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 June 30, 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 June 30, 1998
- - ----------------------------- ----------------------------
Common Stock, $0.01 par value 7,397,350
<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. Legal Proceedings.....................................
Item 2. Changes in Securities.................................
Item 3. Defaults upon Senior Securities.......................
Item 4. Submission of Matters to a vote of Security Holders
Item 5. Other Information.....................................
Item 6. Exhibits and Reports on Form 8-K......................
Signatures............................................................
Exhibit Index.........................................................
<PAGE>
Item 1. Consolidated Financial Statements
On Stage Entertainment, Inc. and Subsidiaries
PART I. FINANCIAL INFORMATION
On Stage Entertainment, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
December 31, June 30,
1997 1998
----------------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents .......................... $ 2,323,559 $ 1,087,974
Accounts receivable, net ........................... 455,340 1,353,651
Inventory .......................................... 118,700 227,097
Deposits ........................................... 342,096 494,223
Prepaid and other assets ........................... 271,338 428,862
Pre-opening costs, net ............................. -- 1,256,382
Notes receivable from stockholder .................. 136,194 184,695
----------- -----------
Total current assets .......................... 3,647,227 5,032,884
----------- -----------
Property, equipment and leasehold
improvements (Note 5) ............................... 5,008,835 23,433,744
Less: Accumulated depreciation and amortization ........ (2,553,347) (2,852,505)
----------- -----------
Property, equipment and leasehold improvements, net ..... 2,455,488 20,581,239
----------- -----------
Cost in excess of net assets acquired, net of accumulated
Amortization of $7,370 and $12,429 ..................... 116,415 111,357
Direct acquisition costs ................................ 258,133 112,414
Deferred financing costs, net of amortization
of $14,583 (Note 5) .................................... -- 1,235,417
----------- -----------
$ 6,477,263 $ 27,073,311
=========== ===========
Liabilities and Stockholder's Equity
Current liabilities
Accounts payable and accured expenses .............. $ 880,286 $ 2,238,788
Accrued payroll and other liabilities .............. 698,499 1,506,562
Current maturities of long-term debt ............... 271,918 1,399,155
----------- -----------
Total current liabilities ..................... 1,850,703 5,144,505
----------- -----------
Long-term debt, less current maturities (Note 5) ........ 550,332 14,671,232
----------- -----------
Total liabilities ............................. 2,401,035 19,815,737
----------- -----------
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
7,397,350 shares issued and outstanding .......... 65,955 73,973
Additional paid-in capital ......................... 7,340,013 11,055,155
Accumulated deficit ................................ (3,329,740) (3,871,554)
----------- -----------
Total stockholder's equity .................... 4,076,228 7,257,574
----------- -----------
$ 6,477,263 $ 27,073,311
=========== ===========
</TABLE>
<PAGE>
On Stage Entertainment, Inc. and Subsidiaries
Consolidated Statements of Operations
Three months ended
June 30,
---------------------------
1997 1998
(Unaudited) (Unaudited)
---------------------------
Net revenues (Note 5) ......................... $ 3,979,685 $ 8,244,581
Costs of revenues ............................. 2,569,863 6,466,463
----------- -----------
Gross profit .................................. 1,409,822 1,778,118
Selling, general & administrative ............. 877,171 1,076,753
Depreciation and amortization ................. 171,868 329,939
----------- -----------
Operating income .............................. 360,783 371,426
Interest expense, net ......................... 60,141 431,721
Other income .................................. -- (47,207)
----------- -----------
Net income (loss) before income taxes ......... 300,642 (13,088)
Income taxes .................................. -- --
----------- -----------
Net income (loss) ............................. $ 300,642 $ (13,088)
============ ===========
Basic income (loss) per share ................. $ 0.06 $ (0.00)
============ ===========
Diluted net income (loss) per share ........... $ 0.06 $ (0.00)
============ ===========
Basic average of common shares outstanding .... 4,683,331 7,193,008
============ ===========
Diluted average number of common shares
outstanding ................................... 4,763,214 7,193,008
============ ===========
<PAGE>
On Stage Entertainment, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
Six months ended
June 30,
----------------------------
1997 1998
(Unaudited) (Unaudited)
----------------------------
<S> <C> <C>
Net revenues (Note 5) .............................. $ 6,698,462 $ 14,449,952
Costs of revenues .................................. 4,472,751 10,921,686
----------- -----------
Gross profit ....................................... 2,225,711 3,528,266
Selling, general & administrative .................. 1,947,003 2,821,074
Depreciation and amortization ...................... 319,109 518,560
----------- -----------
Operating income (loss) ............................ (40,401) 188,632
Interest expense, net .............................. 174,010 445,481
Other income ....................................... -- (82,806)
Subsidiary operations for period not owned (Note 5) -- 366,516
----------- -----------
Net (loss) before income taxes ..................... (214,411) (540,559)
Income taxes ....................................... 2,319 1,255
----------- -----------
Net loss ........................................... $ (216,730) $ (541,814)
=========== ===========
Basic loss per share ............................... $ (0.05) $ (0.08)
============ ===========
Diluted net loss per share ......................... $ (0.05) $ (0.08)
============ ===========
Basic average of common shares outstanding ......... 4,585,467 6,883,421
============ ===========
Diluted average number of common shares
outstanding ........................................ 4,585,467 6,883,421
============ ===========
</TABLE>
<PAGE>
On Stage Entertainment, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
Six months ended
June 30,
-----------------------------
1997 1998
(Unaudited) (Unaudited)
-----------------------------
<S> <C> <C>
Cash flows from operating activities
Net loss ..................................................................... $ (216,730) $ (541,814)
------------ ------------
Adjustments to reconcile net loss to net cash used in operating activites:
Issuance of common stock to officer ........................................ 162,129 --
Depreciation and amortization .............................................. 319,109 318,799
Increase (decrease) from changes in operating assets and liabilities
Account receivable ..................................................... 89,670 (898,311)
Inventory .............................................................. (11,221) 11,687
Deposits ............................................................... (205,923) (152,127)
Pre-opening costs ...................................................... (454,245) (1,256,382)
Prepaid and other assets ............................................... (393,082) (8)
Accounts payable and accrued expenses .................................. 548,961 297,458
Accrued payroll and other liabilities................................... (166,140) 808,063
Litigation settlement accrual .......................................... (100,000) --
------------ ------------
Total adjustments ......................................................... (210,742) (870,821)
------------ ------------
Net cash used in operating activities (427,472) (1,412,635)
------------ ------------
Cash flows from investing activities
Advances on note receivable from stockholder............................ (183,046) (81,127)
Payments received on notes receivable from stockholder.................. -- 32,626
Capital expenditures ................................................... (653,448) (167,920)
Direct acquisition costs ............................................... -- 829,665
Payment for acquisitions, less cash received ........................... -- (14,602,005)
------------ ------------
Net cash used in investing activities .......................................... (836,494) (13,988,761)
------------ ------------
Cash used in financing activities
Offering costs ............................................................ (449,332) --
Borrowings/repayments under line of credit ................................ 627,391 1,000,000
Proceeds from long-term borrowing (Note 5) ................................ -- 13,727,237
Repayment on long-term borrowing .......................................... -- (561,426)
Proceeds from bridge notes ................................................ 875,000 --
------------ ------------
Net cash provided by financing activities ...................................... 1,053,059 14,165,811
------------ ------------
Net decrease in cash and cash equivalents ...................................... (210,907) (1,235,585)
Cash and cash equivalents at beginning of period ............................... 290,751 2,323,559
------------ ------------
Cash and cash equivalents at end of period ..................................... $ 79,844 $ 1,087,974
============ ===========
Supplemental disclosure of cash flow information Cash paid during the period
for:
Interest .................................................................. $ 177,008 $ 507,762
Taxes ..................................................................... $ 2,319 $ 1,255
============ ============
</TABLE>
Supplemental schedule of non-cash investing and financing activities
During the six months ended June 30, 1997 and 1998, $531,319 and $1,082,326 of
lease assets and other obligations, principally pre-opening costs, were
capitalized, respectively.
