, which agreement
may be combined with or incorporated into the Deed of Trust or
Mortgage;
(e) Uniform Commercial Code financing statements, in duplicate, executed
by the applicable Borrower as debtor with respect to all of the
Personal Property;
(f) The Blazing Piano's Security Agreement, along with uniform commercial
code financing statement(s) with respect to the property described
therein;
(g) An assignment to Lender of all of the right, title and interest of
such Borrower in and to all agreements and other documents relating to
the ownership, development, operation, construction, or use of the
Project, including any management agreements, franchise agreements,
reservation agreements, concession agreements, contracts, leases,
licenses, warranties and guaranties relating to such Project, together
with consents thereto from those third parties to such agreements as
Lender may require;
(h) An indemnity agreement with respect to certain matters including
environmental covenants;
(i) A repayment guaranty executed by On Stage Entertainment, Inc. and each
other Borrower;
(j) Any other documents required by this Agreement; and
(k) Such other papers and documents as Lender may reasonably require.
2.3 Terms of the Loans. The Loans will bear interest for the period and at the
rate set forth in the Notes. The unpaid principal balance, all accrued and
unpaid interest and all other sums due and payable under the Notes or other
Loan Documents, if not sooner paid, shall be paid in full at Loan Maturity.
<PAGE>
2.4 Prepayments. No Borrower shall have the right to make prepayments of the
Loan in whole or in part except in accordance with the terms of the Notes.
2.5 Sources and Uses. Each Borrower shall use the proceeds of the respective
Loan solely for the purposes set forth in Exhibit C.
3. BORROWERS' COVENANTS. Borrowers further covenant and agree with Lender as
follows:
3.1 Impound Accounts and Reserves. With respect to each Project, the Borrower
shall deposit for the benefit of Lender into separate interest-bearing
accounts at a financial institution selected by Lender (collectively, the
"Reserves"):
3.1.1 Impound Account. On the first day of each calendar month, a sum equal to
one twelfth (1/12) of the amount estimated by Lender or its Servicer to
be required to pay, at least thirty (30) days prior to their respective
due dates, annual taxes, assessments, ground rent and insurance premiums
(for any Policy if the premiums therefor are not paid on a monthly basis)
for each Project (the "Impound Account"). On the Loan Opening Date, Such
Borrower shall make an initial deposit of a sum equal to one-twelfth
(1/12) of the yearly property taxes and assessments plus a sum equal to
one-twelfth (1/12) of the annual insurance premiums (for any Policy if
the premiums therefor are not paid on a monthly basis), each as estimated
by Lender, multiplied by the number of months elapsed in the respective
billing periods. The Servicer shall manage the disbursements out of the
Impound Account.
3.1.2 Additional Security; Control by Borrower Until released as above
provided, the Reserves shall constitute additional security for the Loan
relating to such Project. Each Borrower shall, from time to time, upon
Lender's request, execute, deliver, record and furnish such documents and
notices as Lender may reasonably deem necessary or desirable to create,
perfect and maintain perfected security interests in the Reserves.
Subject to Lender's security interests therein, until an Event of Default
has occurred, the Reserves shall remain in the name of Borrower. Upon the
occurrence of an Event of Default, Lender may require that any sums then
present in any Reserve be applied to the payment of the applicable Loan
in any order in its sole discretion.
3.2 Payment of Taxes. Each Borrower shall pay all special assessments and all
real estate taxes, assessments and charges of every kind upon such
Borrower's Project before the same become delinquent; provided, however,
that such Borrower shall have the right to pay any such tax under protest
or to otherwise contest any such tax, assessment or charge but only if
(i) such contest has the effect of preventing the collection of such
taxes so contested and also prevent the commencement of sale or
foreclosure proceedings with respect to, or forfeiture of, such Project
or any part thereof or any interest therein, (ii) such Borrower has
notified Lender in writing in advance of its intent to contest such
taxes, and (iii) such Borrower has deposited security in form and amount
satisfactory to Lender, in its sole judgment, and increases the amount of
such security so deposited promptly after Lender's request therefor. If
such Borrower fails to commence such contest or, having commenced to
contest the same, and having deposited such security required by Lender
for its full amount, Borrower shall thereafter fail to prosecute such
contest vigorously, in good faith, with due diligence and by appropriate
proceedings, or, upon adverse conclusion of any such contest, shall fail
to pay such tax, assessment or charge, Lender may at its election (but
shall not be required to), pay and discharge any such tax, assessment or
charge, and any interest or penalty thereon, and any amounts so expended
by Lender shall be deemed to constitute disbursements of the Loan
proceeds hereunder (even if the total amount of disbursements would
exceed the face amount of the applicable Note). Lender in making any
payment hereby authorized relating to taxes and assessments, may do so
according to any bill, statement or estimate procured from the
appropriate public office without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax, assessment, sale,
forfeiture, tax lien or title or claim thereof.
3.3 Maintenance of Insurance.
<PAGE>
3.3.1 All Risk Insurance. Each Borrower, at its sole cost and expense, for the
mutual benefit of such Borrower and Lender, shall obtain and maintain
during the entire Term (or if later, until all amounts payable under such
Loan are paid in full) policies of insurance against loss or damage by
fire, lightning, wind and such other perils as are included in a standard
"all-risk" or "special causes of loss" form, and against loss or damage
by all other risks and hazards covered by a standard extended coverage
insurance policy including, without limitation, riot and civil commotion,
vandalism, malicious mischief, burglary and theft. Such insurance shall
be in an amount equal to the greater of (i) the then full replacement
cost of the Improvements, without deduction for physical depreciation,
and (ii) such amount as would cause the insurer to not deem such Borrower
a co-insurer under said policies. The policies of insurance carried in
accordance with this paragraph shall be paid monthly in advance and shall
contain a "Replacement Cost Endorsement" with a waiver of depreciation
and an "Agreed Amount Endorsement". The policies shall have a deductible
no greater than $25,000 unless agreed to by Lender.
3.3.2 Additional Insurance. Each Borrower, at its sole cost and expense, for
the mutual benefit of such Borrower and Lender, shall also obtain and
maintain during the Term the following policies of insurance for each
Project:
(a) Flood insurance if any part of the applicable Project is located in
an area identified by the Federal Emergency Management Agency as an
area having special flood hazards and in which flood insurance has
been made available under the National Flood Insurance Program in an
amount at least equal to the outstanding principal amount of the
applicable Loan or the maximum limit of coverage available with
respect to the Improvements under said Program, whichever is less.
(b) Comprehensive General Liability or Commercial General Liability
insurance, including a broad form comprehensive general liability
endorsement and coverage for broad form property damage, contractual
damages, personal injuries (including death resulting therefrom) and
a liquor liability endorsement if liquor is sold on such Project
containing minimum limits per occurrence of $1,000,000.00 and
$2,000,000.00 in the aggregate for any policy year. In addition, at
least $10,000,000.00 excess and/or umbrella liability insurance
shall be obtained and maintained for any and all claims, including
all legal liability imposed upon such Borrower and all court costs
and attorneys' fee incurred in connection with the ownership,
operation and maintenance of the relevant Project.
(c) Rental loss and/or business interruption insurance from all perils
(including earthquake insurance if readily available and if not
unreasonable for a lender to require) for a period of 12 months in
an amount equal to the estimated gross revenues from the operations
of the Project over 12 months. The amount of such insurance shall be
increased from time to time during the Term as the annual estimate
of (or the actual) gross revenue, as may be applicable, increases.
(d) Insurance against loss or damage from (A) leakage of sprinkler
systems and (B) explosion of steam boilers, air conditioning
equipment, high pressure piping, machinery and equipment, pressure
vessels or similar apparatus now or hereafter installed in the
Improvements (without exclusion for explosions), in an amount at
least equal to the outstanding principal amount of the relevant Note
or $2,000,000.00, whichever is more.
(e) Worker's compensation insurance with respect to any employees of
such Borrower, as required by any governmental authority or
applicable Laws.
(f) During any period of renovation, repair or restoration, builder's
"all risk" insurance in an amount equal to not less than the full
insurable value of such Project against such risks (including,
without limitation, fire and extended coverage and collapse of the
Project Improvements to agreed limits) as Lender may request, in
form and substance acceptable to Lender.
(g) Earthquake insurance in an amount equal to the lesser of the
original principal balance of the relevant Loan and the maximum
amount permitted by law, if readily available and if not
unreasonable for a lender to require.
(h) Such other insurance as may from time to time be reasonably required
by Lender in order to protect its interests.
<PAGE>
3.3.3 Additional Requirements. All policies of insurance (the "Policies")
required pursuant to this Section 3.3: (i) shall be issued by companies
approved by Lender and licensed to do business in the state where the
Project is located, with a claims paying ability rating of "BBB" or
better by Standard & Poor's Ratings Services, a division of McGraw-Hill
Companies, Inc., and a rating of "A:X" or better in the current Best's
Insurance Reports; (ii) shall name as additional insureds Lender and its
successors and/or assigns as their interest may appear; (iii) shall
contain a Non-Contributory Standard Mortgagee Clause and a Lender's Loss
Payable Endorsement, or their equivalents, naming Lender as the Person to
which all payments made by the insurance company issuing the Policies
shall be paid; (iv) shall contain a waiver of subrogation against Lender;
(v) shall be maintained throughout the Term without cost to Lender; (vi)
shall be assigned and the originals delivered to Lender (including
certified copies of the Policies in effect on the date hereof within
thirty (30) days after the closing of the Loan); (vii) shall contain such
provisions as Lender deems reasonably necessary or desirable to protect
its interest including, without limitation, endorsements providing that
neither any Borrower, Lender nor any other Person shall be a co-insurer
under said Policies and that Lender shall receive at least thirty (30)
days prior written notice of any modification, reduction or cancellation
for any reason, including nonpayment of premiums; and (viii) shall be
satisfactory in form and substance to Lender and shall be approved by
Lender as to amounts, form, risk coverage, deductibles, loss payees and
insureds. Lender may elect to close even though the Policies and related
certificate do not meet the requirements recited above, provided Lender
may subsequently require that duplicate original Policies meeting such
requirements be obtained and submitted to Lender within 30 days after
written notice to Borrowers. The applicable Borrower shall pay the
premiums (except to the extent Impounds therefor have been funded and
funds in such Impounds allocable thereto have not been otherwise applied)
for such Policies (the "Insurance Premiums") as the same become due and
payable and shall furnish to Lender evidence of the renewal of each of
the Policies with receipts for the payment of the Insurance Premiums or
other evidence of such payment reasonably satisfactory to Lender. If the
applicable Borrower does not furnish such evidence and receipts at least
thirty (30) days prior to the expiration of any Policy, then Lender may
procure, but shall not be obligated to procure, such insurance and pay
the Insurance Premiums therefor, and such Borrower shall reimburse Lender
for the cost of such Insurance Premiums promptly on demand. Within thirty
(30) days after request by Lender, such Borrower shall obtain such
increases in the amounts of coverage required hereunder as may be
reasonably requested by Lender, taking into consideration inflation,
changes in the value of money over time, changes in liability laws,
changes in prudent customs and practices, and the like.
3.4 Mechanics' Liens and Contest Thereof. Each Borrower will not suffer or
permit any mechanics' lien claims to be filed or otherwise asserted
against the Borrower's Project and will promptly discharge the same if
any claims for lien or any proceedings for the enforcement thereof are
filed or commenced; provided, however, that such Borrower shall have the
right to contest in good faith and with due diligence the validity of any
such lien or claim upon furnishing to the Title Insurer such security or
indemnity as it may require to induce the Title Insurer to insure against
all such claims, liens or proceedings; and provided further that Lender
will not be required to make any further disbursements of the Loan
proceeds unless (x) all mechanics' lien claims shown by any title
insurance commitments or interim binders or certifications, and all stop
notices delivered to it with respect to the Loan, have been released or
insured against by the Title Insurer or (y) such Borrower shall have
provided Lender with such other security with respect to such claim or
stop notice as may be acceptable to Lender, in its sole discretion. Such
Borrower shall properly post, deliver to Lender and (if legally required)
record notices of nonresponsibility in appropriate form with respect to
any contemplated work of improvement relating to the Borrower's Project.
<PAGE>
3.5 Settlement of Mechanics' Lien Claims. If a Borrower shall fail promptly
to discharge any mechanics' lien claim filed or otherwise asserted or to
contest any such claims and give security or indemnity in the manner
provided in Section 3.4 hereof (except for mechanics' lien claims of less
than $10,000 for which no proceedings have commenced which could lead to
foreclosure of the lien), or, having commenced to contest the same, and
having given such security or indemnity, shall thereafter fail to
prosecute such contest vigorously, in good faith and with due diligence
and by appropriate proceeding, or fail to maintain such indemnity or
security so required by the Title Insurer for its full amount, or, upon
adverse conclusion of any such contest, shall fail to cause any judgment
or decree to be satisfied and lien to be promptly released, then, and in
any such event, Lender may, at its election (but shall not be required
to) and in addition to its remedies set forth in Section 8 (i) procure
the release and discharge of any such claim and any judgment or decree
thereon, without inquiring into or investigating the amount, validity or
enforceability of such lien or claim and (ii) effect any settlement or
compromise of the same, or may furnish such security or indemnity to the
Title Insurer, and any amounts so expended by Lender, including premiums
paid or security furnished in connection with the issuance of any surety
company bonds, shall be deemed to constitute disbursements of the Loan
proceeds hereunder (even if the total amount of disbursements would
exceed the face amount of the Note).
3.6 Maintenance, Repair and Restoration of Improvements. Each Borrower shall
(i) promptly repair, restore or rebuild any of such Borrower's
Improvements which may become damaged or be destroyed; and (ii) keep such
Improvements and each portion or component thereof in good condition and
repair, without waste. Notwithstanding (i) in the preceding sentence, in
the event of condemnation of or damage or destruction to a Project for
which the repair or restoration will exceed 75% of the original principal
amount of the applicable Loan, based on reasonable and detailed
estimates, the applicable Borrower may elect to prepay the relevant Loan
in full, provided the applicable Deed of Trust or Mortgage shall remain
in place in order to secure the Guarantee executed by such Borrower.
3.7 Leases and Lease Reports. (i) No Borrower shall enter into any new lease
of space in the Borrower's Project without Lender's prior written
consent, except for leases of premises at Fort Liberty (other than the On
Stage Lease) at market value entered into with bona fide third parties
for a term not to exceed five years on a form previously approved in
writing by Lender; (ii) no Borrower shall modify, amend, waive any
material provision of, terminate or cancel (a) any On Stage Lease, or (b)
any existing leases of space in the applicable Project that would cause
the term of any lease to exceed five years or the rentable payable
thereunder to be other than market rates without the prior written
consent of Lender (and the applicable Borrower shall be required at
Lender's election to use its reasonable best efforts to cause each lessee
to execute estoppel certificates and subordination, non-disturbance and
attornment agreements in form and substance satisfactory to Lender); and
(c) if there are any leases of space in such Project generating or
expected to generate annual rents of $60,000 or more, within fifteen (15)
days following the end of each month, such Borrower shall deliver to
Lender a report showing the status of such leases in the Project as of
the end of such month certified by such Borrower. Such report shall
include information on the amount of space covered by any letters of
intent, leases out for execution, and fully executed leases; the rental
under each lease agreement or proposed lease agreement; the term of each
lease agreement; and a summary of any terms which vary from the standard
form of lease previously approved by Lender.