In connection with mortgage financing related to the Gedco Acquisition (as
defined in Note 5 of Part I), the Company issued 575,000 warrants to purchase
the Company's common stock to the lender and an affiliate of the lender which
was valued at $500,000 and accounted for as an original issued discount.
<PAGE>
ON STAGE ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1998
(1) Basis of Presentation
The financial statements included herein include the accounts of On Stage
Entertainment, Inc. a publicly traded Nevada corporation (the "Company" or
"OSE") and its subsidiaries, Legends in Concert, Inc., a Nevada corporation
("LIC"); On Stage Marketing Inc., a Nevada corporation ("Marketing"); On Stage
Theaters, Inc., a Nevada corporation ("Theaters"); Wild Bill's California, Inc.,
a Nevada corporation ("Wild Bills"); Fort Liberty, Inc., a Nevada corporation
("Ft. Liberty"); Blazing Pianos, Inc., a Nevada corporation ("Blazing"); King
Henry's Inc., a Nevada corporation ("King Henry's"); On Stage Merchandise, Inc.,
a Nevada corporation ("Merchandise'); On Stage Events, Inc., a Nevada
corporation ("Events"); On Stage Casino Entertainment, Inc., a Nevada
corporation ("Casino"); On Stage Entertainment Productions, Inc., a Nevada
coporation ("Productions"); On Stage Entertainment Theaters North Myrtle Beach,
Inc., a Nevada corporation ("North Myrtle"); On Stage Theaters Surfside Beach,
Inc., a Nevada corporation ("Surfside'); 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 six months ended June 30, 1998, are
not necessarily indicative of those expected for the full year. Certain prior
period amounts have been adjusted and reclassified to conform to this period
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. 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 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 June 30, 1998, the Company had advanced Mr. Stuart an
aggregate of $136,194 (the "Advance"), which Advance beared interest at a rate
of 6% per annum, matured one year from the date of the Advance and was evidenced
by a promissory note. On July 6, 1998 Mr. Stuart paid off the Advance in full.
<PAGE>
(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.
For the six months ended June 30, 1997, potential dilutive securities
representing 441,353 outstanding options and 440,755 outstanding warrants are
not included, since their effect would be anti-dilutive. For the six months
ended June 30, 1998, potential dilutive securities representing 773,853
outstanding stock options and 4,480,956 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 Acquisition").
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 Theater
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.
<PAGE>
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 559,238 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
===========
Cash paid for the purchase pf Gedco, USA,
net of cash received is as follows:
Cash paid to sellers....................................... $11,500,000
Acquisition costs.......................................... 1,645,874
-----------
13,145,874
Less cash received (343,444)
-----------
$12,762,430
===========
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 costs of acquisition incurred primarily relates to the lenders
origination fee of $750,000, legal fees of $240,000, financing fees of $100,000,
recording fees of $100,000, and accounting fees of $125,000. The allocation of
the purchase price was as follows:
Cash........................................................... $ 383,444
Inventory...................................................... 120,084
Prepaid expenses............................................... 157,156
Land........................................................... 11,275,507
Building....................................................... 3,214,740
Equipment...................................................... 730,627
Deferred financing acquisition expenses........................ 750,000
-----------
$16,631,918
===========
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.
Calvin Gilmore Productions, Inc.
On June 30, 1998, the Company completed its acquisition of certain assets from
Calvin Gilmore Productions, Inc. ("CGP"), an affiliate of Fox Family Worldwide,
for a purchase price of $1,000,000 in cash and 206,612 shares of Common Stock
valued at $723,142 (the "Fox Acquisition").
Included in the Fox Acquisition were substantially all of CGP's income producing
assets and associated real and personal property in the greater Myrtle Beach,
South Carolina area, consisting of the fee simple purchase of The Surfside Beach
Theater, which the Company had leased from CGP for its presentation of its
flagship Legends in Concert production since 1995, and a leasehold interest in
The Eddie Miles Theater. In connection with the Fox Acquisition, Mel Woods, the
Chief Operating Officer of Fox Family Worldwide, was subsequently elected as a
member of the Company's Board of Directors, filling a vacancy created by the
resignation of Nelson Foster.
The Company funded the cash portion of the purchase price and transaction fees
and expenses with $1,100,000 million of mortgage financing from ICCMIC.
<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.
<PAGE>
Results of Operations
The following tables sets forth, the results of operations by Corporation for
the period indicated:
<TABLE>
Three months ended June 30, 1997
-----------------------------------------------------------------------------------------------------
Sub-Total
Operating Total
Casino Events Merchandising Production Theaters Corporations OSE Consolidated
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues .............. $ 1,875,170 $ 513,315 $ 86,534 $ -- $ 1,504,666 $ 3,979,685 $ 3,979,685
Cost of revenues .......... 1,098,242 312,038 25,517 30,450 1,103,616 2,569,863 2,569,863
----------- ---------- ---------- ---------- ----------- ----------- --------- ----------
Gross profit (loss) ....... 776,928 201,277 61,017 (30,450) 401,050 1,409,822 1,409,822
Selling, general &
Administrative ........ 88,532 154,162 -- 12,155 61,807 316,656 560,515 877,171
Depreciation & amortization 37,706 148 -- -- 8,842 46,696 125,172 171,868
----------- ---------- ---------- ---------- ----------- ----------- --------- ----------
Operating income (loss) ... 650,690 46,967 61,017 (42,605) 330,401 1,046,470 (685,687) 360,783
Interest expense, net ..... -- (101) -- -- -- (101) 60,242 60,141
----------- ---------- ---------- ---------- ----------- ----------- --------- ----------
Net income (loss) before
Income taxes .......... 650,690 47,068 61,017 (42,605) 330,401 1,046,571 (745,930) 300,642
Income taxes .......... -- -- -- -- -- -- -- --
----------- ---------- ---------- ---------- ----------- ----------- --------- ----------
Net income (loss) ........ $ 650,690 $ 47,068 $ 61,017 $ (42,605) $ 330,401 $ 1,046,571 $ (745,930) $ 300,642
=========== ========== =========== ========== ========== =========== =========== ==========
</TABLE>
<TABLE>
Three months ended June 30, 1998
-----------------------------------------------------------------------------------------------------
Sub-Total
Operating Total
Casino Events Merchandising Production Theaters Corporations OSE Consolidated
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues ................ $ 1,534,319 $ 869,964 $ 159,633 $ -- $ 5,680,665 $8,244,581 $8,244,581
Cost of revenues ............ 1,031,192 559,341 60,459 94,711 4,720,760 6,466,463 6,466,463
----------- ---------- ---------- ---------- ----------- ----------- --------- ---------
Gross profit (loss) ......... 503,127 310,623 99,174 (94,711) 959,905 1,778,118 1,778,118
Selling, general &
Administrative ........... 43,524 187,424 -- (34,696) 338,280 534,532 542,221 1,076,753
Depreciation & amortization . 43,265 11,633 1,684 59 183,043 239,684 90,255 329,939
----------- ---------- ---------- ---------- ----------- ----------- --------- ----------
Operating income (loss) .. 416,338 111,566 97,490 (60,074) 438,582 1,003,902 (632,476) 371,426
Interest expense, net .... -- -- -- -- 377,989 377,989 53,732 431,721
Other income ........ -- (13) -- -- (8,652) (8,665) (38,542) (47,207)
----------- ---------- ---------- --------- ----------- ----------- --------- ---------
Net income (loss) before
Income taxes ........ 416,338 111,579 97,490 (60,074) 69,245 634.578 (647,666) (13,088)
Income taxes ........... -- -- -- -- -- --
----------- ---------- ---------- ---------- ----------- --------- ---------- ----------
Net income (loss) ........ $ 416,338 $ 111,579 $ 97,490 $ (60,074) $ 69,245 $ 634,578 $ (647,666) $ (13,088)
============ ========== ========== ========== =========== ========= =========== ==========
</TABLE>
<PAGE>
Results of Operations
The following tables sets forth, the results of operations by
Corporation for the period indicated:
<TABLE>
Six months ended June 30, 1997
-----------------------------------------------------------------------------------------------------
Sub-Total
Operating Total
Casino Events Merchandising Production Theaters Corporations OSE Consolidated
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues ................ $ 3,332,216 $ 1,138,364 $ 153,911 -- $ 2,073,971 $ 6,698,462 -- $ 6,698,462
Cost of revenues ............ 1,985,687 762,472 39,978 60,137 1,624,477 4,472,751 -- 4,472,751
------------ ----------- ---------- ---------- ---------- ---------- ----------- ----------
Gross profit (loss) ......... 1,346,529 375,892 113,933 (60,137) 449,494 2,225,711 -- 2,225,711
Selling, general &
Administrative ........... 142,290 305,445 -- 36,029 98,855 582,619 1,364,384 1,947,003
Depreciation & amortization . 68,289 148 -- -- 13,964 82,400 236,708 319,109
----------- ---------- ---------- ---------- ----------- ----------- --------- ----------
Operating income (loss) ..... 1,135,950 70,299 113,933 (96,166) 336,675 1,560,691 (1,601,092) (40,401)
Interest expense, net ....... -- (246) -- -- -- (246) 174,256 174,010
----------- ---------- ---------- ---------- ----------- ----------- --------- ----------
Net income (loss) before
income taxes ........... 1,135,950 70,544 113,933 (96,166) 336,675 1,560,937 (1,775,348) (214,411)
Income taxes ............. -- 1,723 -- -- -- 1,723 596 2,319
----------- ---------- ---------- ---------- ----------- ----------- --------- ----------
Net income (loss) ...... $ 1,135,950 $ 68,821 $ 113,933 $ (96,166) $ 336,675 $ 1,559,214 $(1,775,944) $ (216,730)
=========== ========== ========== =========== ========== ========== =========== ===========
</TABLE>
<TABLE>
Six months ended June 30, 1998
-----------------------------------------------------------------------------------------------------
Sub-Total
Operating Total
Casino Events Merchandising Production Theaters Corporations OSE Consolidated
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues ................ $3,059,672 $1,409,762 $ 215,689 -- $9,764,829 $14,449,952 -- $ 14,449,952
Cost of revenues ............ 2,004,800 904,525 73,229 126,260 7,812,872 10,921,686 -- 10,921,686
----------- ---------- --------- ---------- ----------- ----------- ---------- ------------
Gross profit (loss) ........ 1,054,872 505,237 142,460 (126,260) 1,951,957 3,528,266 -- 3,528,266
Selling, general &
Administrative ........ 97,830 417,140 4,702 8,408 1,042,502 1,570,582 1,250,492 2,821,074
Depreciation & amortization . 81,667 14,381 2,244 59 254,894 353,245 165,315 518,560
----------- ---------- --------- ---------- ----------- ----------- ---------- ------------
Operating income (loss) .. 875,375 73,716 135,514 (134,727) 654,561 1,604,439 (1,415,807) 188,632
Interest expense, net .... (33) 384,784 384,784 60,697 445,481
Other income ........ (44,230) (44,263) (38,543) (82,806)
Subsidiary operations for
period not owned ...... 366,516 366,516 366,516
----------- ---------- --------- ---------- ----------- ----------- ---------- ------------
Net income (loss) before
Income taxes ........ 875,375 73,749 135,514 (134,727) (52,509) 897,402 (1,437,961) (540,559)
Income taxes .......... 1,255 1,255
----------- ---------- --------- ---------- ----------- ----------- ---------- ------------
Net income (loss) ........ $ 875,375 $ 73,749 $ 135,514 $ (134,727) $ (52,509) $ 897,402 $(1,439,216) $ (541,814)
=========== ========== ========== ========== ========== =========== =========== ============
</TABLE>
<PAGE>
Three Months Ended June 30, 1997 versus Three Months Ended June 30, 1998
Net Revenues. Revenues increased by 107.2% to $8,245,000 for the three months
ended June 30, 1998 compared to $3,980,000 for the three months ended June 30,
1997. The Company's revenue is derived from four principal operating
corporations: Theaters, Events, Merchandise and Casino.
Theaters revenues were approximately $5,680,000 for the three months ended June
30, 1998 compared to $1,505,000 for the three months ended June 30, 1997, an
increase of $4,175,000, or 277.4%. This increase in revenues was primarily
attributed to new show openings in Branson, Missouri, and Toronto, Canada as
well as additional revenues from the Gedco Acquisition properties.
Events revenues were $870,000 for the three months ended June 30, 1998 compared
to $513,000 for the three months ended June 30, 1997, an increase of $357,000 or
69.6%. This increase was mainly attributable to increase in business.
Merchandise revenues were approximately $160,000 for the three months ended June
30, 1998 compared to $86,000 for the three months ended June 30, 1997, an
increase of $74,000 or 86.0% This increase was mainly attributable to an
increase in photo sales and an increase in merchandise offerings.
Casino revenues were approximately $1,534,000 for the three months ended June
30, 1998 compared to $1,875,000 for the three months ended June 30, 1997, an
decrease of $341,000, or 18.2%. The decrease was primarily attributable to a
reduction in Las Vegas Legends show revenues and a decrease in revenue generated
from limited run casino events.
Costs of Revenues. Total costs of revenues were $6,466,000 for the three months
ended June 30, 1998 compared to $2,570,000 for the three months ended June 30,
1997, an increase of $3,896,000, or 151.63%. Costs of revenues increased to
75.6% of net revenues for the three months ended June 30, 1998, as compared to
66.8% for the three months ended June 30, 1997. This increase in cost of sales
as percentage of revenues was primarily attributable to a change in the mix of
the Company's revenues from exclusively theater shows to theater and dinner
theater shows and due to a re-allocation of the Company's selling, general and
administrative costs.