3.8 Compliance With Laws. Each Borrower shall promptly comply with all
applicable Laws and all requirements of any Governmental Authority having
jurisdiction over such Borrower or the applicable Project, and shall take
all actions necessary to bring such Project into material compliance with
all applicable Laws, including without limitation all Building Laws
(whether now existing or hereafter enacted).
3.9 Alterations. Without the prior written consent of Lender, no Borrower
shall make any material alterations to the Borrower's Project other than
those that both (i) do not affect any structural component, element or
aspect of the Project and (ii) do not cost in any 24 month period in
excess of $50,000 in each case or $100,000 in the aggregate (other than
completion of tenant work required in accordance with the Fort Liberty
Tenant Leases entered into in accordance with the terms of this
Agreement).
<PAGE>
3.10 Personal Property. (i) All of a Borrower's Personal Property, fixtures,
furnishings, furniture, attachments, equipment, books and records located
on or used or useful in connection with the Borrower's Project or its
operation, shall always be located at such Project or at the corporate
offices of OSE in Las Vegas, Nevada, or the corporate offices of On Stage
Theaters, Inc. in Florida, and shall also be kept free and clear of all
chattel mortgages, conditional vendor's liens and all other liens,
encumbrances and security interests of any kind whatever, (ii) such
Borrower will be the absolute owner of said Personal Property, fixtures,
attachments, equipment, books and records, except for additional
equipment acquired after the date hereof which a Borrower elects to lease
up to a maximum value of $50,000 per Project, and (iii) such Borrower
shall, from time to time, furnish Lender with evidence of such ownership
satisfactory to Lender, including searches of applicable public records.
Notwithstanding (i) above, Personal Property used in theater productions
may be moved to and used in other Projects or venues owned by On Stage
Theaters, Inc. or OSE, provided such relocated Personal Property shall be
replaced by other personal property of equal or greater value.
Notwithstanding item (ii) above, a Borrower may lease Personal Property
at a Project having an aggregate value in excess of $50,000 if at all
times during the term of such lease such Borrower also owns Personal
Property located at that Project and in good order and repair having a
value at least equal to the value of the Personal Property located at
that Project on the date hereof.
3.11 Inspection by Lender; Appraisals. Each Borrower will cooperate (and will
cause the managing agent to cooperate) with Lender in arranging for
inspections of such Borrower's Project from time to time by Lender and
its agents and representatives. Within thirty (30) days after written
request, such Borrower will cause an Appraisal to be performed and the
report thereof submitted to Lender; provided that one time per 12 month
period per Project Lender shall have the right to order independently an
Appraisal and the cost thereof shall be paid by such Borrower within
twenty (20) days after presentation of written invoice.
3.12 Financial Reporting.
3.12.1 Books and Records. Each Borrower will keep and maintain or will cause to
be kept and maintained on a fiscal year basis, in accordance with GAAP
(or such other accounting basis reasonably acceptable to Lender)
consistently applied, proper and accurate books, records and accounts
reflecting all of the financial affairs of such Borrower and all items of
income and expense in connection with the operation of the applicable
Project or in connection with any services, equipment or furnishings
provided in connection with the operation thereof. Lender shall have the
right from time to time at all times during normal business hours upon
reasonable notice to examine such books, records and accounts at the
office of any Borrower or other person maintaining such books, records
and accounts and to make such copies or extracts thereof as Lender shall
desire. After the occurrence of an Event of Default, the Borrower which
is in default shall pay any costs and expenses incurred by Lender to
examine such Borrower's books and accounting and other records with
respect to the Project, as Lender shall determine to be necessary or
appropriate in the protection of Lender's interest.
3.12.2 Annual Statements. Each Borrower will cause OSE to furnish to Lender,
within thirty (30) business days after Lender's request therefor (but no
sooner than March 31 for the year ending the preceding December 31), with
a complete copy of OSE's most recent consolidated financial statements,
including a consolidating schedule setting forth such Borrower's
financial condition, audited and certified without qualification by a
nationally-recognized independent certified public accountant that is
reasonably acceptable to Lender (in accordance with GAAP except as
disclosed and in accordance with generally accepted auditing standards
consistently applied as in effect as of the end of such fiscal year)
containing (for OSE and, in such consolidating schedule, for such
Borrower) a statement of revenues and expenses, a statement of assets and
liabilities and a statement of OSE's and such Borrower's equity. BDO
Seidman is acceptable to Lender. Each such statement shall indicate
compliance with any financial covenant relating to OSE and such Borrower
contained in the Loan Documents. Together with such financial statements,
such Borrower shall furnish to Lender an officer's certificate certifying
as of the date thereof (A) that the annual financial statements
accurately represent the results of operations and financial condition of
such entity all in accordance with GAAP (except as disclosed) and in
accordance with generally accepted auditing standards consistently
applied, and (B) whether there exists an event or circumstance which
constitutes, or which upon notice or lapse of time or both would
constitute, an Event of Default under this Agreement, the applicable Note
or any other Loan Document executed and delivered by such Borrower or OSE
and, if such event or circumstance exists, the nature thereof, the period
of time it has existed and the action then being taken to remedy such
event or circumstances.
<PAGE>
3.12.3 Quarterly Statements. Each Borrower will furnish Lender quarterly, within
forty-five (45) days following the end of each quarter, with a complete
copy of OSE's Form 10-Q for such quarter as filed with the Securities and
Exchange Commission, including a consolidating schedule setting forth
such Borrower's financial condition, unaudited, containing a statement of
revenues and expenses for the Project. Together with such consolidating
schedule, such Borrower shall furnish to Lender an officer's certificate
certifying as of the date thereof that such consolidating schedule
accurately represents the results of operation of the applicable Project
for such quarter.
3.12.4 Other Information Requested by Lender. Each Borrower shall furnish to
Lender, within thirty (30) days after Lender's request therefor, such
further detailed information with respect to the operation of the
Borrower's Project and the financial affairs of such Borrower as may be
reasonably requested by Lender.
3.13 Documents of Further Assurance. Each Borrower shall, from time to time,
upon Lender's request, execute, deliver, record and furnish such
documents as Lender may reasonably deem necessary or desirable to (i)
perfect and maintain perfected as valid liens upon the Borrower's
Project, the liens granted by such Borrower to Lender under the Deed of
Trust or Mortgage and the collateral assignments and other security
interests under the other Loan Documents as contemplated by this
Agreement, (ii) correct any errors of a typographical nature or
inconsistencies which may be contained in any of the Loan Documents, and
(iii) consummate fully the transactions contemplated under this
Agreement.
3.14 Furnishing Reports. Each Borrower shall provide Lender promptly after
receipt with copies of all material inspections, reports, test results
and other information received by such Borrower from time to time from
its employees, agents, representatives, architects and engineers, which
in any way relate to its Project, any part thereof or the businesses
conducted by such Borrower or any Affiliated Party therein.
3.15 Operation of Project and Zoning. As long as any portion of a Loan remains
outstanding, the applicable Borrower shall maintain and operate its
Project in a first class manner. Each Borrower shall fully and faithfully
perform all of its covenants, agreements and obligations under each of
the leases of space in the Borrower's Project and each contract relating
to operation as a dinner theater, piano bar or restaurant, as applicable.
No Borrower shall initiate or acquiesce in a zoning variation or
reclassification without Lender's consent.
3.16 Intentionally Deleted.
3.17 Furnishing Notices. Each Borrower shall deliver to Lender copies of all
material notices received or given by such Borrower (or its agents or
representatives) in connection with the Borrower's Project.
3.18 Indemnification. Each Borrower shall indemnify, defend and hold harmless
Lender, and its officers, directors, employees, shareholders, advisers,
and agents (collectively, "Indemnified Parties") from and against all
claims, injury, damage, loss, costs (including attorneys' fees and costs)
and liability of any and every kind incurred by Indemnified Parties by
reason of (i) the operation or maintenance of the Borrower's Project or
any construction or business conducted at such Project; (ii) the payment
of any and all brokerage commissions or fees of any kind with respect to
the applicable Loan, and for any and all legal or other fees or expenses
paid or incurred by Lender in connection with any claims for such
commissions or fees; (iii) any and all other action or inaction by, or
matter which is the responsibility of, or is otherwise related to, such
Borrower; (iv) the transfer of the applicable Project to Borrower on the
date hereof, and any failure to obtain any consent or approval required
therefor from any Person; and (v) the breach of any representation or
warranty or failure to fulfill any of such Borrower's obligations under
this Agreement or any other Loan Document. The foregoing indemnity shall
include the cost of all alterations, repairs and replacements to the
applicable Project (including without limitation architectural,
engineering, legal and accounting costs), all fines, fees and penalties,
and all legal and other expenses (including attorneys' fees), incurred in
connection with such Project being in violation of Laws and for the cost
of collection of the sums due under this indemnity, whether or not
Borrower is in possession of such Project. Notwithstanding the preceding,
however, no Borrower shall be obligated to indemnify Indemnified Parties
for injuries to natural persons or damage to tangible property to the
extent caused by the gross negligence or willful misconduct of Lender.
<PAGE>
3.19 Corporate Documents; Redemption; Capital Structure. Without the prior
written consent of Lender, no Borrower shall:
(a) Permit or suffer any amendment or modification of its bylaws,
articles, shareholder's agreement or other organizational documents,
and no Borrower shall permit or suffer the admission of any new
shareholder, except as permitted pursuant to Section 6.2;
(b) Redeem any stock of such Borrower;
(c) Issue any shares of common stock of such Borrower except in exchange
for the cash payment of the fair market value of such stock; or
(d) Issue any preferred shares of stock or otherwise change its capital
structure.
3.20 Replacement or Division of Note.
3.20.1 Each Borrower shall, if the applicable Note is mutilated, destroyed,
lost, or stolen, promptly deliver to Lender, in substitution therefor, a
new promissory note containing the same terms and conditions as the
applicable Note with a notation thereon of the unpaid principal accrued
and unpaid interest. In the case of the replacement of a lost Note,
Lender shall indemnify the applicable Borrower for damages arising out of
a claim for payment under the lost Note (as opposed to the replacement
Note).
3.20.2 At Lender's election, each Borrower shall execute two or more promissory
notes replacing the applicable Note and ancillary Loan Documents,
provided the principal balance, and payment terms (in the aggregate)
shall not be changed, provided that different notes may have different
interest rates provided that the aggregate interest on the aggregate
principal balance shall not be in excess of the interest rate provided
under the relevant Note.
3.21 Publicity. During the term of the Loan, Lender may issue or publish
releases or announcements stating that the financing for one or more
Projects is being provided by Lender to one or more Borrowers, and each
Borrower hereby consents thereto.
3.22 Access to Leased Premises and Right to Cure Defaults Under the Ground
Lease and Easement Agreements. In the event of a material default by a
Borrower under a ground lease or easement agreement, each Borrower agrees
that Lender shall have the right (but not the obligation), to cure or
cause the cure of such default and, in the event the cure of such default
by its nature requires that Lender enter upon and/or take possession of
the demised premises, each Borrower hereby agrees that Lender may, and
each Borrower hereby grants Lender the right to, enter in and upon and
take possession of the relevant Real Property to the extent necessary to
cause the cure of such default; provided, however, Lender shall not be
entitled to exercise its rights under this Section until the expiration
of applicable grace periods under such agreements, so long as Lender
shall be afforded an independent cure right and grace period of not less
than 30 days (subject to extension if Lender commences such cure within
such 30 day cure period and diligently prosecutes the same to completion)
following the expiration of applicable grace periods under such
agreements. Any costs incurred by Lender in curing such default shall
constitute additional indebtedness evidenced by the Note for such Real
Property and shall be secured by the Deed of Trust or Mortgage and other
Loan Documents to the same extent and effect as if the terms and
provisions of this Agreement were set forth therein, whether or not the
aggregate of such indebtedness shall exceed the aggregate face amount of
the applicable Note.
<PAGE>
3.23 Lender's Attorneys' Fees and Expenses. If at any time prior to repayment
of the Loan in full, Lender employs counsel for advice or other
representation (whether or not any suit has been or shall be filed and
whether or not other legal proceedings have been or shall be instituted
and, if such suit is filed or legal proceedings instituted, through all
administrative, trial, and appellate levels) with respect to a Loan, a
Project or any part thereof, this Agreement or any of the Loan Documents,
including any proposed or actual restructuring of a Loan, or to protect,
collect, lease, sell, take possession of, or liquidate any of such
Project, or to attempt to enforce any security interest or lien on any of
such Project, or to enforce any rights of Lender or any of the relevant
Borrower's obligations hereunder or those of any other person, firm or
entity which may be obligated to Lender by virtue of this Agreement or
any other agreement, instrument or document heretofore or hereafter
delivered to Lender by or for the benefit of such Borrower, or to analyze
and respond to any request for consent or approval made by such Borrower,
then, in any such event, such Borrower shall pay upon demand all of the
reasonable attorneys' fees and expenses arising from such services, and
all expenses, costs and charges relating thereto, and if such Borrower
fails to pay such fees, costs and expenses payment thereof by Lender
shall be deemed to constitute disbursement of additional Loan proceeds
hereunder (even if the total amount of disbursements would exceed the
face amount of the applicable Note) and shall constitute additional
indebtedness of such Borrower to Lender, payable on demand and secured by
the Deed of Trust or Mortgage and other Loan Documents.
3.24 Loan Expenses. Each Borrower agrees to pay all reasonable expenses of or
related to the applicable Loan, including all amounts payable pursuant to
Sections 3.25 and 3.26 of this Agreement, and also including all
recording charges, title insurance charges, costs of surveys, costs for
certified copies of instruments, escrow charges, fees, expenses and
charges of architectural/engineering consultants of Lender, fees and
expenses (including word processing and photocopying expenses) of
Lender's attorneys, and all costs and expenses incurred by Lender in
connection with the determination of whether such Borrower has performed
the obligations undertaken by such Borrower under this Agreement or has
satisfied any conditions precedent to the obligations of Lender under
this Agreement. Each Borrower shall be obligated to pay, and shall pay,
all such expenses, charges, costs and fees regardless of whether the
applicable Loan is disbursed in whole or in part unless such failure to
disburse is due to Lender's wrongful failure to disburse hereunder. Any
and all advances or payments made by Lender under this Agreement from
time to time, or for fees of architectural and engineering consultants
and attorneys' fees and expenses, if any, and all other Loan expenses
shall, as and when advanced or incurred by Lender, constitute additional
indebtedness evidenced by the applicable Note and secured by the Deed of
Trust or Mortgage and the other Loan Documents. Lender acknowledges prior
receipt of $100,000 to be applied against expenses incurred in making the
Loans, and agrees that the total out of pocket expenses incurred by
Lender in the origination of the Loans shall not exceed $150,000.
3.25 Loan Fees. On the Loan Opening Date, Borrowers shall pay to Lender a loan
origination fee and, on behalf of Imperial Credit Capital, LLC, a loan
arrangement fee in the aggregate amount of Seven Hundred Thousand Dollars
($700,000). No additional loan origination fee or loan arrangement fee
shall be payable with respect to the Additional Loans (as defined in
Section 11).