Selling, General and Administrative. Selling, general and administrative costs
were approximately $1,076,000 for the three months ended June 30, 1998 as
compared to $877,000 for the three months ended June 30, 1997, an increase of
$199,000, or 2.75%. Selling, general and administrative costs decreased to 13.1%
of net revenues for the three months ended June 30, 1998, as compared to 22.1%
for the three months ended June 30, 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.
Operating Income. The Company's operating income was approximately $371,000 for
the three months ended June 30, 1998, compared to an operating income of
$360,000 for the three months ended June 30, 1997, an increase of $11,000, or
3.1%.
Depreciation and Amortization. Depreciation and amortization for the three
months ended June 30, 1998 increased by $158,000, or 91.9%, as compared to the
three months ended June 30, 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 three months ended June 30, 1998
increased by $372,000, or 620%, as compared to the three months ended June 30,
1997. The increase was primarily due to the acquisition financing.
Other Income. Other income for the three months ended June 30, 1998 was
attributable to a sign-on bonus received from a new supplier.
<PAGE>
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 three months ended
June 30, 1998. Income taxes for the three months ended June 30, 1997 and 1998,
relate to income taxes due in those states other than Nevada in which the
Company conducts business. At June 30, 1997 and 1998, the Company had federal
net operating loss carryforwards of approximately $845,000 and $4,339,000,
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.
Six Months Ended June 30, 1997 versus Six Months Ended June 30, 1998
Net Revenues. Revenues increased by 115.7% to $14,449,000 for the six months
ended June 30, 1998 compared to $6,698,000 for the six months ended June 30,
1997.
Theaters revenues were approximately $9,765,000 for the six months ended June,
1998 compared to $2,074,000 for the six months ended June 30, 1997, an increase
of $7,691,000, or 370.8%. The increase was mainly attributable to the inclusion
of the Gedco Acquisition.
Events revenues were $1,410,000 for the six months ended June 30, 1998 compared
to $1,138,000 for the six months ended June 30, 1997, an increase of $272,000 or
23.9%. This increase was mainly attributable to an increase in events sold.
Merchandise revenues were approximately $216,000 for the six months ended June
30, 1998 compared to $154,000 for the six months ended June 30, 1997, an
increase of $62,000 or 40.3%. This increase was mainly attributable to an
increase photo sales and merchandise offerings.
Casino revenues were approximately $3,100,000 for the six months ended June 30,
1998 compared to $3,332,000 for the six months ended June 30, 1997, a decrease
of $232,000, or 7.0%.
Costs of Revenues. Total costs of revenues were $10,928,000 for the six months
ended June 30, 1998 compared to $4,473,000 for the six months ended June 30,
1997, an increase of $6,449,000, or 144.2%. Costs of revenues increased to 75.6%
of net revenues for the six months ended June 30, 1998, as compared to 66.8% for
the six months ended June 30, 1997. This increase in cost of sales as percentage
of revenues was primarily attributable to a change in the mix of the Company's
revenues from primarily theater shows to theater and dinner theater shows.
Selling, General and Administrative. Selling, general and administrative costs
were approximately $2,821,000 for the six months ended June 30, 1998 as compared
to $1,947,000 for the six months ended June 30, 1997, an increase of or 4.1%.
Selling, general and administrative costs decreased to 19.5% of net revenues for
the six months ended June 30, 1998, as compared to 29.1% for the six months
ended June 30, 1997. The increase in total cost was primarily attributable to
the inclusion of the Gedco Acquisition.
Operating Income. The Company's operating income was approximately $189,000 for
the six months ended June 30, 1998, compared to an operating loss of $40,000 for
the six months ended June 30, 1997, an increase of $229,000.
Depreciation and Amortization. Depreciation and amortization for the six months
ended June 30, 1998 increased by $199,000, or 63.3%, as compared to the six
months ended June 30, 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 six months ended June 30, 1998
increased by $268,000, or 51.4%, as compared to the quarter ended June 30, 1997.
The increase was primarily due to acquisition financing.
<PAGE>
Other Income. Other income for the six months ended June 30, 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 six months ended
June 30, 1998. Income taxes for the six months ended June 30, 1997 and 1998,
relate to income taxes due in those states other than Nevada in which the
Company conducts business. At June 30, 1997 and 1998, the Company had federal
net operating loss carryforwards of approximately $843,944 and $4,338,910,
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.
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 assumptions
relating to its current 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 6 months. In addition the Company plans to further reduce selling,
general administrative marketing expenses as part of its on going consolidation
of operations. The Company's acquisition strategy will require additional debt
and/or equity financing and the Company intents to raise additional working
capital to fund the seasonal capital requirements of its business. 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 six months ended June 30, 1997, the Company used cash of $430,000 in
operations. As of June 30, 1997, the Company had approximately $80,000 in cash
and cash equivalents. For the six months ended June 30, 1998, the Company used
cash of $1,413,000 in operations. As of June 30, 1998, the Company had
$1,100,000 in cash and cash equivalents. The operating deficits for both periods
were primarily attributable to business seasonality and pre-opening costs for
new shows.
The net cash used in investing activities for the six months ended June 30, 1997
of $836,000, 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 June 30, 1998 of $13,989,000, was primarily attributable to direct
acquisition costs related to the Gedco Acquisition and Fox Acquisition.
Net cash provided by financing activities for the six months ended June 30, 1997
of $1,053,000, was primarily attributable to a series of debt and bank
financings. Net cash provided by financing activities for the six months ended
June 30, 1998 of $14,166,000, was primarily attributable to ICCMIC's funding of
$12,500,000 for the Gedco Acquisition and $1,100,000 million for the Fox
Acquisition.
At June 30, 1997, the Company had working capital of approximately $1,797,000,
primarily attributable to the Company's financings. At June 30, 1998, the
Company had a working capital deficit of $111,621, primarily attributable to the
pre-opening costs of new shows.
<PAGE>
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 July 31, 1998,
the Company had drawn $750,000 on the line of credit.
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 March 28, 1998, the Company used $12,500,000 of said
facility to fund the cash portion of the Gedco Acquisition and related fees and
subsequently used $1,100,000 on June 30, 1998 to find the cash portion of the
Fox acquisition. 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.
New Accounting Pronouncements
Reporting on the Costs of Start-up Activities
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities,"
(SOP 98-5) issued by the American Institute of Certified Public Accountants is
effective for financial statements beginning after December 15, 1998. SOP 98-5
requires that the costs of start-up activities, including organization costs, be
expensed as incurred. Start-up activities are defined broadly as those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a new
class of customers (excluding ongoing customer acquisition costs, such as policy
acquisition costs and loan origination costs) or beneficiary, initiating a new
process in an existing facility, or commencing some new operation. The adoption
of SOP 98-5 will require the Company to expense all capitalized pre-opening
costs. Such costs were $1,256,382 at June 30, 1998.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Commitments and Contingencies.
On May 28, 1998, Silver State Property Management, a Nevada corporation, Roger
A. Bergmann Enterprises, a Nevada corporation, and R.E. Lyle Corp., a Nevada
corporation filed a complaint in the Second Judicial District Court of the State
of Nevada in and for the County of Washoe alleging, among other things, that
John W. Stuart, acting as an agent, Chairman of the Board and Chief Executive
Officer of On Stage Entertainment, Inc., breached an alleged oral agreement to
purchase the Plaintiff's respective interests in the Legends in Concert
production in Hawaii for an aggregate purchase price of $1,000,000. The Company
filed a motion to dismiss, which motion is currently pending.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a vote of Security Holders
The Registrant's 1998 Annual Meeting of Stockholders was held on June
15, 1998. At the meeting, the following items were submitted to a vote of
stockholders:
The following nominees were elected to serve on the Board of Directors:
Name of Nominee Votes Cast For Vote Cast Against
- - --------------------------------------------------------------------------------
Neil H. Foster 5,582,672 20,355
James L. Nederlander 5,603,027 0
Item 4. Submission of Matters to a vote of Security Holders (continued)
The proposal to amend the Registrant's Amended and Restated 1996 Stock Option
Plan was approved with:
Votes For Votes Against Abstentions
------------------------------------------------------------------------
4,214,610 227,242 22,271
The appointment of BDO Seidman, LLP as independent public accountants of the
registrant was ratified with:
Votes For Votes Against Abstentions
-------------------------------------------------------------------------
5,500,471 102,556 0
Item 5. Other Information
Not applicable
Item 6. Exhibits & Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
On May 19, 1998, the Registrant filed a report on Form 8-K/A in which
the Registrant amended its report on Form 8-K filed on March 30, 1998
to include financial information related to 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.
Date: August 13, 1998 /s/ John W. Stuart
---------------------------------
John W Stuart, Chairman
and Chief Executive Officer
Date: August 13, 1998 /s/ Kiranjit S. Sidhu
Kiranjit S. Sidhu, Senior Vice
President Finance and
Administration, and Chief
Financial Officer
<PAGE>
EXHIBIT INDEX
10.3 Amended and Restated Loan Agreement by and between Imperial Credit
Commercial Mortgage Investment Corp. and Wild Bill's California,
Inc., King Henry's, Inc., Fort Liberty, Inc., On Stage Theaters North
Myrtle Beach, Inc., and On Stage Theaters Surfside Beach, Inc., dated
as of June 30, 1998.
10.4 First Amendment to Guaranty by and between Imperial Credit Commercial
Mortgage Investment Corp. and the Registrant, dated as of March 13,
1998, as amended on June 30, 1998.
10.5 Asset Purchase Agreement by and between On Stage Theaters Surfside
Beach, Inc., On Stage Theaters North Myrtle Beach, Inc., On Stage
Entertainment, Inc., and Calvin Gilmore Productions, Inc. dated June
30, 1998.
AMENDED AND RESTATED LOAN AGREEMENT
by and between
IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP.,
as Lender
and
WILD BILLS CALIFORNIA, INC.,
KING HENRY'S, INC., FORT LIBERTY, INC.,
ON STAGE THEATERS NORTH MYRTLE BEACH, INC. AND
ON STAGE THEATERS SURFSIDE BEACH, INC.
as Borrowers
Date: As of June __, 1998
AMENDED AND RESTATED LOAN AGREEMENT
This Amended and Restated Loan Agreement is made as of this ___ day of
June, 1998, by and between WILD BILLS CALIFORNIA, INC., a Nevada corporation,
KING HENRY'S, INC., a Nevada corporation, FORT LIBERTY, INC., a Nevada
corporation, ON STAGE THEATERS NORTH MYRTLE BEACH, INC., a Nevada corporation,
and ON STAGE THEATERS SURFSIDE BEACH, INC. a Nevada corporation (collectively,
"Borrowers"), and IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP., a
Maryland corporation ("Lender").
<PAGE>
RECITALS
A. Wild Bills California, Inc., King Henry's, Inc., Fort Liberty, Inc. and
Lender entered into that certain Loan Agreement dated March 11, 1998 (the
"Original Loan Agreement"), pursuant to which Lender made loans
(collectively, the "Original Loans") on the terms and conditions contained
therein in the following principal amounts:
Borrower Loan Amount
--------------------------- -----------
King Henry's Inc. $5,000,000
Fort Liberty, Inc. $6,600,000
Wild Bills California, Inc. $900,000
Each Original Loan is evidenced by a note and secured by a mortgage or
deed of trust encumbering certain real and other property in California
and Florida and legally described in Exhibits A-1, A-2 and A-3.
B. Concurrently herewith, On Stage Theaters North Myrtle Beach, Inc. and On
Stage Theaters Surfside Beach, Inc. are acquiring a leasehold and fee
interest respectively in certain properties located in Horry County, South
Carolina and legally described in Exhibits A-4 and A-5.
C. On Stage Theaters North Myrtle Beach, Inc. and On Stage Theaters Surfside
Beach, Inc. have applied to Lender for loans (each, an "Additional Loan"
and collectively, the "Additional Loans") in the following maximum
amounts, and Lender has agreed to make the Additional Loans on the terms
and conditions contained herein:
Borrower Loan Amount
------------------------------------------ -----------
On Stage Theaters North Myrtle Beach, Inc. $ 25,000
On Stage Theaters Surfside Beach, Inc. $1,075,000
D. Borrowers and Lender desire to make the Additional Loans subject to the
terms and conditions of the Original Loan Agreement (as amended and
restated hereby) and in connection therewith they agree that the Original
Loan Agreement is superseded in its entirety and this Amended and Restated
Loan Agreement is hereby substituted in its place. Each Original Loan or
Additional Loan is referred to herein as a "Loan" and the Original Loans
and Additional Loans are collectively referred to herein as the "Loans".
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
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 Amended and Restated Loan Agreement, as originally
executed or as may be hereafter supplemented or amended from time to time
in writing.
<PAGE>
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 assignments 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: That certain Security Agreement dated
March 11, 1998 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, as
originally executed or as may be hereafter supplemented or amended from
time to time in writing.
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(b) of this Agreement, executed by Wild
Bills California, Inc., as trustor, and recorded on April 27, 1998 as
Instrument No. 19980250317 in the Official Records of Orange County,
California, 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.
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 with respect to a given Project and described in Section 2.2(h)
of this Agreement, as originally executed or as may be hereafter
supplemented or amended from time to time in writing.
<PAGE>
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): Collectively, the Guarantees dated March 11, 1998 previously
executed in favor of Lender by King Henry's Inc., Fort Liberty, Inc.,
Blazing Piano's, Inc., Wild Bills California, Inc. and OSE and the
Guarantees being executed concurrently herewith by On Stage Theaters North
Myrtle Beach, Inc. and On Stage Theaters Surfside Beach, Inc., as
originally executed and as may be hereafter supplemented or amended from
time to time in writing.
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, A-4 and A-5
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: With respect to the Original Loans, March 31, 2008. With
respect to the Additional Loans, May 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.
Myrtle Beach Lease: That certain Lease Agreement dated as of March 3, 1989
between James H. Dusenbury and The Dixie Corporation (On Stage Theaters
North Myrtle Beach, Inc.'s predecessor in interest).
Myrtle Beach Sublease: That certain Sublease Agreement dated as of August
22, 1996, by and between Calvin Gilmore Productions, Inc. (On Stage
Theaters North Myrtle Beach, Inc.'s predecessor in interest) and Eddie
Miles Entertainment, Inc.
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: Collectively, the notes dated March 11, 1998 previously executed and
delivered by Wild Bills California Inc., Keng Henry's, Inc. and Fort
Liberty, Inc. contemporaneuously with the Original Loan Agreement, and the
notes being executed and delivered by On Stage Theaters North Myrtle
Beach, Inc. and On Stage Theaters Surfside Beach, Inc. concurrently
herewith, each as originally executed and delivered 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, A-3, A-4 and A-5.