3.26 Deferred Maintenance. All deferred maintenance listed on Schedule 3.26
attached hereto and made a part hereof shall be completed on or before
July 31, 1998.
3.27 No Additional Debt. No Borrower shall, without the prior written consent
of Lender, incur any indebtedness (whether personal or nonrecourse,
secured or unsecured) other than customary trade payables.
<PAGE>
3.28 Single Purpose Entity/Separateness. Each Borrower does not own and will
not own any asset or property other than (i) the applicable Project, and
(ii) incidental Personal Property necessary for the ownership or
operation of the applicable Project. Each Borrower will not engage in any
business other than the ownership, management and operation of the
applicable Project and such Borrower will continue to conduct and operate
its business (i.e., renting its Project to On Stage Theaters, Inc. for
the purpose of operating a dinner theater live production show) as
presently conducted and operated. Other than the applicable On Stage
Lease, no Borrower will enter into any contract or agreement with any
Affiliated Parties of Borrower except if such Affiliated Parties have the
requisite skills therefor, and then only upon terms and conditions that
are intrinsically fair and substantially similar to those that would be
available on an arms-length basis with third parties other than any such
party. No Borrower has made and will not make any loans or advances to
any third party (including any Affiliated Parties), and shall not acquire
obligations or securities of its Affiliated Parties. Each Borrower is and
will remain solvent, and each Borrower will pay its debts and liabilities
(including, as applicable, shared personnel and overhead expenses) from
its assets as the same shall become due. Each Borrower will maintain all
of its books, records, financial statements and bank accounts separate
from those of its Affiliated Parties and each Borrower will file its own
tax returns, unless such Borrower is included within the consolidated tax
returns of OSE. Each Borrower shall maintain its books, records,
resolutions and agreements as official records. Each Borrower will be,
and at all times will hold itself out to the public as, a legal entity
separate and distinct from any other entity (including any Affiliated
Parties of such Borrower) shall correct any known misunderstanding
regarding its status as a separate entity, shall conduct business in its
own name, shall not identify itself or any of its Affiliated Parties as a
division or part of the other (except as subsidiaries of OSE) and shall
maintain and utilize a separate telephone number and separate invoices
and checks. Each Borrower will maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations. Neither
any Borrower nor any Affiliated Parties of any Borrower will seek the
dissolution, winding up, liquidation, consolidation or merger in whole or
in part, of such Borrower. No Borrower will commingle the funds and other
assets of such Borrower with those of any Affiliated Parties or any other
person. Each Borrower has and will maintain its assets in such a manner
that it will not be costly or difficult to segregate, ascertain or
identify its individual assets from those of any Affiliated Parties or
any other person. Each Borrower does not and will not hold itself out to
be responsible for the debts or obligations of any other person.
3.29 Changes in Laws Regarding Taxation. If any law is enacted or adopted or
amended after the date of this Agreement which deducts the outstanding
balance of the applicable Loan from the value of the applicable Project
for the purpose of taxation or which imposes a tax, either directly or
indirectly, on such Loan or Lender's interest in such Project, such
Borrower will pay such tax, with interest and penalties thereon, if any.
In the event Lender is advised by counsel chosen by it that the payment
of such tax or interest and penalties by a Borrower would be unlawful or
taxable to Lender or unenforceable or provide the basis for a defense of
usury, then in any such event, Lender shall have the option, by written
notice of not less than ninety (90) days, to declare the applicable Loan
immediately due and payable.
3.30 ERISA. Each Borrower covenants and agrees that during the Term, unless
Lender shall have previously consented in writing, (a) such Borrower will
take no action that would cause it to become an "employee benefit plan"
as defined in 29 C.F.R. Section 2510.3-101, or "assets of a governmental
plan" subject to regulation under the state statutes, and (b) such
Borrower will not sell, assign or transfer the applicable Project, or any
portion thereof or interest therein, to any transferee that does not
execute and deliver to Lender its written assumption of the obligations
of this covenant. Each Borrower further covenants and agrees to protect,
defend, indemnify and hold Lender harmless from and against all loss,
cost, damage and expense (including without limitation, all attorneys'
fees and excise taxes, costs of correcting any prohibited transaction or
obtaining an appropriate exemption) that Lender may incur as a result of
such Borrower's breach of this covenant. This covenant and indemnity
shall survive the extinguishment of the lien of the Deed of Trust or
Mortgage by foreclosure or action in lieu thereof; furthermore, the
foregoing indemnity shall supersede any limitations on such Borrower's
liability under any of the Loan Documents.
3.31 No Dividends. No Borrower shall make distributions, pay dividends or
repay loans to an Affiliated Party at any time when the Debt Service
Coverage Ratio is less than 2.0:1.
<PAGE>
3.32 California Lease Option Exercise. If the Loans have not theretofore been
paid in full, Wild Bills California, Inc. shall exercise the option to
extend the term of the California Lease at least 180 days prior to the
last date such option may be exercised pursuant to the California Lease
and shall provide Lender with a copy of such exercise notice. If such
option has not been exercised by such date, Lender may exercise such
option to extend in the name of the then lessee under the California
Lease.
3.33 On Stage Leases. Concurrently with the execution of this Agreement, each
Borrower shall enter into the On Stage Lease for such Borrower's Project
having a triple net rent of at least 150% of the monthly payments due
under the Loan relating to applicable Projects and shall not amend,
modify or terminate such Lease without Lender's prior written consent,
which may be withheld in Lender's sole and absolute discretion.
3.34 Relocation of Drainage Easement. King Henry's, Inc. shall cooperate with
First American Title Insurance Company in relocating the drainage
easement in favor of the Florida Department of Transportation described
in Book 131, Page 313 of the Official Records of Orange County, Florida
to a location not under any buildings, and shall use its best efforts to
have such easement relocated on or before September 30, 1998.
4. REPRESENTATIONS AND WARRANTIES. To induce Lender to execute this
Agreement and perform the obligations of Lender hereunder, Borrowers
jointly and severally hereby represent and warrant to Lender as follows:
4.1 Organization. Each Borrower is duly organized and in good standing as a
corporation under the laws of the State of Nevada.
4.2 Title. On the Loan Opening Date and thereafter, each Borrower will have
good and marketable title to the Land on which such Borrower's Project is
located (or in the case of the Wild Bills Real Property, a valid
leasehold interest) and fee simple title to the Improvements, subject
only to the Permitted Exceptions.
4.3 No Litigation. Except for claims fully covered by insurance, where the
insurance company is defending such claims and such defense is not being
provided under a reservation of rights, and except as disclosed in
writing to Lender prior to the date hereof, there is no pending
litigation (i.e., litigation which has been filed and served) or
unsatisfied judgment entered of record, or to Borrowers' knowledge, any
filed but unserved litigation or threatened litigation, against Borrowers
or any Project. No litigation or proceedings are pending or to Borrowers'
knowledge are threatened, against any Affiliated Party (i) which might
affect the validity or priority of the lien of the Deed of Trust or
Mortgage, (ii) which might affect the ability of any Borrower or any
Indemnitor to perform their respective obligations pursuant to and as
contemplated by the terms and provisions of this Agreement and the other
Loan Documents, or (iii) which could materially affect the operations or
financial condition of any Project, Borrower, or any Affiliated Party.
4.4 No Breach. No Borrower is in breach of any obligation, nor has any breach
of any obligation of any Borrower been alleged (i) which might affect the
validity or priority of the lien of the Deed of Trust or Mortgage, (ii)
which might affect the ability of any Borrower or any Indemnitor to
perform their respective obligations pursuant to and as contemplated by
the terms and provisions of this Agreement and the other Loan Documents,
or (iii) which could materially affect the operations or financial
condition of any Project, Borrower, or any Affiliated Party.
4.5 Due Authorization. The execution and delivery of the Loan Documents and
all other documents executed or delivered by or on behalf of each
Borrower and pertaining to the Loan have been duly authorized or approved
by such Borrower and when executed and delivered by such Borrower or when
caused to be executed and delivered on behalf of such Borrower, will
constitute the legal, valid and binding obligations of such Borrower,
enforceable in accordance with their respective terms except as limited
by bankruptcy, insolvency, or other laws of general application relating
to the enforcement of creditor's rights, and the payment or performance
thereof will be subject to no offsets, claims or defenses of any kind or
nature whatsoever.
4.6 Breach of Laws or Agreements. The execution, delivery and performance of
this Agreement and the other Loan Documents have not constituted (and
will not, upon the giving of notice or lapse of time or both, constitute)
a breach or default under any other agreement to which any Borrower or
Indemnitor is a party or may be bound or affected, or a violation of any
Law which may affect any Project, any part thereof, any interest therein,
or the use thereof. No notice to, approval or consent from any party is
required in connection with the execution and delivery by any Borrower or
any Indemnitor of the Loan Documents or in connection with the
performance or consummation of any of the transactions contemplated
thereby, or if required, such consent or approval has been obtained.
<PAGE>
4.7 Leases. Neither any Borrower or its respective agents have entered into
any leases or other arrangements for occupancy of space within the
applicable Project, except for the Fort Liberty Tenant Leases shown on
Exhibit D. Each lease listed on Exhibit D is in full force and effect,
and there is no default, breach or violation existing thereunder by any
party thereto and no event has occurred that, with the passage of time or
the giving of notice, or both, would constitute a default, breach,
violation by and party thereunder.
4.8 Condemnation. (i) No condemnation of any portion of any Project, (ii) no
condemnation or relocation of any roadways abutting any Project, and
(iii) no denial of access to any Project from any point of access to such
Project, has commenced or, to such Borrower's knowledge, is contemplated
by any Governmental Authority.
4.9 Condition of Improvements. Except as disclosed to Lender in writing prior
to the date of this Agreement, to each Borrower's knowledge, the
foundations and structure of such Borrower's Improvements are
structurally sound and the various mechanical systems have adequate
capacities and are in good working condition. Such Improvements were
built in substantial compliance with applicable plans and specifications
furnished to the Lender's engineering consultant, and such Improvements
are in full compliance with all applicable Building Laws. Certificates of
occupancy with respect to such Improvements and each portion thereof, and
any other certificates which may be required to evidence compliance with
building codes and permits and approval for full occupancy and use of
such Improvements and all installations therein have been issued by all
appropriate authorities. Each Borrower has no knowledge of required
capital expenditures or deferred maintenance other than those that would
be normally expected for a building of similar age and type. No Borrower
has received any notice of violation at any Project of any Building Law.
4.10 Mechanic's Liens. No mechanic's liens claims are currently pending or to
any Borrower's knowledge threatened against any Borrower's Project.
4.11 Information Correct. All financial statements furnished to Lender by any
Borrower or any Affiliated Party fairly present the financial condition
of such Persons and were prepared in accordance with a method of
preparation approved by Lender, consistently applied, and all other
information previously furnished by any Borrower or any Affiliated Party
to Lender in connection with the Loan or the financial capacity of
Borrowers and/or Indemnitor are true, complete and correct in all
respects except as otherwise disclosed to Lender in writing and do not
fail to state any material fact necessary to make the statements made not
misleading. Neither any Borrower nor Indemnitor has misstated or failed
to disclose to Lender any material fact relating to: (i) the condition,
use or operation of any Project, (ii) the status or any material
condition of any tenant or lease at any Project known to it, (iii) any
Borrower, (iv) Indemnitor; or (v) the litigation disclosure provided by
any Borrower and Indemnitor, except as disclosed in writing to Lender
prior to the date hereof. All projections of economic performance of the
Projects have been prepared by Borrowers based on information believed
accurate from the current owners of such Projects and are not
intentionally misleading.
4.12 Solvency. Neither any Borrower nor Indemnitor is (a) currently insolvent
on a balance sheet basis, or (b) currently unable to pay its debts as
they come due; and no bankruptcy or receivership proceedings are
contemplated or pending as to either of them.
4.13 Zoning. The use of each Project (including contemplated accessory uses)
does not violate (i) any Law (including subdivision, zoning, building,
environmental protection and wetlands protection Laws), or (ii) any
codes, covenants or restrictions of record, or any agreement affecting
such Project or any part thereof. Without limiting the generality of the
foregoing, all consents, licenses and permits and all other
authorizations or approvals (collectively, "Governmental Approvals")
required for the operation of such Project as a dinner theater-live
production show (and the balance of the Fort Liberty Project as a retail
center) (collectively, the "Licenses") have been obtained and are in full
force and effect (including without limitation any applicable liquor
license.
4.14 Utilities. Each Project has adequate water, gas and electrical supply,
storm and sanitary sewerage facilities, other required public utilities,
fire and police protection, and means of appropriate access between such
Project and public highways.
<PAGE>
4.15 Brokerage Fees. Except as previously disclosed and agreed to by Lender in
writing, and/or to Imperial Capital, LLC no brokerage fees or commissions
are payable by or to any person in connection with this Agreement or any
Loan to be disbursed hereunder.
4.16 Encroachments. Except as disclosed in any Survey, no building or other
improvement in any Project encroaches upon any building line, setback
line, side yard line, or any recorded or visible easement (or other
easement of which any Borrower has knowledge of with respect to such
Project) and no neighboring buildings or improvements encroach upon the
Land related to such Project.
4.17 Separate Parcel. Each Project's Real Property is taxed separately without
regard to any other property and for all purposes such Real Property may
be mortgaged, conveyed, and otherwise dealt with as an independent
parcel.
4.18 No Default. No Default or Event of Default has occurred and is
continuing.
4.19 FIRPTA. No Borrower is a "foreign person" within the meaning of Sections
1445 or 7701 of the Internal Revenue Code.
4.20 RICO. No Borrower has been charged with nor, to its knowledge, is it
under investigation for, possible violations of the Racketeer Influenced
and Corrupt Organizations Act ("RICO"), the Continuing Criminal
Enterprise Act ("CCE"), the Controlled Substance Act of 1978, or similar
laws providing for the possible forfeiture of any of its respective
assets or properties.
4.21 No Casualty. No part of any Project has been damaged by fire or other
casualty except as disclosed in writing to Lender.
4.22 Liabilities. No Borrower has liability, contingent or otherwise, which is
not disclosed in the financial statements provided to Lender.
4.23 Truth of Recitals. All statements set forth in the Recitals are true and
correct.
4.24 No Breach. Neither the execution and delivery of the Loan Documents, each
Borrower's performance thereunder, the recordation of any of the
Mortgages or Deed of Trust, nor the exercise of any remedies by Lender,
will adversely affect any Borrower's rights under any franchise agreement
or any leases.
4.25 Liquor License. A validly issued liquor license is in effect for the each
Project's operations, allowing on-site consumption of all lawful
alcoholic beverages. Each license is in the name of the applicable
Borrower (or leased by the applicable Borrower from the former owner of
the Projects) and all required fees have been paid in connection
therewith.
4.26 California Ground Leases.
4.26.1 The California Lease or a memorandum thereof has been duly recorded, the
California Lease permits the interest of the ground lessee thereunder to
be encumbered by the Deed of Trust, and there has not been a material
change in the terms of the California Lease since its recordation.
4.26.2 Except for the Permitted Exceptions, Wild Bills California, Inc.'s
interest in the California Lease is not subject to any liens or
encumbrances superior to, or of equal priority with, the Deed of Trust.