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).
<PAGE>
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, Commonwealth Land
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 dated March 11, 1998
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.
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 have
executed and delivered or 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
On Stage Theaters North Myrtle Beach, Inc. $ 25,000
On Stage Theaters Surfside Beach, Inc. $ 1,075,000
Total of Loans: $13,600,000
(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);
<PAGE>
(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 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.
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 folloBORROWERS' 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.
<PAGE>
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.
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. <PAGE>
(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).
<PAGE>
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).
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.
<PAGE>
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.
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.
<PAGE>
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 sed by the gross
negligence or willful misconduct of Lender.
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).
<PAGE>
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.
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.
<PAGE>
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 $150,000 for expenses previously
incurred by Lender in originating the Original Loans, provided that
Lender's receipt of the foregoing amount shall in no way impair each
Borrower's obligation to pay any additional expenses incurred by
Lender in connection with the Original Loans.
3.25 Loan Fees . Lender acknowledges prior receipt of 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 Subsequent Loans
(as defined in Section 11).
3.26 Deferred Maintenance 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 ncluding 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
Affiliatd 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.
<PAGE>
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.
3.32 Lease Option Exercise. If the Loans have not theretofore been paid in
full, Wild Bills California, Inc. and On Stage Theaters North Myrtle
Beach, Inc. shall exercise the option to extend the term of the
California Lease and the Myrtle Beach Lease, respectively, at least
180 days prior to the last date such option may be exercised pursuant
to the California Lease and the Myrtle Beach Lease and shall provide
Lender with a copy of such exercise notice. If either of such options
has not been exercised by the date so specified as to it, Lender may
exercise such option to extend in the name of the then lessee under
the California Lease and the Myrtle Beach Lease, respectively.
3.33 On Stage Leases. Concurrently with or prior to 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 had and
will continue to have (with respect to the Original Loans) or will
have (with respect to the Additional Loans) 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.
<PAGE>
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.
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 On Stage Leases for the Fort
Liberty, King Henry's and Wild Bills California Properties, the
Myrtle Beach Sublease and the Fort Liberty Tenant Leases shown on
Exhibit D. The On Stage Leases for the Fort Liberty, King Henry's and
Wild Bills California Properties, the Myrtle Beach Sublease and each
lease listed on Exhibit D are 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.
<PAGE>
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.
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.
<PAGE>
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 Lease.
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 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, the Myrtle Beach Lease, the Myrtle Beach Sublease or any part
or component of any 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, the California Lease, the Myrtle Beach Lease, the Myrtle
Beach Sublease or any portion or component of any of them, shall
release any Borrower from its obligations under the Loan Documents.
<PAGE>
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) an agreement by On Stage
Theaters North Myrtle Beach, Inc. to subordinate its interest in the
Myrtle Beach Lease, except to the Permitted Exceptions, (iv) 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; (v) 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; (vi) 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 (vii) 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, the California Lease or Myrtle Beach Lease without
Lender's consent. This provision shall apply to every sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of
a Project, the California Lease or Myrtle Beach 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, the California Lease or the
Myrtle Beach Lease.
6.2.4 No Waiver. Lender's consent to one sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of a Project, the
California Lease, the Myrtle Beach Lease or the Myrtle Beach Sublease
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,
the California Lease, the Myrtle Beach Lease or the Myrtle Beach
Sublease 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;
<PAGE>
(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 On Stage Theaters North Myrtle Beach, Inc. materially defaults
under the Myrtle Beach Lease, or if the Myrtle Beach Lease ceases
to be in full force and effect;
(j) If a default occurs under any of the Loan Documents and continues
beyond the applicable grace period, if any, contained therein;
(k) 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);
(l) Any Project has a fair market value as shown by an Appraisal
(which for the purpose of this item (l) 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.
<PAGE>
(m) 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, 1999 and all
subsequent quarters 2.00:1
(n) 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 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 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 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.
9. ENVIRONMENTAL PROVISIONS.
<PAGE>
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 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.
<PAGE>
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.
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;
<PAGE>
(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.;
(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:
<PAGE>
(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
(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.
<PAGE>
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
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.
<PAGE>
(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.
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.
<PAGE>
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.
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.
<PAGE>
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.
11. SUBSEQUENT LOANS. Upon fulfillment of each and every precondition set
forth below, Lender shall make one or more additional loans (each, an
"Subsequent Loan") in the aggregate amount of not less than
$1,000,000 and not more than $6,500,000.
11.1 Preconditions. Prior to making any Subsequent Loan, the following
preconditions must be fulfilled to Lender's satisfaction:
(a) Each borrower for an Subsequent Loan (each, an "Subsequent 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 Subsequent 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
Subsequent 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 Subsequent Loans.
Lender's obligation to make any Subsequent 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
Subsequent Loan project shall be in excess of 166.7% for the
first $3,000,000 of Subsequent Loans, thereafter 133.3% (both
exclusive of any going concern value or good will) of the amount
of the Subsequent Loan.
(c) The Subsequent 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 Subsequent Loans
shall expire March 31, 1999 and be of no further force or effect.
<PAGE>
(d) Each Subsequent 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 Subsequent Loan Borrower of the other
Subsequent 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 Subsequent 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
Subsequent Loan Borrower's project.
(e) All aspects of the Subsequent 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 Subsequent 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 Subsequent 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 Subsequent 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 Subsequent 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 Subsequent Loan. No Subsequent 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:_____________________________
ON STAGE THEATERS NORTH MYRTLE
BEACH, INC., a Nevada corporation
By:_______________________________
Name:_____________________________
Title:_____________________________
ON STAGE THEATERS SURFSIDE BEACH,
INC., a Nevada corporation
By:_______________________________
Name:_____________________________
Title:_____________________________
LENDER:
IMPERIAL CREDIT COMMERCIAL
MORTGAGE INVESTMENT CORP., a
Maryland corporation
By:_______________________________
Name:_____________________________
Title:_____________________________
<PAGE>
EXHIBIT AEXHIBIT A
LEGAL DESCRIPTION
<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 A-4
LEGAL DESCRIPTION
Myrtle Beach Real Property
<PAGE>
EXHIBIT A-5
LEGAL DESCRIPTION
Surfside Real Property
<PAGE>
EXHIBIT BEXHIBIT B
PERMITTED EXCEPTIONS
<PAGE>
EXHIBIT C
SOURCES AND USES OF FUNDS
[Revise to Include Additional Loans]
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
<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.
FIRST AMENDMENT TO GUARANTY
(On Stage Entertainent)
THIS FIRST AMENDMENT TO GUARANTY (this "Amendment") is made as of June __, 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. Guarantor has previously executed in favor of Lender that certain
Guaranty (the "Guaranty") dated March 11, 1998, pursuant to which, among other
things, Guarantor guaranteed the prompt payment and performance of the
obligations of certain affiliates of Guarantor under loans made by Lender.
B. Guarantor desires to amend the Guaranty to add the obligations of
certain other affiliates of Guarantor under additional loans being made by
Lender.
AGREEMENTS
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Guarantor hereby agrees as
follows:
1. Recital A. Recital A of the Guaranty is hereby deleted in its
entirety and replaced with the following:
"A. Lender has made the following loans (each, an "Original
Loan" and collectively, the "Original Loans") to the following
borrowers (collectively, the "Original Borrowers") pursuant to a Loan
Agreement (the "Original Loan Agreement") dated as of March 11, 1998:
Borrower Loan Amount
--------------------------- -----------
Fort Liberty, Inc. $6,600,000
King Henry's, Inc. $5,000,000
Wild Bills California, Inc. $ 900,000
Lender has agreed to make the following additional loans
(each, an "Additional Loan" and collectively, the "Additional Loans")
to the following additional borrowers (collectively, the "Additional
Borrowers") pursuant to an Amended and Restated Loan Agreement (the
"Loan Agreement") of even date herewith:
Additional Borrower Loan Amount
------------------------------------------ -----------
On Stage Theaters North Myrtle Beach, Inc. $ 25,000
On Stage Theaters Surfside Beach, Inc. $1,075,000
Each Original Loan or Additional Loan is referred to herein as
a "Loan," and the Original Loans and Additional Loans are collectively
referred to herein as the "Loans". Each Original Borrower or Additional
Borrower is referred to herein as a "Borrower," and the Original
Borrowers and the Additional Borrowers are referred to herein as the
"Borrowers".
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") encumbering
certain real and other property owned by Borrowers in Florida,
California and South Carolina and described therein, 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")."
<PAGE>
2. Representations and Warranties. Section 13(c) of the Guaranty is
hereby deleted in its entirety and replaced with the following:
"(c) Any and all balance sheets, net worth statements, and
other financial data with respect to Borrowers, Guarantor, Gedco USA,
Inc. and its affiliated entities, and Calvin Gilmore Productions, Inc.
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 such party as of the respective dates thereof."
3. Miscellaneous. Except as amended above, the Guaranty remains in full
force and effect. This Amendment constitutes the entire agreement of the parties
regarding the modification of the Guaranty and supersedes all prior written and
oral communications regarding such subject. This Amendment may be amended only
in writing. In the event of a dispute regarding the terms of this Amendment, the
prevailing party shall be entitled to reasonable attorneys' fees in an amount
determined by the court having jurisdiction.
IN WITNESS WHEREOF, Guarantor has executed and delivered this Amendment
as of the date first written above.
GUARANTOR: ON STAGE ENTERTAINMENT, INC.
a Nevada corporation
By:__________________________
Name:________________________
Title:_______________________
On Stage Entertainment, Inc.
4625 W. Nevso Drive
Las Vegas, Nevada 89103
Signed and sealed and delivered in the presence of:
- - ----------------------------------
Print Name:_______________________
- - ----------------------------------
Print Name:_______________________
ASSET PURCHASE AGREEMENT
by and among
ON STAGE THEATERS SURFSIDE BEACH, INC.,
(a Nevada corporation),
ON STAGE THEATERS NORTH MYRTLE BEACH, INC.,
(a Nevada corporation),
ON STAGE ENTERTAINMENT, INC.,
(a Nevada corporation),
and
CALVIN GILMORE PRODUCTIONS, INC.,
(a Delaware corporation)
<PAGE>
Section Page
1. Definitions...................................................
2. Purchase and Sale of the Purchased Assets.....................
2.1 The Purchased Assets.................................
2.2 Assumed Liabilities..................................
2.3 Excluded Liabilities.................................
2.4 Consent of Third Parties.............................
2.5 Purchase Price.......................................
2.7 Pledge Agreement.....................................
3. Closing.......................................................
3.1 Location, Date.......................................
3.2 Closing Deliveries...................................
4. Representations and Warranties of the Seller..................
4.1 Corporate Status.....................................
4.2 Authorization........................................
4.3 Consents and Approvals...............................
4.4 Title to Assets and Related Matters..................
4.5 Real Property........................................
4.6 Leased Property......................................
4.7 Liabilities..........................................
4.8 Taxes................................................
4.9 Legal Proceedings and Compliance with Law............
4.10 Seller Not in Default under any Contract.............
4.11 Finder's Fees........................................
4.12 Investment Representations...........................
4.13 Restricted Stock.....................................
4.14 Full Disclosure......................................
5. Representations and Warranties of On Stage and the Buyers.....
5.1 Corporate Status.....................................
5.2 Enforceability.......................................
5.3 Consents and Approvals...............................
5.4 Capital Stock Ownership..............................
5.5 SEC Filings..........................................
5.6 Finder's Fees........................................
5.7 Full Disclosure......................................
5.8 Financing............................................
6. Certain Agreements............................................
6.1 Access...............................................
6.2 Exclusivity..........................................
6.3 Update Schedules.....................................
6.4 Required Consents, Regulatory and other Approvals....
6.5 Publicity............................................
6.6 Satisfaction of Liabilities..........................
6.7 Restrictions on Transfer.............................
6.8 Piggyback Registration...............................
6.9 Registration Rights..................................
6.10 Option...............................................
7. Conditions Precedent to Obligations of On Stage and the Buyers.
7.1 Legality..............................................
7.2 Representations and Warranties.......................
7.3 Agreements, Conditions and Covenants..................
7.4 Certificates..........................................
7.5 Required Consents and Approvals.......................
7.6 Third Party Consents..................................
7.7 Other Agreements......................................
7.8 Title Insurance.......................................
7.9 Estoppel Certificates.................................
7.10 Regulatory and other Approvals........................
7.11 Right of First Negotiation with FFWW..................
7.12 Financing.............................................
7.13 Pledge Agreement......................................
<PAGE>
8. Conditions Precedent to Obligations of the Seller..............
8.1 Legality..............................................
8.2 Representations and Warranties.......................
8.3 Agreements, Conditions and Covenants..................
8.4 Purchase Price........................................
8.5 Officer's Certificates................................
8.6 Other Agreements......................................
8.7 Pledge Agreement......................................
9. Indemnification................................................
9.1 Seller's Indemnification .............................
9.2 Buyer's Indemnification ..............................
9.3 Claims Period.........................................
10. Termination....................................................
10.1 Grounds for Termination..............................
10.2 Effect of Termination.................................
11. Exclusive Dealing and Recoupment of Expenses...................
11.1 Exclusive Dealing.....................................
11.2 Recoupment of Expenses................................
12. Payment of Expenses; Sales and Transfer Taxes..................
13. Contents of Agreement..........................................
14. Amendment, Parties in Interest, Assignment, Etc................
15. Interpretation................................................
16. Remedies.......................................................
17. Notices........................................................
18. Governing Law..................................................
19. Consent to Jurisdiction; Service of Process, etc...............
20. Headings; Gender...............................................
21. Further Assurances.............................................
22. Exhibits and Schedules.........................................
23. No Benefit to Others...........................................
24. Counterparts...................................................
25. Survival.......................................................
<PAGE>
Exhibit
A Pledge Agreement
Schedules
2.1 Permitted Encumbrances
2.1(a) Real Property Owned
2.1(b) Leased Property
2.1(c) Equipment and Other Tangible Personal Property
2.1(d) Contracts Relating to the Businesses
2.1(e) Permits
2.1(f) Inventory
2.2 Assumed Liabilities
2.6 Allocation of the Purchase Price
4.3 Consents and Approvals
4.5 Real Property
4.6(a) Leased Property
4.6(b) Tangible Personal Property Located Within the Leased Property.