4.26.3 Wild Bills California, Inc.'s interest in the California Lease is
assignable to Lender upon notice to, but without the consent of, Ground
Lessor (or, if any such consent is required, it has been obtained on or
prior to the date hereof) and it is further assignable by Lender and its
successors and assigns upon notice to, but without a need to obtain the
consent of, Ground Lessor.
4.26.4 The California Lease is in full force and effect and no default has
occurred under the California Lease and no event has occurred and there
is no existing condition which, but for the passage of time or the giving
of notice, would result in a default under the terms of the California
Lease.
<PAGE>
4.26.5 The California Lease requires Ground Lessor to give notice of any default
by Wild Bills California, Inc. to any holder of a lien against or an
assignment of the California Lease, notice of which has been served upon
the lessor (each such party being referred to herein as a "Leasehold
Mortgagee"); or the California Lease provides that notice of termination
given under the California Lease is not effective against any Leasehold
Mortgagee unless a copy of the notice has been delivered to such
Leasehold Mortgagee in the manner described in the California Lease.
4.26.6 The California Lease permits a Leasehold Mortgagee an opportunity
(including, where necessary, sufficient time to gain possession of the
interest of Wild Bills California, Inc. under the California Lease) to
cure any default under the California Lease, which is curable after the
receipt of notice of any the default before Ground Lessor may terminate
the California Lease.
4.26.7 The California Lease has a term which, with options to renew, extends not
less than 10 years beyond the Maturity Date.
4.26.8 The California Lease requires Ground Lessor to enter into a new lease
with a Leasehold Mortgagee upon termination of the California Lease for
any reason, including rejection of the California Lease in a bankruptcy
proceeding.
4.26.9 Under the terms of the California Lease any insurance proceeds related to
Wild Bills California, Inc.'s Project will be applied either to the
repair or restoration of all or part of such Project, or to the payment
of the outstanding principal balance of the applicable Loan together with
any accrued interest thereon.
4.26.10 The California Lease does not impose any material restrictions on
subletting of portions of Wild Bills California, Inc.'s Improvements.
5. CASUALTY AND CONDEMNATION.
5.1 Borrower's Obligation to Restore. If any Project shall be damaged or
destroyed, in whole or in part, by fire or other casualty (a
"Casualty"), the relevant Borrower shall give prompt notice thereof to
Lender. Following the occurrence of a Casualty, such Borrower,
regardless of whether insurance proceeds are available, shall promptly
proceed to restore, repair, replace or rebuild the same to be of at
least equal value and of substantially the same character as prior to
such damage or destruction, all to be effected in accordance with
applicable law. The expenses incurred by Lender in the adjustment and
collection of insurance proceeds shall become part of the amounts owing
in connection with the respective Loan and shall be secured by the Deed
of Trust or Mortgage and shall be reimbursed to Lender upon demand.
5.2 Insured Losses; Condemnation Proceeds. In case of loss or damages
covered by any of the Policies or a condemnation or taking under power
of eminent domain of any portion of or interest in the Project, the
following provisions shall apply:
5.2.1 In the event of a Casualty or condemnation proceeding that does not
exceed twenty-five percent (25%) of the original principal amount of
the Note signed by Wild Bills California, Inc., twenty percent (20%) of
the original principal amount of the Notes signed by other Borrowers,
the applicable Borrower may settle and adjust any claim without the
consent of Lender and agree with the insurance company or companies on
the amount to be paid upon the loss; provided that such adjustment is
carried out in a competent and timely manner. In such case, such
Borrower is hereby authorized to collect and receipt for any such
condemnation or insurance proceeds.
5.2.2 In the event a Casualty or condemnation proceeding shall exceed
twenty-five percent (25%) of the original principal amount of the Note
signed by Wild Bills California, Inc., twenty percent (20%) of the
original principal amount of the Notes signed by other Borrowers, then
and in that event, Lender may settle and adjust any claim without the
consent of the applicable Borrower and agree with the insurance company
or companies on the amount to be paid on the loss and the proceeds of
any such policy shall be due and payable solely to Lender and held in
escrow by Lender in accordance with the terms of this Agreement.
<PAGE>
5.2.3 In the event of a Casualty or condemnation proceeding where the loss is
in an aggregate amount less than thirty-three and one-third (33 1/3%)
of the original principal balance of the Note signed by Wild Bills
California, Inc. and twenty-five percent (25%) of the original
principal balance of the other Notes, and if, in the reasonable
judgment of Lender, the applicable Project can be restored within six
(6) months and prior to maturity of such Note to an economic unit not
less valuable (including an assessment of the impact of the termination
of any Leases due to such Casualty or condemnation) and not less useful
than the same was prior to the Casualty or condemnation, and after such
restoration will adequately secure the outstanding balance of the
applicable Loan, and if the applicable Borrower has deposited with
Lender in an amount equal to the difference between the total cost of
restoration/rebuild and net dollar proceeds actually received by
Lender, and if no Event of Default (as hereinafter defined) shall have
occurred and be then continuing, the proceeds (after reimbursement of
any expenses incurred by Lender and after application of any funds
deposited by such Borrower with Lender) shall be applied to reimburse
the applicable Borrower for the cost of restoring, repairing, replacing
or rebuilding such Project or part thereof subject to the Casualty, in
the manner set forth below. Each Borrower hereby covenants and agrees
to commence and diligently to prosecute such restoring, repairing,
replacing or rebuilding; provided always, that such Borrower shall pay
all costs (and if required by Lender, such Borrower shall deposit the
total thereof with Lender in advance), as estimated by Lender, of
completing such restoration, repair, replacement or rebuilding in
excess of the net proceeds made available pursuant to the terms hereof.
5.2.4 Except as provided above or in Section 3.6, the proceeds collected upon
any Casualty or condemnation shall, at the option of Lender in its sole
discretion, be applied to the payment of the applicable Loan or applied
to reimburse such Borrower for the cost of restoring, repairing,
replacing or rebuilding such Project or part thereof subject to the
Casualty or condemnation, in the manner set forth below. Any such
application to the relevant Loan shall be without any prepayment
consideration except that if an Event of Default, or an event which
with notice and/or the passage of time would constitute an Event of
Default, has occurred then the such Borrower shall pay to Lender any
prepayment penalty provided for in the relevant Note. Any such
application to the relevant Loan shall (A) be applied to those payments
of principal and interest last due under such Note but shall not
postpone any payments otherwise required pursuant to such Note other
than such last due payments and (B) cause such Note to be re-amortized
in accordance with its terms and conditions.
5.2.5 In the event a Borrower is entitled to reimbursement out of insurance
or condemnation proceeds held by Lender, such proceeds shall be
disbursed from time to time upon Lender being furnished with (i)
evidence satisfactory to it of the estimated cost of completion of the
restoration, repair, replacement and rebuilding, (ii) funds or, at
Lender's option, assurances satisfactory to Lender that such funds are
available, sufficient in addition to the insurance or condemnation
proceeds to complete the proposed restoration, repair, replacement and
rebuilding, and (iii) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, bonds,
plats of survey and such other evidences of cost, payment and
performance as Lender may reasonably require and approve. Lender may,
in any event, require that all plans and specifications for such
restoration, repair, replacement and rebuilding be submitted to and
approved by Lender prior to commencement of work. No payment made prior
to the final completion of the restoration, repair, replacement and
rebuilding shall exceed ninety percent (90%) of the value of the work
performed from time to time; funds other than proceeds of insurance or
condemnation shall be disbursed prior to disbursement of such proceeds;
and at all times, the undisbursed balance of such proceeds remaining in
the hands of Lender, together with funds deposited for that purpose or
irrevocably committed to the satisfaction of Lender by or on behalf of
such Borrower for that purpose, shall be at least sufficient in the
reasonable judgment of Lender to pay for the cost of completion of the
restoration, repair, replacement or rebuilding, free and clear of all
liens or claims for lien. Any surplus which may remain out of insurance
or condemnation proceeds held by Lender after payment of such costs of
restoration, repair, replacement or rebuilding shall be paid to any
party entitled thereto.
<PAGE>
6. ASSIGNMENTS.
6.1 Lender's Right to Assign. Lender shall have the right to assign,
transfer, sell, negotiate, pledge or otherwise hypothecate this
Agreement and any of its rights and security hereunder, including any
Note, Deed of Trust, Mortgage, and any other Loan Documents, provided
Lender shall not assign any of the Notes, Deed of Trust, Mortgage or
other Loan Documents to an entity known to Lender to be in the on-stage
entertainment business (but such proviso shall not apply to any
participation or assignment of part of any such Loan). Each Borrower
hereby agrees that all of the rights and remedies of Lender in
connection with the interest so assigned shall be enforceable against a
Borrower by such assignee with the same force and effect and to the
same extent as the same would have been enforceable by Lender but for
such assignment. Each Borrower agrees that Lender shall have the right
to sell participations in the applicable Loan or to include such Note
in a securitized pool of indebtedness without the consent of such
Borrower.
6.2 Transfer or Encumbrance of the Project.
6.2.1 Prohibition on Transfer or Encumbrance. Each Borrower acknowledges that
Lender has examined and relied on the creditworthiness and experience
of such Borrower in owning and operating properties such as the
applicable Project in agreeing to make such Loan, and that Lender will
continue to rely on such Borrower's ownership of such Project as a
means of maintaining the value of such Project as security for
repayment of such Loan. Each Borrower acknowledges that Lender has a
valid interest in maintaining the value of such Project so as to ensure
that, should such Borrower default in the repayment of the such Loan,
Lender can recover such Loan by a sale of the relevant Project. No
Borrower shall, without the prior written consent of Lender, sell,
assign, convey, alienate, mortgage, encumber, pledge or otherwise
transfer any Project, the California Lease or any part or component of
either of them, or permit any Project or any part or component thereof
to be sold, conveyed, alienated, mortgaged, encumbered, pledged or
otherwise transferred (or, in the case of a leasehold interest, permit
the relevant lease to expire or otherwise terminate). No assignment,
sale, conveyance or other transfer of a Project or the California
Lease, or any portion or component of either of them, shall release any
Borrower from its obligations under the Loan Documents.
6.2.2 Transfer Defined. A sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer within the meaning of this Section 6.2
shall be deemed to include (i) an installment sales agreement wherein a
Borrower agrees to sell a Project or any part thereof for a price to be
paid in installments; (ii) an agreement by Wild Bills California, Inc.
to subordinate its interest in the California Lease, except to the
Permitted Exceptions, (iii) except for the relevant On Stage Lease, an
agreement by a Borrower leasing all or a substantial part of any
Project for other than actual occupancy by a space tenant thereunder or
a sale, assignment or other transfer of, or the grant of a security
interest in, a Borrower's right, title and interest in and to any
ground lease or any leases or rents at such Project; (iv) if a Borrower
or any member of a Borrower is a corporation, the voluntary or
involuntary sale, conveyance or transfer of such corporation's stock
(or the stock of any corporation directly or indirectly controlling
such corporation by operation of law or otherwise) or the creation or
issuance of new stock in one or a series of transactions by which an
aggregate of more than 10% of such corporation's stock shall be vested
in a party or parties who are not now stockholders or any change in the
control of such corporation; (v) if a Borrower or any member of a
Borrower is a limited or general partnership, joint venture or limited
liability company, the change, removal, resignation or addition of a
general partner, managing partner, limited partner, joint venturer or
member or the transfer of the partnership interest of any general
partner, managing partner or limited partner or the transfer of the
interest of any joint venturer or member; and (vi) any pledge,
hypothecation, assignment, transfer or other encumbrance of any
ownership interest in a Borrower.
6.2.3 No Showing of Impairment Required. Lender shall not be required to
demonstrate any actual impairment of its security or any increased risk
of default hereunder in order to declare a Loan immediately due and
payable upon the applicable Borrower's sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of such Project or the
California Lease without Lender's consent. This provision shall apply
to every sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of a Project or the California Lease regardless of whether
voluntary or not, or whether or not Lender has consented to any
previous sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of such Project or the California Lease.
<PAGE>
6.2.4 No Waiver. Lender's consent to one sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of a Project or the
California Lease shall not be deemed to be a waiver of Lender's right
to require such consent to any future occurrence of same. Any sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of
the Project or the California Lease made in contravention of this
paragraph shall be null and void and of no force and effect.
6.2.5 Reimbursement of Lender's Expenses. Each Borrower agrees to bear and
shall pay or reimburse Lender on demand for all reasonable expenses
(including, without limitation, reasonable attorneys' fees and
disbursements, title search costs and title insurance endorsement
premiums) incurred by Lender in connection with the review, approval
and documentation of any such sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer.
6.3 Successors and Assigns. Subject to the foregoing restrictions on
transfer and assignment contained in this Article 6, this Agreement
shall inure to the benefit of and shall be binding on the parties
hereto and their respective successors and assigns.
7. EVENTS OF DEFAULT.
7.1 The occurrence of any one or more of the following shall constitute an
"Event of Default," as such term is used herein:
(a) If any Borrower fails to pay principal or interest under a Note
and such failure shall continue for ten (10) days after the due
date therefor, without any requirement to give such Borrower
notice of such failure;
(b) If any Borrower defaults in the performance of any of its other
covenants, agreements and obligations under this Agreement
involving the payment of money and such failure shall continue for
ten (10) days after the due date therefor, without and requirement
to give such Borrower notice of such failure;
(c) If any Borrower defaults in the performance of any of its
non-monetary covenants, agreements and obligations under this
Agreement and fails to cure such default within thirty (30) days
after written notice thereof from Lender; provided, however, that
if such default can not be cured within such thirty (30) day
period but is reasonably susceptible of cure within thirty (30)
days after the end of such thirty (30) day period, then so long as
such Borrower promptly commences cure following notice of such
default from Lender and thereafter diligently and continuously
pursues such cure to completion, the cure period shall be extended
for an additional thirty (30) days, within which such Borrower may
complete such cure;
(d) If at any time or times hereafter any representation or warranty
(including the representations and warranties of any Borrower or
Indemnitor set forth in any Loan Document), or any statement,
report or certificate furnished to Lender in connection with a
Loan which was certified by a Borrower is not true and correct in
any material respect as of the time when made;
(e) If any petition is filed by or against any Borrower or any
Affiliated Party under the Federal Bankruptcy Code or any similar
state or federal Law, whether now or hereafter existing (and, in
the case of involuntary proceedings, failure to cause the same to
be vacated, stayed or set aside within ninety (90) days after
filing);
(f) If any assignment, pledge, encumbrance, transfer, hypothecation or
other disposition is made in violation of Section 6.2 of this
Agreement;
(g) If any Borrower or Indemnitor shall fail to pay any debt in excess
of $20,000 owed by it or is in default under any agreement with
Lender and such failure or default continues after any applicable
grace period specified in the instrument or agreement relating
thereto;
(h) If Wild Bill's California, Inc. materially defaults under the
California Lease or if the California Lease ceases to be in full
force and effect;
(i) If a default occurs under any of the Loan Documents and continues
beyond the applicable grace period, if any, contained therein;
<PAGE>
(j) If any Borrower ceases to carry on its business (i.e., renting its
Project to On Stage Theaters, Inc. for the purpose of operating a
dinner theater live production show) as presently conducted (other
than during periods of repair of casualty loss or reconfiguration
due to condemnation);
(k) Any Project has a fair market value as shown by an Appraisal
(which for the purpose of this item (k) shall include the going
concern value of the business conducted by On Stage Theaters,
Inc.) less than 1.25 times the principal balance of the applicable
Loan at any time, and the Borrower fails to post, within thirty
(30) days after Lender notifies any Borrower or OSE of such
shortfall in value, additional collateral that is satisfactory to
Lender in all respects and the value of which, when added to the
value of such Project, will be sufficient in Lender's judgment to
equal or exceed 1.25 times the principal balance of such Loan.
(l) If the Debt Service Coverage Ratio is less than or equal to the
following ratios:
Calendar Quarter Ending Date Debt Service Coverage Ratio
---------------------------- ---------------------------
June 30, 1998 1.50:1
September 30, 1998 1.50:1
December 31, 1998 1.75:1
March 31, 1999 1.75:1
June 30, 1998 and all
subsequent quarters 2.00:1
(m) If there is a material default by OSE past any express cure period
under the Warrant Agreement.
8. REMEDIES.
8.1 Remedies Conferred Upon Lender. Upon the occurrence of any Event of
Default and until Lender commences any remedy (including those
described in Subparagraphs (a), (b) or (c) below), Lender shall have
the right (but not the obligation) to pursue any one or more of the
following remedies concurrently or successively, it being the intent
hereof that all such remedies shall be cumulative and that no such
remedy shall be to the exclusion of any other:
(a) Declare all Notes to be immediately due and payable;
(b) Use and apply any monies deposited by a Borrower with Lender or
any monies in which Lender has a security interest, including
amounts in the Impound Account, regardless of the purpose for
which the same was deposited, to cure any such default or to apply
on account of any indebtedness under this Agreement which is due
and owing to Lender; and
(c) Exercise or pursue any other right or remedy permitted under this
Agreement or any of the Loan Documents or conferred upon Lender by
operation of Law.
Lender shall accept complete cure of any Event of Default if such
complete cure is accomplished prior to Lender commencing any
remedy (including without limitation any of the non-exclusive
remedies described above).
8.2 Non-Waiver of Remedies. No waiver of any breach or default hereunder
shall constitute or be construed as a waiver by Lender of any
subsequent breach or default or of any breach or default of any other
provision of this Agreement.
8.3 Cash Collateral Account. Upon the occurrence of an Event of Default,
the defaulting Borrower shall deposit all revenues from the operation
of the applicable Project (including all businesses conducted by such
Borrower or any Affiliated Party therein) into an account in the name
of Lender or such Borrower (as elected by Lender) and pledged to Lender
in the manner required by Lender as additional security for the
applicable Loan ("Cash Collateral Account"). Lender shall not pay
interest on any amounts held on deposit in the Cash Collateral Account,
unless required to do so under applicable law. Such Borrower shall
execute such documents as Lender, in its sole discretion, deems
necessary to perfect its interest in the Cash Collateral Account.
<PAGE>
9. ENVIRONMENTAL PROVISIONS.
9.1 Hazardous Substances. Each Borrower hereby represents and warrants to
Lender that, to such Borrower's knowledge: (a) the Borrower's Project
is not in direct or indirect violation of any local, state, federal or
other governmental authority, statute, ordinance, code, order, decree,
law, rule or regulation pertaining to or imposing liability or
standards of conduct concerning environmental regulation, contamination
or clean-up including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended
("CERCLA"), the Resource Conservation and Recovery Act, as amended
("RCRA"), the Emergency Planning and Community Right-to-Know Act of
1986, as amended, the Hazardous Substances Transportation Act, as
amended, the Solid Waste Disposal Act, as amended, the Clean Water Act,
as amended, the Clean Air Act, as amended, the Toxic Substance Control
Act, as amended, the Safe Drinking Water Act, as amended, the
Occupational Safety and Health Act, as amended, any state super-lien
and environmental clean-up statutes and all regulations adopted in
respect to the foregoing laws (collectively, "Environmental Laws"); (b)
such Project is not subject to any private or governmental lien or
judicial or administrative notice or action or inquiry, investigation
or claim relating to hazardous and/or toxic, dangerous and/or
regulated, substances, wastes, materials, raw materials which include
hazardous constituents, pollutants or contaminants including without
limitation, petroleum, tremolite, anthlophylie, actinolite or
polychlorinated biphenyls and any other substances or materials which
are included under or regulated by Environmental Laws or which are
considered by scientific opinion to be otherwise dangerous in terms of
the health, safety and welfare of humans (collectively, "Hazardous
Substances"); (c) except for lawfully used cleaning fluids and/or
copier toner or other substances typically used in offices or non-dry
cleaning retail establishments ("Permitted Substances"), no Hazardous
Substances are or have been (including the period prior to such
Borrower's acquisition of such Project) discharged, generated, treated,
disposed of or stored on, incorporated in, or removed or transported
from such Project other than in compliance with all Environmental Laws;
(d) no Hazardous Substances are present in, on or under any nearby real
property which could migrate to or otherwise affect such Project; and
(e) no underground storage tanks exist on any of such Project. So long
as such Borrower owns or is in possession of such Project, such
Borrower (i) shall keep or cause such Project to be kept free from
Hazardous Substances (except for Permitted Substances) and in
compliance with all Environmental Laws, (ii) shall promptly notify
Lender if such Borrower shall become aware of any Hazardous Substances
(except for Permitted Substances) on or near such Project and/or if
such Borrower shall become aware that such Project is in direct or
indirect violation of any Environmental Laws and/or if such Borrower
shall become aware of any condition on or near such Project which shall
pose a threat to the health, safety or welfare of humans, (iii) such
Borrower shall remove such Hazardous Substances (except for Permitted
Substances) and/or cure such violations and/or remove such threats, as
applicable, as required by law (or as shall be required by Lender in
the case of removal which is not required by law, but in response to
the opinion of a licensed hydrogeologist, licensed environmental
engineer or other qualified consultant engaged by Lender ("Lender's
Consultant")), promptly after such Borrower becomes aware of same, at
such Borrower's sole expense and (iv) shall comply with all of the
recommendations contained in the environmental report which was
delivered to Lender in connection with the origination of the
applicable Loan. Nothing herein shall prevent a Borrower from
recovering such expenses from any other party that may be liable for
such removal or cure. The obligations and liabilities of a Borrower
under this Section 9.1 shall survive any termination, satisfaction, or
assignment of the Deed of Trust or Mortgage and the exercise by Lender
of any of its rights or remedies thereunder, including, without
limitation, the acquisition of a Project by foreclosure or a conveyance
in lieu of foreclosure.
<PAGE>
9.2 Asbestos. Each Borrower represents and warrants that, to such
Borrower's knowledge, no asbestos or any substance or material
containing asbestos ("Asbestos") is located on any Project except as
may have been disclosed in an environmental report delivered to Lender
prior to the date of this Agreement. No Borrower shall install in a
Project, nor permit to be installed in a Project, Asbestos and shall
remove any Asbestos promptly upon discovery to the satisfaction of
Lender, at such Borrower's sole expense. Each Borrower shall in all
instances comply with, and ensure compliance by all occupants of the
applicable Project with, all applicable federal, state and local laws,
ordinances, rules and regulations with respect to Asbestos, and shall
keep such Project free and clear of any liens imposed pursuant to such
laws, ordinances, rules or regulations. In the event that a Borrower
receives any notice or advice from any governmental agency or any
source whatsoever with respect to Asbestos on, affecting or installed
on the applicable Project, such Borrower shall immediately notify
Lender. The obligations and liabilities of each Borrower under this
Section 9.2 shall survive any termination, satisfaction, or assignment
of the Deed of Trust or Mortgage and the exercise by Lender of any of
its rights or remedies thereunder, including but not limited to, the
acquisition of a Project by foreclosure or a conveyance in lieu of
foreclosure.
9.3 Environmental Remediation.
9.3.1 Borrower's Obligation to Perform Remedial Work. If any investigation,
site monitoring, containment, cleanup, removal, restoration or other
remedial work of any kind or nature (collectively, "Remedial Work") is
required on a Project pursuant to an order or directive of any
Governmental Authority or under any applicable Environmental Law, or in
Lender's opinion, based upon recommendations of a qualified
environmental engineer reasonably acceptable to Lender, after notice to
the applicable Borrower, is reasonably necessary to prevent future
liability under any applicable Environmental Law, because of or in
connection with the current or future presence, suspected presence,
release, or suspected release of a Hazardous Substance into the air,
soil, ground water, surface water, or soil vapor on, under or from such
Project or any portion thereof, such Borrower shall (at such Borrower's
sole cost and expense), or shall cause such responsible third parties
to promptly commence and diligently prosecute to completion (or cause
to be commenced and diligently prosecuted to completion) all such
Remedial Work. In all events, such Remedial Work shall be commenced
within thirty (30) days after any demand therefor by Lender or such
shorter period as may be required under any applicable Environmental
Law; however, such Borrower shall not be required to commence such
Remedial Work within the above specified time periods if prevented from
doing so by any Governmental Authority, or if commencing such Remedial
Work within such time periods would result in such Borrower or such
Remedial Work violating any Environmental Law. All such Remedial Work
shall be commenced within thirty (30) days after any demand therefor by
Lender or such shorter period as may be required under any applicable
Environmental Law; however, such Borrower shall not be required to
commence such Remedial Work within the above-specified time periods if
(x) prevented from doing so by any Governmental Authority, (y)
commencing such Remedial Work within such time periods would result in
such Borrower or such Remedial Work violating any Environmental Law or
(z) such Borrower is contesting in good faith and by appropriate
proceedings the applicability of the relevant Environmental Laws;
provided that such contest shall not (i) create or materially increase
the risk of any civil or criminal liability of any kind whatsoever on
the part of Lender or (ii) permit or materially increase the risk of
the spread, release or suspected release of any Hazardous Substance
into the air, soil, ground water, surface water, or soil vapor on,
under or emanating from such Project or any portion thereof during the
pendency of such contest.
9.3.2 Contractors; Reimbursement of Lender's Costs and Expenses. All Remedial
Work shall be performed by contractors, and under the supervision of a
consulting engineer, each approved in advance by Lender (which approval
shall not be unreasonably withheld or delayed). All costs and expenses
reasonably incurred in connection with such Remedial Work and Lender's
reasonable monitoring or review of such Remedial Work (including
reasonable attorneys' fees and disbursements, but excluding internal
overhead, administrative and similar costs of Lender) shall be paid by
the applicable Borrower. If such Borrower does not timely commence and
diligently prosecute to completion the Remedial Work, then Lender may
(but shall not be obligated to) cause such Remedial Work to be
performed. Such Borrower agrees to bear and shall pay or reimburse
Lender on demand for all Advances and expenses (including reasonable
attorneys' fees and disbursements, but excluding internal overhead,
administrative and similar costs of Lender) reasonably relating to or
incurred by Lender in connection with monitoring, reviewing or
performing any such Remedial Work.
<PAGE>
9.3.3 No Impairment of Lender's Security. Except with Lender's prior written
consent, no Borrower shall commence any Remedial Work or enter into any
settlement agreement, consent decree or other compromise relating to
any Hazardous Substances or Environmental Laws which might, in Lender's
sole judgment, impair the value of Lender's security hereunder to a
material degree. Lender's prior written consent shall not be required,
however, if the presence or threatened presence of Hazardous Substances
on, under or about a Project poses an immediate threat to the health,
safety or welfare of any person or is of such a nature that an
immediate remedial response is necessary, or if Lender fails to respond
to any notification by a Borrower hereunder within twenty (20) Business
Days from the date of such notification. In such events, such Borrower
shall notify Lender as soon as practicable of any action taken.
9.4 Inspection.
9.4.1 Lender's Right to Inspect. Upon reasonable prior notice, Lender and its
agents, representatives and employees shall have the right at all
reasonable times and during normal business hours, except to the extent
such access is limited by applicable Law, to enter upon and inspect all
or any portion of any Project, provided that such inspections shall not
unreasonably interfere with the operation thereof. At its sole expense,
except as provided in Section 9.4.2. hereof, (y) Lender may retain an
environmental consultant to conduct and prepare reports of such
inspections and (z) the applicable Borrower shall be given a reasonable
opportunity to review any and all reports, data and other documents or
materials reviewed or prepared by the consultant, and to submit
comments and suggested revisions or rebuttals to same. The inspection
rights granted to Lender in this Section 9.4 shall be in addition to,
and not in limitation of, any other inspection rights granted to Lender
in this Agreement, and shall expressly include the right to conduct
soil borings and other customary environmental tests, assessments and
audits in compliance with applicable Legal Requirements: provided,
that, except as set forth in clause (ii) below, Lender shall repair any
damage caused by borings, tests, assessments or audits.
9.4.2 Reimbursement of Lender's Costs and Expenses. Each Borrower agrees to
bear and shall pay or reimburse Lender on demand for all costs and
expenses (including reasonable attorneys' fees and disbursements, but
excluding internal overhead, administrative and similar costs of
Lender) reasonably relating to or incurred by Lender in connection with
the inspections, tests and reports described in this Section 9.4 in the
following situations:
(a) If Lender has reasonable grounds to believe at the time any such
inspection is ordered, that there exists a violation of any
Environmental Law or that a Hazardous Substance is present on,
under or emanating from the Real Property, or is migrating to or
from adjoining property, except under conditions permitted by
applicable Environmental Laws and not prohibited by any Loan
Document;
(b) If any such inspection reveals a violation of any Environmental
Law or that a Hazardous Substance is present on, under or
emanating to or from a Project or is migrating from adjoining
property, except under conditions permitted by applicable
Environmental Laws and not prohibited by any Loan Document; or
(c) If an Event of Default exists at the time any such inspection is
ordered.
9.5 Notices. To the extent that a Borrower has knowledge thereof, such
Borrower shall promptly provide notice to Lender of:
(a) any proceeding or investigation commenced or threatened by any
Governmental Authority with respect to the presence of any
Hazardous Substance on, under or emanating from a Project;
(b) any proceedings or investigation commenced or threatened by any
Governmental Authority, against such Borrower, with respect to the
presence, suspected presence, release or threatened release of
Hazardous Substances from any property not owned by such Borrower,
including, but not limited to, proceedings under the Federal
Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9601 et seq.;
<PAGE>
(c) all claims made or any lawsuit or other legal action or proceeding
against (i)such Borrower or such Project or any portion thereof,
or (ii) any other party occupying such Project or any portion
thereof, in any such case relating to any loss or injury allegedly
resulting from any Hazardous Substance or relating to any
violation or alleged violation of Environmental Law;
(d) the discovery of any occurrence or condition on such Project or on
any real property adjoining or in the vicinity of such Project, of
which the applicable Borrower becomes aware, which reasonably
could be expected to lead to such Project or any portion thereof
being in violation of any Environmental Law or subject to any
restriction on ownership, occupancy, transferability or use under
any Environmental Law; and
(e) the commencement and completion of any Remedial Work.
9.6 Copies of Notices. Each Borrower will transmit to Lender copies of any
citations, orders, notices or other communications received by such
Borrower with respect to the notices described in Section 9.5 hereof.
9.7 Environmental Claims. Lender may join and participate in, as a party if
Lender so determines, any legal or administrative proceeding or action
concerning a Project or any portion thereof under any Environmental
Law, if, in Lender's reasonable judgment, the interests of Lender will
not be adequately protected by Borrowers. Borrowers agree to bear and
shall pay or reimburse Lender on demand for all costs and expenses
(including reasonable attorneys' fees and disbursements, but excluding
internal overhead, administrative and similar costs of Lender) relating
to or incurred by Lender in connection with any such action or
proceeding.
9.8 Indemnification. Each Borrower agrees to indemnify, reimburse, defend
(with counsel reasonably approved by Lender), and hold harmless the
Indemnified Parties for, from, and against all demands, claims, actions
or causes of action, assessments, losses, damages, liabilities, costs
and expenses, including, without limitation, interest, penalties,
punitive and consequential damages, reasonable attorneys' fees,
disbursements and expenses, and reasonable consultants' fees,
disbursements and expenses asserted against, resulting to, imposed on,
or incurred by the Indemnified Parties, directly or indirectly, in
connection with any of the following:
(a) the events, circumstances, or conditions which are alleged to, or
do, (i) relate to the presence, or release into the environment,
of any Hazardous Substance at any location owned, leased or
operated by any Borrower or relate to circumstances forming the
basis of any violation, or alleged violation, of any Environmental
Law by a Borrower or with respect to any such locations, and in
either case, result in Environmental Claims, or (ii) constitute a
violation of any Environmental Law;
(b) any pollution or threat to human health or the environment that is
related in any way to a Borrower's or any previous owner's or
operator's management, use, control, ownership or operation of a
Project, including, without limitation, all onsite and offsite
activities involving Hazardous Substances, and whether occurring,
existing or arising prior to or from and after the date hereof,
and whether or not the pollution or threat to human health or the
environment is described in the Environmental Report;
(c) any Remedial Work under Section 9.3 hereof, required to be
performed pursuant to any Environmental Law of the terms hereof;
or
<PAGE>
(e) the breach of any environmental representation, warranty or
covenant set forth in this Agreement;
except to the extent any of the foregoing result solely from
the negligence or willful misconduct of the Indemnified Parties.
The indemnity provided in this Section 9.8 shall not be included
in any exculpation of Borrowers from personal liability provided
in this Agreement or in any of the other Loan Documents and shall
survive the repayment in full of the Loan, any foreclosure of any
Project and the satisfaction and release of the Deed of Trust or
Mortgage or reconveyance. Nothing in this Section 9.8 shall be
deemed to deprive Lender of any rights or remedies provided to it
elsewhere in this Agreement or the other Loan Documents.
Notwithstanding anything to the contrary set forth herein, if
title to a Project is transferred to Lender or its nominee
pursuant to a foreclosure, then (i) in the event that Lender's
willful misconduct or gross negligence with respect to Hazardous
Substances existing on, at or under such Project prior to such
transfer of title causes additional liability with respect to such
Hazardous Substance, such Borrower shall have no obligation to
indemnify the Lender Parties for the cost, if any, of such
additional liability, and (ii) such Borrower shall have no
obligation to indemnify the Indemnified Parties for liability
arising from Hazardous Substances placed, released or disposed on,
at or under such Project after the date of such transfer of title
solely through the willful misconduct or negligence of Lender.
10. GENERAL PROVISIONS.
10.1 Captions. The captions and headings of various Articles and Sections of
this Agreement and Exhibits pertaining hereto are for convenience only
and are not to be considered as defining or limiting in any way, the
scope or intent of the provisions hereof.
10.2 Merger. This Agreement and the Loan Documents and instruments delivered
in connection herewith, as may be amended from time to time in writing,
constitute the entire agreement of the parties with respect to the
Projects and the Loans, and all prior discussions, negotiations and
document drafts are merged herein and therein. If there are any
inconsistencies between this Agreement and any other Loan Document, the
terms contained in this Agreement shall prevail. Neither Lender nor any
employee of Lender has made or is authorized to make any representation
or agreement upon which Borrowers may rely unless such matter is made
for the benefit of Borrowers and is in writing signed by an authorized
officer of Lender. Borrowers agree that they have not and will not rely
on any custom or practice of Lender, or on any course of dealing with
Lender, in connection with the Loans unless such matters are set forth
in this Agreement or the Loan Documents or in an instrument made for
the benefit of Borrowers and in a writing signed by an authorized
officer of Lender.
10.3 Notices. Any notice, demand, request or other communication which any
party hereto may be required or may desire to give hereunder shall be
in writing, addressed as follows and shall be deemed to have been
properly given if hand delivered, if sent by reputable overnight
courier (effective the business day following delivery to such
courier), by telecopier (provided electronic confirmation is received)
(provided delivery shall be effective only on the next business day
following electronic receipt) or by messenger:
If to Borrowers:
c/o On Stage Entertainment, Inc.
4620 W. Nevso
Las Vegas, Nevada 89103
with a copy to:
Morgan, Lewis & Bockius LLP
2500 One Logan Square
Philadelphia, PA 19103-6993
Attention: James W. McKenzie, Jr.
Facsimile (215) 963-5299
If to Lender:
Imperial Credit Commercial Mortgage Investment Corp.
11601 Wilshire Boulevard, Suite 2080
Los Angeles, California 90025
Attn: Norbert Seifert
Telephone (310) 231-1280
Facsimile (310) 231-1281
<PAGE>
with a copy to:
Sonnenschein Nath & Rosenthal
601 South Figueroa Street, Suite 1500
Los Angeles, California 90017-5704
Attn: Matthew C. Fragner
Telephone (213) 623-9300
Facsimile (213) 623-9924
or at such other address as the party to be served with notice may have
furnished in writing to the party seeking or desiring to serve notice
as a place for the service of notice. Notices given in any other
fashion shall be deemed effective only upon receipt.
10.4 Modification; Waiver. No modification, waiver, amendment, discharge or
change of this Agreement shall be valid unless the same is in writing
and signed by the party against which the enforcement of such
modification, waiver, amendment, discharge or change is sought.
10.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER
THE INTERNAL LAWS (AS OPPOSED TO THE LAWS OF CONFLICTS) OF THE STATE OF
FLORIDA.
10.6 Acquiescence Not to Constitute Waiver of Lender's Requirements. Each
and every covenant and condition for the benefit of Lender contained in
this Agreement may be waived by Lender.
10.7 Disclaimer by Lender.
(a) This Agreement is made for the sole benefit of Borrowers and
Lender (and Lender's successors, assigns and participants, if
any), and no other Person shall have any benefits, rights or
remedies under or by reason of this Agreement, or by reason of any
actions taken by Lender pursuant to this Agreement. Lender shall
not be liable for any debts or claims accruing in favor of any
third parties against Borrowers or others or against any Project.
Borrowers are not and shall not be an agent of Lender for any
purposes. Except as expressly set forth in the Loan Documents,
Lender is not and shall not be an agent of any Borrower for any
purposes. Lender, by making the Loan or taking any action pursuant
to any of the Loan Documents, shall not be deemed a partner or a
joint venturer with any Borrower or fiduciary of any Borrower.
(b) Any review, investigation or inspection conducted by Lender, any
architectural or engineering consultants retained by Lender or any
agent or representative of Lender in order to verify independently
any Borrower's satisfaction of any conditions precedent to the
disbursement of the Loan, any Borrower's performance of any of the
covenants, agreements and obligations of any Borrower under this
Agreement, or the truth of any representations and warranties made
by any Borrower hereunder (regardless of whether or not the party
conducting such review, investigation or inspection should have
discovered that any of such conditions precedent were not
satisfied or that any such covenants, agreements or obligations
were not performed or that any such representations or warranties
were not true), shall not affect (or constitute a waiver by Lender
of) (i) any of any Borrower's representations and warranties under
this Agreement or Lender's reliance thereon, or (ii) Lender's
reliance upon any certifications required under this Agreement or
any other facts, information or reports furnished Lender by any
Borrower hereunder.
(c) By accepting or approving anything required to be observed,
performed, fulfilled or given to Lender pursuant to the Loan
Documents, including any certificate, statement of profit and loss
or other financial statement, survey, appraisal, lease or
insurance policy, Lender shall not be deemed to have warranted or
represented the sufficiency, legality, effectiveness or legal
effect of the same, or of any term provision or condition thereof,
and such acceptance or approval thereof shall not constitute a
warranty or representation to anyone with respect thereto by
Lender.
<PAGE>
10.8 Right of Lender to Make Advances to Cure Borrower's Defaults. If a
Borrower shall fail to perform in a timely fashion any of such
Borrower's covenants, agreements or obligations contained in this
Agreement or the Loan Documents, Lender may (but shall not be required
to) perform any of such covenants, agreements and obligations. Any
funds advanced by Lender in the exercise of its judgment that the same
are needed to protect its security for a Loan are deemed to be
obligatory advances hereunder and any amounts expended (whether by
disbursement of undisbursed Loan proceeds or otherwise) by Lender in so
doing, shall constitute additional indebtedness evidenced and secured
by the Notes, the Deed of Trust, the Mortgages and the other Loan
Documents.
10.9 Definitions Include Amendments. Definitions contained in this Agreement
which identify documents, including the Loan Documents, shall be deemed
to include all amendments and supplements to such documents from the
date hereof, and all future amendments and supplements thereto entered
into from time to time to satisfy the requirements of this Agreement or
otherwise with the consent of the Lender. Reference to this Agreement
contained in any of the foregoing documents shall be deemed to include
all amendments and supplements to this Agreement.
10.10 Time Is of the Essence. Time is hereby declared to be of the essence of
this Agreement and of every part hereof.
10.11 Execution in Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same agreement.
10.12 Waiver of Consequential Damages. In no event shall Lender be liable to
any Borrower for consequential damages, whatever the nature of a breach
by Lender of its obligations under this Loan Agreement, or any of the
Loan Documents, and each Borrower for itself and all Affiliated Parties
hereby waives all claims for consequential damages.
10.13 Claims Against Lender. Lender shall not be in default under this
Agreement, or under any other Loan Documents, unless a written notice
specifically setting forth the claim of a Borrower shall have been
given to Lender within 60 days after such Borrower first had knowledge
of the occurrence of the event which such Borrower alleges gave rise to
such claim and Lender does not remedy or cure the default, if any there
be, promptly thereafter. If it is determined in any proceedings that
Lender has improperly failed to grant its consent or approval, where
such consent or approval is required by this Loan Agreement or any
other Loan Documents, such Borrower's sole remedy shall be to obtain
declaratory relief determining such withholding to have been improper,
and for itself and all Affiliated Parties each Borrower hereby waives
all claims for damages or set-off against Lender resulting from any
withholding of consent or approval by Lender.
<PAGE>
10.14 Secondary Sales. Each Borrower acknowledges that Lender and its
successors and assigns may (i) sell this Loan Agreement, the Deed of
Trust, the Mortgages, the Notes and other Loan Documents to one or more
investors as a whole loan, (ii) participate one or more Loans to one or
more investors, (iii) deposit this Loan Agreement, the Deed of Trust,
the Mortgages, the Notes and other Loan Documents with a trust, which
trust may sell certificates to investors evidencing an ownership
interest in the trust assets, or (iv) otherwise sell one or more of the
Loans or interest therein to investors (the transactions referred to in
clauses (i) through (iv) are hereinafter each referred to as "Secondary
Market Transaction"). Each Borrower shall cooperate with Lender in
effecting any such Secondary Market Transaction and shall cooperate to
implement all requirements imposed by any Rating Agency involved in any
Secondary Market Transaction. Each Borrower shall provide such
information, legal opinions and documents relating to such Borrower,
the applicable Project and any tenants of the Improvements as Lender
may reasonably request in connection with such Secondary Market
Transaction. In addition, each Borrower shall make available to Lender
all information concerning its business and operations that Lender may
reasonably request. Lender shall be permitted to share all such
information with the investment banking firms, Rating Agencies,
accounting firms, law firms and other third-party advisory firms
involved with the Loan and the Loan Documents or the applicable
Secondary Market Transaction. It is understood that the information
provided by Borrowers to Lender may ultimately be incorporated into the
offering documents for the Secondary Market Transaction and thus
various investors may also see some or all of the information. Lender
and all of the aforesaid third-party advisors and professional firms
shall be entitled to rely on the information supplied by, or on behalf
of, each Borrower and each Borrower indemnifies Lender as to any
losses, claims, damages or liabilities that arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in such information or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated in such information or necessary in order to make
the statements in such information, or in light of the circumstances
under which they were made, not misleading. Lender may publicize the
existence of the Loans in connection with its marketing for a Secondary
Market Transaction or otherwise as part of its business development.
10.15 Jurisdiction and Venue. With respect to any suit, action or proceedings
relating to this agreement, any Project, or any of the Loan Documents
("Proceedings") each party irrevocably (i) submits to the non-exclusive
jurisdiction of the state and federal courts located in the State where
such Project is located, and (ii) waives any objection which it may
have at any time to the laying of venue of any proceedings brought in
any such court, waives any claim that such Proceedings have been
brought in an inconvenient forum and further waives the right to
object, with respect to such Proceedings, that such court does not have
jurisdiction over such party. Nothing in this agreement shall preclude
either party from bringing Proceedings in any other jurisdiction nor
will the bringing of Proceedings in any one or more jurisdictions
preclude the bringing of Proceedings in any other jurisdiction.
10.16 Severability. The parties hereto intend and believe that each provision
in this Agreement comports with all applicable local, state and federal
laws and judicial decisions. However, if any provision or provisions,
or if any portion of any provision or provisions, in this Agreement is
found by a court of law to be in violation of any applicable local,
state, or federal law, statute, ordinance, administrative or judicial
decision, or public policy, and if such courts declare such portion,
provision, or provisions of this Agreement to be illegal, invalid,
unlawful, void or unenforceable as written, then it is the intent of
all parties hereto that such portion, provision, or provisions shall be
given force to the fullest possible extent that they are legal, valid
and enforceable, and that the remainder of this Agreement shall be
construed as if such illegal, invalid, unlawful, void, or unenforceable
portion, provision, or provisions were not contained therein, and that
the rights, obligations, and interests of Borrower and Lender under the
remainder of this Agreement shall continue in full force and effect.
10.17 Incorporation of Recitals. The Recitals set forth herein and the
Exhibits attached hereto are incorporated herein and expressly made a
part hereof.
10.18 WAIVER OF JURY TRIAL. BORROWERS AND LENDER EACH HEREBY WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR RELATING
THERETO OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT
OF THIS AGREEMENT AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
<PAGE>
11. ADDITIONAL LOANS. Upon fulfillment of each and every precondition set
forth below, Lender shall make one or more additional loans (each, an
"Additional Loan") in the aggregate amount of not less than $1,000,000
and not more than $7,500,000.
11.1 Preconditions. Prior to making any Additional Loan, the following
preconditions must be fulfilled to Lender's satisfaction:
(a) Each borrower for an Additional Loan (each, an "Additional Loan
Borrower") shall be a newly formed Nevada corporation, wholly
owned by On Stage Theaters, Inc., and otherwise meeting Lender's
requirements as to capital structure.
(b) The proceeds of the Additional Loans shall be used solely for the
payment of the purchase price for the acquisition of additional
projects (including a fee or leasehold estate in the related real
estate) to be used for on-stage live production entertainment.
Each such project shall be leased to On Stage Theaters, Inc.
pursuant to an On Stage Lease providing triple net rent equal to
at least 150% of the debt service for the relevant applicable
Additional Loan and subject to a lease guarantee executed by OSE
in form acceptable to Lender. Borrowers have previously identified
the acquisition of the assets of Calvin Gilmore Productions, Inc.,
a Delaware corporation, as a prospective project which would serve
as security for the Additional Loans. Lender's obligation to make
any Additional Loans is subject to Lender's being satisfied that
the value (net of liabilities) of the real estate components that
are a part of each such Additional Loan project shall be in excess
of 166.7% for the first $4,000,000 of Additional Loans, thereafter
133.3% (both exclusive of any going concern value or good will) of
the amount of the Additional Loan.
(c) The Additional Loans shall be funded on or before March 31, 1999,
and if such funding does not occur for any reason other than
Lender's breach of its obligations under this Section 11, then
Lender's obligation to make any or all of the Additional Loans
shall expire March 31, 1999 and be of no further force or effect.
(d) Each Additional Loan Borrower shall execute loan documents in
substantially the same form as the Loan Documents required for the
Loans, subject to such changes as shall be required by Lender's
counsel. Such Loan Documents shall include repayment guarantees by
each Additional Loan Borrower of the other Additional Loans and
the Loans. In addition, each Borrower and OSE shall be required to
execute an additional or restated Guarantee guaranteeing the
repayment of the Additional Loans, and each such modified or
restated Guarantee (other than OSE's Guarantee) shall be secured
by the Deed of Trust or Mortgage encumbering each Borrower's
Project or, as applicable, each Additional Loan Borrower's
project.
(e) All aspects of the Additional Loan projects shall meet Lender's
reasonable requirements, including without limitation requirements
as to permitted exceptions to clean title, title insurance and
endorsements, zoning, completeness of associated personal
property, building permit and other entitlements, structural
integrity, surveys, and similar due diligence items, and all
aspects of the Additional Loan project shall be satisfactory to
Lender in its reasonable judgment (including operating history,
management team, actual prior and projected EBITDA, and other
factors).
(f) Each Additional Loan Borrower shall be required to make each and
every one of the representations, warranties and covenants
contained in this Agreement (which shall be expanded to include
the Additional Loan Borrower's project), either by becoming a
party hereto or by executing an additional loan agreement, as
required by Lender.
(g) No Event of Default shall have occurred and be continuing past any
express cure period.
(h) Borrowers shall have paid all of Lender's costs and expenses
related to each proposed Additional Loan within 10 days after
request therefor.
(i) There shall have been no material adverse change in the financial
condition of OSE.
11.2 Minimum Additional Loan. No Additional Loan shall be for an original
principal balance of less than $1,000,000.
<PAGE>
IN WITNESS WHEREOF, Borrowers and Lender have executed this Agreement as of the
day and year first set forth above.
BORROWERS:
WILD BILLS CALIFORNIA, INC.,
a Nevada corporation
By:_______________________________
Name:_____________________________
Title:_____________________________
KING HENRY'S, INC.
a Nevada corporation
By:_______________________________
Name:_____________________________
Title:_____________________________
FORT LIBERTY, INC.
a Nevada corporation
By:_______________________________
Name:_____________________________
Title:_____________________________
LENDER:
IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT
CORP., a Maryland corporation
By:_______________________________
Name:_____________________________
Title:_____________________________
<PAGE>
EXHIBIT A-1
LEGAL DESCRIPTION
King Henry's Real Property
<PAGE>
EXHIBIT A-2
LEGAL DESCRIPTION
Wild Bills Real Property
<PAGE>
EXHIBIT A-3
LEGAL DESCRIPTION
Fort Liberty Real Property
<PAGE>
EXHIBIT B
PERMITTED EXCEPTIONS
<PAGE>
EXHIBIT C
SOURCES AND USES OF FUNDS
<TABLE>
<S> <C>
SOURCES OF FUNDS
Loan Proceeds from Borrower ....................................... $12,500,000
Borrower's Funds .................................................. 212,500
TOTAL SOURCES OF FUNDS ................................... $12,712,350
USES OF FUNDS
Cash Portion of Acquisition Price ................................. $10,250,000
Funds Being Deposited into Escrow per Section ___ of
the Asset Purchase Agreement ............................. 1,250,000
Financing Fees and Expenses:
Lender Out of Pocket Costs not previously paid by Borrower 50,000
Loan Origination and Arrangement Fees .................... 700,000
Borrower Legal ........................................... $ 50,000
-----------
Total Financing Fees and Expenses ................................. 800,000
Appraisal ......................................................... 45,000
Environmental ..................................................... 7,000
Structural ........................................................ 12,000
Document Stamps ................................................... 53,350
Title/Survey ...................................................... 45,000
Accounting & Legal Fees Associated w/Due Diligence ................ 250,000
-----------
Total transaction costs (other than financing fees and expenses: .. 412,350
Total Financing Fees and Expenses and Transaction Costs: .......... $ 1,212,350
TOTAL USES OF FUNDS ...................................... $12,712,350
</TABLE>
<PAGE>
EXHIBIT D
FORT LIBERTY LEASES
<PAGE>
Schedule 1
Non-Recurring Items For Periods Ended Prior to December 31, 1997
Items on balance sheet charged off
Pre-Opening costs-Miami ............................... $ 3,880
Pre-Opening costs-Branson ............................. 168,174
Pre-Opening costs-Toronto ............................. 76,181
Pre-Opening costs-Valley Forge ........................ 118
Pre-Opening costs-Cancun .............................. 2,297
Developmental ......................................... 71,760
Pre-Opening-Myrtle Beach .............................. 17,864
----------
Subtotal ........... $ 340,274
----------
Other Items
Direct operating expenses
physical inventory adjustments ............... $ 62,608
Indirect operating expenses
physical inventory adjustment ................ 9,391
Selling, general & administrative
adjustments .................................. 266,371
Discontinued operation-Daytona ........................ 1,925,711
CFO stock grant ....................................... 162,128
Principal stockholder debt foregiveness ............... 221,521
Interest expense-bridge loan underwriter .............. 444,000
Interest expense-debenture conversion ................. 194,228
----------
Subtotal ........... $3,285,958
----------
Total non recurring items ...................................... $3,626,232
==========
<PAGE>
Schedule 3.26
Deferred Maintenance at Fort Liberty to Be Completed By July 31, 1998
Repair the missing portion of the exterior wall of the in-line retail premises
closest to (but not a part of) the Wild Bills Theater/Retail Courtyard portion
of the property, and repair the roof and water damage to ceiling and interior
walls of that retail premises and adjacent premises.
Exhibit 10.2
GUARANTY
THIS GUARANTY ("Guaranty") is made as of March 11, 1998, by ON STAGE
ENTERTAINMENT, INC., a Nevada corporation ("Guarantor"), to and for the benefit
of IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP., a Maryland corporation
("Lender").
RECITALS
A. Lender has agreed to make the following loans (each, a "Loan" and
collectively, the "Loans") to the following borrowers ("Borrowers")
pursuant to a Loan Agreement (the "Loan Agreement") dated as of the date
hereof:
Borrower Loan Amount Property Address
-----------------------------------------------------------------------
King Henry's, Inc. $5,000,000 8984 International Drive
Orlando, Florida
Fort Liberty, Inc. $6,600,000 5260 West Irlo Branson
Kissimmee, Florida
Wild Bills California, Inc. $ 900,000 7600 Beach Boulevard
Buena Park, California
Each Loan is evidenced by a note (each, a "Note" and collectively the
"Notes") and secured by a mortgage or deed of trust (each a "Mortgage"
and collectively the "Mortgages") of even date herewith encumbering
certain real and other property owned by Borrowers in California and
Florida and described therein (each a "Property" and collectively the
"Properties"), and other security documents (the Loan Agreement, the
Notes, the Mortgages and any and all other documents or instruments
executed in connection with or as security for the Notes being sometimes
hereinafter collectively referred to as the "Loan Documents").
B. Guarantor is an affiliate of Borrowers, and will benefit from Lender
making the Loans described in the Loan Agreement.
C. Lender has relied on the statements and agreements contained herein in
agreeing to make the Loans. The execution and delivery of this Guaranty
by Guarantor is a condition precedent to the making of the Loans by
Lender.
AGREEMENTS
NOW, THEREFORE, intending to be legally bound and intending by this
Guaranty to induce Lender to make the Loans, Guarantor, in consideration
of the matters described in the foregoing Recitals, which Recitals are
incorporated herein and made a part hereof, and for other good and
valuable consideration, the receipt and sufficiency of which are
acknowledged, hereby covenants and agrees for the benefit of Lender and
its successors, indorsees, transferees, participants and assigns as
follows:
. Guarantor absolutely, unconditionally and irrevocably guarantees:
() the full and prompt payment of the principal of and interest on the
Loans when due, whether at stated maturity, upon acceleration or
otherwise, and at all times thereafter, and the full and prompt payment
of all sums which may now be or may hereafter become due and owing under
the Notes, the Loan Agreement and the other Loan Documents; and
() the full, complete and punctual observance, performance and
satisfaction of all of the obligations, duties, covenants and agreements
under the Loan Agreement and the other Loan Documents; and
() the full and prompt payment of any Enforcement Costs (as hereinafter
defined in Section 7 hereof).
<PAGE>
All amounts due, debts, liabilities and payment obligations described in
subsections (a), (b) and (c) of this Section 1 shall be hereinafter
collectively referred to as the "Indebtedness".
. In the event of any default by Borrowers in the payment of the
Indebtedness, after the expiration of any applicable cure or grace
period, Guarantor agrees, on demand by Lender or the holder of the Notes,
to pay the Indebtedness regardless of any defense, right of set-off or
claims which Borrowers or Guarantor may have against Lender or the holder
of the Notes.
All of the remedies set forth herein and/or provided for in any of the
Loan Documents or at law or equity shall be equally available to Lender,
and the choice by Lender of one such alternative over another shall not
be subject to question or challenge by Guarantor or any other person, nor
shall any such choice be asserted as a defense, setoff, or failure to
mitigate damages in any action, proceeding, or counteraction by Lender to
recover or seeking any other remedy under this Guaranty, nor shall such
choice preclude Lender from subsequently electing to exercise a different
remedy. The parties have agreed to the alternative remedies provided
herein in part because they recognize that the choice of remedies in the
event of a default hereunder will necessarily be and should properly be a
matter of good-faith business judgment, which the passage of time and
events may or may not prove to have been the best choice to maximize
recovery by Lender at the lowest cost to Borrowers and/or Guarantor. It
is the intention of the parties that such good-faith choice by Lender be
given conclusive effect regardless of such subsequent developments.
. Guarantor does hereby waive (a) notice of acceptance of this Guaranty
by Lender and any and all notices and demands of every kind which may be
required to be given by any statute, rule or law, (b) any defense, right
of set-off or other claim which Guarantor may have against Borrower or
which Guarantor or Borrowers may have against Lender or the holder of the
Note, (c) presentment for payment, demand for payment, notice of
nonpayment or dishonor, protest and notice of protest, diligence in
collection and any and all formalities which otherwise might be legally
required to charge Guarantor with liability, and (d) any failure by
Lender to inform Guarantor of any facts Lender may now or hereafter know
about Borrowers, the Properties, the Loans, or the transactions
contemplated by the Loan Agreement, it being understood and agreed that
Lender have no duty so to inform and that Guarantor is fully responsible
for being and remaining informed by Borrowers of all circumstances
bearing on the risk of nonpayment of the Indebtedness. Credit may be
granted or continued from time to time by Lender to Borrowers without
notice to or authorization from Guarantor, regardless of the financial or
other condition of Borrowers at the time of any such grant or
continuation. Lender shall have no obligation to disclose or discuss with
Guarantor its assessment of the financial condition of Borrowers.
Guarantor acknowledges that no representations of any kind whatsoever
have been made to him or it by Lender. No modification or waiver of any
of the provisions of this Guaranty shall be binding upon Lender except as
expressly set forth in a writing duly signed and delivered on behalf of
Lender.
<PAGE>
. Guarantor further agrees that Guarantor's liability as guarantor shall
in nowise be impaired or affected by any renewals or extensions which may
be made from time to time, with or without the knowledge or consent of
Guarantor of the time for payment of interest or principal under the
Notes or by any forbearance or delay in collecting interest or principal
under the Notes, or by any waiver by Lender under the Loan Agreement,
Mortgages or any other Loan Documents, or by Lender's failure or election
not to pursue any other remedies it may have against Borrowers or
Guarantor, or by any change or modification in the Notes, Loan Agreement,
Mortgages or any other Loan Document, or by the acceptance by Lender of
any additional security or any increase, substitution or change therein,
or by the release by Lender of any security or any withdrawal thereof or
decrease therein, or by the application of payments received from any
source to the payment of any obligation other than the Indebtedness, even
though Lender might lawfully have elected to apply such payments to any
part or all of the Indebtedness, it being the intent hereof that
Guarantor shall remain liable as principal for payment of the
Indebtedness until the Indebtedness has been paid in full,
notwithstanding any act or thing which might otherwise operate as a legal
or equitable discharge of a surety. Each Guarantor further understands
and agrees that Lender may at any time enter into agreements with
Borrowers to amend and modify the Notes, Loan Agreement, Mortgages or
other Loan Documents, and may waive or release any provision or
provisions of the Notes, Loan Agreement, Mortgages and other Loan
Documents or any thereof, and, with reference to such instruments, may
make and enter into any such agreement or agreements as Lender and
Borrowers may deem proper and desirable, without in any manner impairing
or affecting this Guaranty or any of Lender's rights hereunder or
Guarantor's obligations hereunder. Without limiting the generality of the
foregoing, (a) to the extent California law is deemed to apply to this
Guaranty notwithstanding the choice of Florida law provided in Section 17
hereof, Guarantor expressly waives any and all benefits, rights and
defenses (i) arising out of an election of remedies by Lender, even
though that election of remedies, such as nonjudicial foreclosure with
respect to security for the Indebtedness, has destroyed Guarantor's
rights of subrogation and reimbursement against Borrowers including by
the operation of Section 580d of the California Code of Civil Procedure
or otherwise, and (ii) under California Code of Civil Procedure Sections
580a, 580b, 580d or 726; and (b) Guarantor waives all rights and defenses
that Guarantor may have because the Borrowers' debt is secured by real
property, which means, among other things: (1) Lender may collect from
Guarantor without first foreclosing on any real or personal property
collateral pledged by Borrowers. (2) If Lender forecloses on any real
property collateral pledged by Borrowers: (A) The amount of the debt may
be reduced only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale
price. (B) Lender may collect from Guarantor even if Lender, by
foreclosing on the real property collateral, has destroyed any right
Guarantor may have to collect from Borrowers. This is an unconditional
and irrevocable waiver of any rights and defenses Guarantor may have
because Borrowers' debt is secured by real property. These rights and
defenses include, but are not limited to, to the extent held applicable
hereto, any rights or defenses based upon Section 580a, 580b, 580d, or
725 of the Code of Civil Procedure.
<PAGE>
. This is an absolute, present and continuing guaranty of payment and not
of collection. Guarantor agrees that this Guaranty may be enforced by
Lender without the necessity at any time of resorting to or exhausting
any other security or collateral given in connection herewith or with the
Notes, Loan Agreement, Mortgages or any of the other Loan Documents
through foreclosure or sale proceedings, as the case may be, under the
Mortgages or otherwise, or resorting to any other guaranties, and
Guarantor hereby waives any right to require Lender to join Borrowers in
any action brought hereunder or to commence any action against or obtain
any judgment against Borrowers or to pursue any other remedy or enforce
any other right. Guarantor further agrees that nothing contained herein
or otherwise shall prevent Lender from pursuing concurrently or
successively all rights and remedies available to it at law and/or in
equity or under the Notes, Loan Agreement, Mortgages or any other Loan
Documents, and the exercise of any of its rights or the completion of any
of its remedies shall not constitute a discharge of Guarantor's
obligations hereunder, it being the purpose and intent of Guarantor that
the obligations of Guarantor hereunder shall be absolute, independent and
unconditional under any and all circumstances whatsoever. None of
Guarantor's obligations under this Guaranty or any remedy for the
enforcement thereof shall be impaired, modified, changed or released in
any manner whatsoever by any impairment, modification, change, release or
limitation of the liability of Borrowers under the Notes, Loan Agreement,
Mortgages or other Loan Documents or by reason of the bankruptcy of
Borrowers or by reason of any creditor or bankruptcy proceeding
instituted by or against Borrowers. This Guaranty shall survive
foreclosure of the Mortgages until the Indebtedness is paid or satisfied
in full, and shall survive any deed in lieu of foreclosure. Subject to
the following sentence, this Guaranty shall terminate and be released
upon the payment in full of all sums due under the Notes, Loan Agreement
and the other Loan Documents (including, without limitation, all
Enforcement Costs) and Lender's release of the Mortgages. This Guaranty
shall continue to be effective or be reinstated (as the case may be) if
at any time payment of all or any part of any sum payable pursuant to the
Notes, Loan Agreement, Mortgages or any other Loan Document is rescinded
or otherwise required to be returned by Lender upon the insolvency,
bankruptcy, dissolution, liquidation, or reorganization of Borrowers, or
upon or as a result of the appointment of a receiver, intervenor,
custodian or conservator of or trustee or similar officer for, Borrowers
or any substantial part of their property, or otherwise, all as though
such payment to Lender had not been made, regardless of whether Lender
contested the order requiring the return of such payment. The obligations
of Guarantor pursuant to the preceding sentence shall survive any
termination, cancellation, or release of this Guaranty. In the event of
the foreclosure of the Mortgages and of a deficiency, Guarantor hereby
promises and agrees forthwith to pay the amount of such deficiency
notwithstanding the fact that recovery of said deficiency against
Borrowers would not be allowed by applicable law; however, the foregoing
shall not be deemed to require that Lender institute foreclosure
proceedings or otherwise resort to or exhaust any other collateral or
security prior to or concurrently with enforcing this Guaranty.
. In the event Lender or the holder of the Notes shall assign the Notes
to any bank or other entity (including a trust) to secure a loan from
such bank or other entity to Lender or such holder for an amount not in
excess of the amount which will be due, from time to time, from Borrowers
to Lender under the Notes with interest not in excess of the rate of
interest which is payable by Borrowers to Lender under the Notes,
Guarantor will accord full recognition thereto and agree that all rights
and remedies of Lender or such holder hereunder shall be enforceable
against Guarantor by such bank or other entity with the same force and
effect and to the same extent as would have been enforceable by Lender or
such holder but for such assignment; provided, however, that unless
Lender shall otherwise consent in writing, Lender shall have an
unimpaired right, prior and superior to that of its assignee or
transferee, to enforce this Guaranty for Lender's benefit to the extent
any portion of the Indebtedness or any interest therein is not assigned
or transferred.
. If: (a) this Guaranty is placed in the hands of an attorney for
collection or is collected through any legal proceeding; (b) an attorney
is retained to represent Lender in any bankruptcy, reorganization,
receivership, or other proceedings affecting creditors' rights and
involving a claim under this Guaranty; (c) an attorney is retained to
provide advice or other representation with respect to this Guaranty; or
(d) an attorney is retained to represent Lender in any other proceedings
whatsoever in connection with this Guaranty, then Guarantor shall pay to
Lender upon demand all attorneys' fees, costs and expenses, including,
without limitation, court costs, filing fees, recording costs, expenses
of foreclosure, title insurance premiums, survey costs, minutes of
foreclosure, and all other costs and expenses incurred in connection
therewith (all of which are referred to herein as "Enforcement Costs"),
in addition to all other amounts due hereunder, regardless of whether all
or a portion of such Enforcement Costs are incurred in a single
proceeding brought to enforce this Guaranty as well as the other Loan
Documents.
<PAGE>
. The parties hereto intend and believe that each provision in this
Guaranty comports with all applicable local, state and federal laws and
judicial decisions. However, if any provision or provisions, or if any
portion of any provision or provisions, in this Guaranty is found by a
court of law to be in violation of any applicable local, state or federal
ordinance, statute, law, administrative or judicial decision, or public
policy, and if such court should declare such portion, provision or
provisions of this Guaranty to be illegal, invalid, unlawful, void or
unenforceable as written, then it is the intent of all parties hereto
that such portion, provision or provisions shall be given force to the
fullest possible extent that they are legal, valid and enforceable, that
the remainder of this Guaranty shall be construed as if such illegal,
invalid, unlawful, void or unenforceable portion, provision or provisions
were not contained therein, and that the rights, obligations and interest
of Lender or the holder of the Notes under the remainder of this Guaranty
shall continue in full force and effect.
. Any indebtedness of Borrowers to Guarantor now or hereafter existing is
hereby subordinated to the Indebtedness. Guarantor agrees that, until the
entire Indebtedness has been paid in full, Guarantor will not seek,
accept, or retain for its own account, any payment from Borrowers on
account of such subordinated debt. Any payments to Guarantor on account
of such subordinated debt shall be collected and received by Guarantor in
trust for Lender and shall be paid over to Lender on account of the
Indebtedness without impairing or releasing the obligations of Guarantor
hereunder.
. Any amounts received by Lender from any source on account of the Loans
may be applied by Lender toward payment of the Indebtedness and in such
order of application as Lender may from time to time elect.
. GUARANTOR WAIVES AND RELEASES ANY CLAIM (WITHIN THE MEANING OF 11
U.S.C. ss. 101) WHICH GUARANTOR MAY HAVE AGAINST BORROWER ARISING FROM A
PAYMENT MADE BY GUARANTOR UNDER THIS GUARANTY AND AGREES NOT TO ASSERT OR
TAKE ADVANTAGE OF ANY RIGHT TO PROCEED AGAINST BORROWER FOR
REIMBURSEMENT. IT IS EXPRESSLY UNDERSTOOD THAT THE WAIVERS AND AGREEMENTS
OF GUARANTOR SET FORTH ABOVE CONSTITUTE ADDITIONAL AND CUMULATIVE
BENEFITS GIVEN TO LENDER FOR ITS SECURITY AND AS AN INDUCEMENT FOR ITS
EXTENSION OF CREDIT TO BORROWERS.
. Any notice, demand, request or other communication which any party
hereto may be required or may desire to give hereunder shall be in
writing and shall be deemed to have been properly given (a) if hand
delivered, when delivered; (b) if mailed, upon the third Business Day
after the day on which it is deposited in the United States Registered or
Certified Mail, postage prepaid, return receipt requested, addressed as
set forth below; (c) if by Federal Express or other reliable express
courier service, on the next Business Day after delivered to such express
courier service, or (d) if via facsimile, on the date of transmission, as
addressed as set forth below:
<PAGE>
If to Guarantor:
On Stage Entertainment, Inc.
4625 Nevso Drive, Suite 10
Las Vegas, Nevada 89103
Telephone: (702) 253-1333
Facsimile: (702) 364-1072
Attention: David Hope
With a copy to:
Morgan Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
Attention: James McKenzie
Telephone: (215) 963-5000
Facsimile: (215) 963-5299
If to Lender:
11601 Wilshire Blvd.
Suite 2080
Los Angeles, CA 90025
Attention: Norbert Seifert
Telephone: (310) 231-5902
Facsimile: (310) 231-1281
With a copy to:
SONNENSCHEIN NATH & ROSENTHAL
601 S. Figueroa St., #1500
Los Angeles, CA 90017
Attention: Matthew C. Fragner
Telephone: (213) 892-5053
Facsimile: (213) 623-9924
or at such other address as the party to be served with notice may have
furnished in writing to the party seeking or desiring to serve notice as a place
for the service of notice.
. In order to induce Lender to make the Loans, Guarantor makes the
following representations and warranties to Lender set forth in this
Section. Guarantor acknowledges that but for the truth and accuracy of
the matters covered by the following representations and warranties,
Lender would not have agreed to make the Loans.
() Guarantor maintains an office at the address set forth for it in
Section 12.
() Guarantor has full power and authority to execute, deliver and perform
its covenants, agreements and obligations under this Guaranty. All
necessary actions have been taken and all necessary consents and
approvals received so that upon the execution and delivery to Lender by
Guarantor of this Guaranty, the execution, delivery and performance of
this Guaranty will have been duly authorized.
() Any and all balance sheets, net worth statements, and other financial
data with respect to Borrowers, Guarantor or Gedco USA, Inc., a Florida
Sub S corporation, and its affiliated entities which have heretofore been
given to Lender by or on behalf of Guarantor fairly and accurately
present the financial condition of Guarantor as of the respective dates
thereof.
() The execution, delivery, and performance by Guarantor of this Guaranty
does not and will not contravene or conflict with (i) any law, order,
rule, regulation, writ, injunction or decree now in effect of any
government, governmental instrumentality court having jurisdiction over
Guarantor, (ii) any contractual restriction binding on or affecting
Guarantor or any of Guarantor's property or assets which may adversely
affect Guarantor's ability to fulfill their obligations under this
Guaranty, or (iii) the instruments creating any trust holding title to
any assets included in Guarantor's financial statements.
<PAGE>
() This Guaranty creates legal, valid, and binding obligations of
Guarantor enforceable in accordance with its terms.
() Except as disclosed in writing to Lender, there is no action,
proceeding, or investigation pending or, to the knowledge of Guarantor,
threatened or affecting Guarantor, which may adversely affect
Guarantor's' ability to fulfill their obligations under this Guaranty.
There are no judgments or orders for the payment of money rendered
against Guarantor which have been undischarged for a period of ten (10)
or more consecutive days and the enforcement of which is not stayed by
reason of a pending appeal or otherwise. No Guarantor is in default under
any agreements which may adversely affect Guarantor's ability to fulfill
its obligations under this Guaranty.
() Guarantor has disclosed all events, conditions, and facts known to
Guarantor which are more likely than not to have a material adverse
effect on the financial condition of Guarantor. No representation or
warranty by Guarantor contained herein, nor any schedule, certificate, or
other document furnished by Guarantor to Lender in connection with this
Guaranty or the Loans contains any material misstatement of fact or omits
to state a material fact or any fact necessary to make the statements
contained therein not misleading.
() There are no facts or circumstances of any kind or nature of which
Guarantor is aware which are more likely than not to in any way impair or
prevent Guarantor from performing Guarantor's obligations under this
Guaranty in any material respect.
() All statements set forth in the Recitals are true and correct.
() All representations and warranties made by Borrowers in the Loan
Documents are true and correct.
Guarantor hereby agrees to indemnify and hold Lender free and harmless
from and against all loss, cost, liability, damage, and expense,
including attorney's fees and costs, which Lender may sustain by reason
of the inaccuracy or breach of any of the foregoing representations and
warranties as of the date the foregoing representations and warranties
are made.
. Guarantor shall deliver or cause to be delivered to Lender its
financial statements in the same form and manner as Borrowers are
required to provide under the Mortgages or Loan Agreement.
. Guarantor shall, within five (5) business days after receipt thereof,
deliver to Lender copies of any notices of default served on Guarantor
pursuant to the terms of any other material agreement to which Guarantor
is a party. . This Guaranty shall be binding upon the heirs, executors,
legal and personal representatives, successors and assigns of Guarantor
and shall not be discharged in whole or in part by the death or
dissolution of Guarantor.
. This Agreement and each of the provisions contained herein shall be
governed by and construed under the internal laws (as opposed to the laws
of conflicts) of the State of Florida.
. Any and all amounts required to be paid by Guarantor hereunder shall be
paid to Lender in United States currency at such place as Lender may,
from time to time, in writing appoint.
. Lender shall be entitled to honor any request for an advance of Loan
proceeds made by Borrowers and shall have no obligation to see to the
proper disposition of such advances. Guarantor agrees that its
obligations hereunder shall not be released or affected by reason of any
improper disposition by Borrowers of the proceeds of such advances.
. Any provision hereof to the contrary notwithstanding, Lender, by virtue
of this Guaranty or any action taken pursuant hereto or contemplated
hereby, shall not be deemed to be a partner or joint venturer with
Guarantor or any other parties. Guarantor shall indemnify and hold Lender
harmless from and against any and all liabilities, damages, claims,
demands, costs and expenses (including, without limitation, the costs and
expenses of defending or settling any such claims or demands and all
reasonable fees and disbursements of legal counsel engaged or employed by
Lender in defending and settling such claims or demands) resulting from
such a construction of the parties and their relationship. Any inspection
of the Properties, any review of documents submitted to Lender or its
consultants, or any analysis of the Properties made by Lender or any of
its respective agents, architects or consultants is intended solely for
the benefit of Lender and shall not be deemed to create or form the basis
of any warranty, representation, covenant, implied promise or liability
to Guarantor, or any contractor or subcontractor, or any other person or
entity.
<PAGE>
. GUARANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER
IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE
GUARANTY, THE LOANS, THE LOAN DOCUMENTS OR ANY ACTS OR OMISSIONS OF
LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION
THEREWITH.
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty as of the
date first written above.
GUARANTOR: ON STAGE ENTERTAINMENT, INC.,
a Nevada corporation
By:_________________________
Name:_______________________
Title:______________________
4625 W. Nevso Drive
Las Vegas, Nevada 89103
Signed and sealed and delivered in the presence of:
- ----------------------------------
Print Name:_______________________
- ----------------------------------
Print Name:_______________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1998 FORM 10-QSB OF ON STAGE ENTERTAINMENT AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,195
<SECURITIES> 0
<RECEIVABLES> 964
<ALLOWANCES> 0
<INVENTORY> 300
<CURRENT-ASSETS> 4,241
<PP&E> 20,807
<DEPRECIATION> 2,706
<TOTAL-ASSETS> 23,301
<CURRENT-LIABILITIES> 3,942
<BONDS> 13,312
0
0
<COMMON> 72
<OTHER-SE> 5,976
<TOTAL-LIABILITY-AND-EQUITY> 23,301
<SALES> 6,205
<TOTAL-REVENUES> 6,205
<CGS> 3,917
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,471
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> (527)
<INCOME-TAX> 1
<INCOME-CONTINUING> (528)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (528)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