4.8 Taxes
4.9(a) Legal Proceedings and Compliance with Law
4.9(b) Environmental Conditions
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of the 30th
day of June, 1998, by and among On Stage Entertainment, Inc., a Nevada
corporation ("On Stage"), On Stage Theaters Surfside Beach, Inc., a Nevada
corporation and On Stage Theaters North Myrtle Beach, Inc., a Nevada corporation
(On Stage Theaters Surfside Beach, Inc., and On Stage Theaters North Myrtle
Beach, Inc., are hereinafter, collectively referred to as the "Buyers"), and
Calvin Gilmore Productions, Inc., a Delaware corporation (f/k/a Great American
Entertainment Company) (the "Seller").
Certain other terms are used herein as defined below in Section 1 or
elsewhere in this Agreement.
Background
The Seller desires to transfer to the Buyers the Purchased Assets (as
defined herein) in exchange for the assumption by the Buyers of the Assumed
Liabilities (as defined herein) and the payment by the Buyers of the Purchase
Price (as defined herein), and the Buyers desire to acquire the Purchased Assets
and assume the Assumed Liabilities from Seller, all in accordance with the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of and reliance on the respective
representations, warranties and covenants contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. For convenience, certain terms used in more than one part of
this Agreement are listed in alphabetical order and defined or referred to below
(such terms as well as any other terms defined elsewhere in this Agreement shall
be equally applicable to both the singular and plural forms of the terms
defined).
"Affiliates" means, with respect to a particular party, Persons
controlling, controlled by or under common control with that party, as well as
the officers, directors and majority-owned Persons of that party and of its
other Affiliates. For the purposes of the foregoing, ownership, directly or
indirectly, of 20% or more of the voting stock or other equity interest shall be
deemed to constitute control.
"Agreement" means this Agreement, including the Schedules and Exhibits,
attached.
"Assumed Liabilities" is defined in Section 2.2.
"Business Day" means a day other than a Saturday, Sunday or any day on
which the principal commercial banks located at Myrtle Beach, South Carolina are
not open for business during normal banking hours.
"Buyers" is defined in the preamble.
"Commitments" is defined in Section 7.8.
"Charter Documents" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization or similar document governing the entity.
"Closing" is defined in Section 3.1.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the U.S. Securities and Exchange Commission.
"Common Stock" means the common stock, par value $.01 per share, of On
Stage.
<PAGE>
"Confidential Information" means any confidential information or trade
secrets of the business, including, without limitation, information and
knowledge pertaining to products and services offered, innovations, designs,
ideas, plans, trade secrets, proprietary information, know-how and other
technical information, advertising, marketing plans and systems, distribution
and sales methods and systems, sales and profit figures, customer and client
lists, and relationships with dealers, distributors, wholesalers, customers,
clients, suppliers and others who have dealings with the business.
"Contract" means any written or oral contract, agreement, lease, plan,
instrument or other document or commitment, arrangement, undertaking, practice
or authorization that is binding on any Person or its property under applicable
law.
"Court Order" means any judgment, decree, injunction, order or ruling
of any Federal, state, local or foreign court or governmental or regulatory body
or arbitrator or authority that is binding on any Person or its property under
applicable law.
"Default" means (a) a breach, default or violation, (b) the occurrence
of an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or cause an Encumbrance
(other than a Permitted Encumbrance) to arise or (c) with respect to any
Contract, the occurrence of an event that with or without the passage of time or
the giving of notice, or both, would give rise to a right of termination,
renegotiation or acceleration or a right to receive damages or a payment of
penalties.
"Eddie Miles Sublease" means that certain Sublease Agreement, dated
August 22, 1996, between Seller and Eddie Miles Entertainment, Inc.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability or voting, defect of title or other claim, charge
or encumbrance of any nature whatsoever on any property or property interest.
"Environmental Condition" is defined in Section 4.9(b).
"Environmental Law" is defined in Section 4.9(b).
"Escrow Agent" means Nelson, Mullins, Riley & Scarborough, LLP.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Liabilities" is defined in Section 2.3.
"FFWW" means Fox Family Worldwide Inc.
"GAAP" means generally accepted accounting principles.
"Hazardous Substances" means (i) any "hazardous substances" as defined
by the federal Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss.ss. 9601 et seq., (ii) any "extremely hazardous substance,"
"hazardous chemical," or "toxic chemical" as those terms are defined by the
federal Emergency Planning and Community Right-to-Know Act, 42 U.S.C. ss.ss.
11001 et seq., (iii) any "hazardous waste," as defined under the federal Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. ss.ss. 6901 et seq., (iv) any "pollutant," as defined under the federal
Water Pollution Control Act, 33 U.S.C. ss.ss. 1251 et seq., and (v) any
regulated substance or waste under any Laws or Court Orders that currently
exist.
"Indemnified Party" is defined in Sections 9.1 and 9.2.
"Intellectual Property" means any copyrights, patents, trademarks,
technology rights and licenses, trade secrets, franchises, know-how and
formulae, inventions, inventional disclosures, designs, processes, drawings,
specifications, patterns, brand names, service marks, logos and other
intellectual property exclusively related to the Purchased Assets.
"Inventory" means any inventory, including raw materials, supplies,
work in process and finished goods.
<PAGE>
"Law" means any statute, law, ordinance, regulation, order or rule of
any Federal, state, local, foreign or other governmental agency or body or of
any other type of regulatory body, including those covering environmental,
energy, safety, health, transportation, bribery, recordkeeping, zoning,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Leased Property" is defined in Section 2.1(b).
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any Person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Litigation" means any lawsuit, claim, action, investigation,
arbitration, administrative or other proceeding or criminal prosecution or, to
the knowledge of an applicable Party, any governmental or regulatory authority
investigation or inquiry.
"On Stage" is defined above in the preamble.
"On Stage Lease" means that certain lease dated January 11, 1995, by
and between On Stage and the Seller, and any amendments thereto .
"Ordinary course" or "ordinary course of business" means the ordinary
course of business that is consistent in nature and, where relevant, amount with
past practices.
"Permit" means any governmental permit, license, registration,
certificate of occupancy, approval and other authorization.
"Permitted Encumbrance" is defined in Section 2.1.
"Person" means any natural person, corporation, partnership,
proprietorship, association, trust or other legal entity.
"Pledge Agreement" means the Pledge Agreement between the Buyers, On
Stage and the Seller, in the form of Exhibit "A" hereto.
"Purchase Cash" is defined in Section 2.5(a).
"Purchase Price" is defined in Section 2.5.
"Purchased Assets" is defined in Section 2.1.
"Real Property" is defined in Section 2.1(a).
"Required Consents" is defined in Section 4.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" is defined above in the preamble.
"Shares" means 206,612 shares of Common Stock of On Stage.
"Taxes" means any taxes, duties, assessments, fees, levies, or similar
governmental charges, together with any interest, penalties, and additions to
tax, imposed by any taxing authority, wherever located (i.e. whether federal,
state, local, municipal, or foreign), including, without limitation, all net
income, gross income, gross receipts, net receipts, sales, use, transfer,
franchise, privilege, profits, social security, disability, withholding,
payroll, unemployment, employment, excise, severance, property, windfall
profits, value added, ad valorem, occupation, or any other similar governmental
charge or imposition.
2. Purchase and Sale of the Purchased Assets.
2.1 The Purchased Assets. Subject to the terms and conditions of this
Agreement, at the Closing, the Seller shall grant, sell, assign, transfer,
convey and deliver to the Buyers, or one or more wholly-owned subsidiaries
thereof, free and clear of all Encumbrances whatsoever, other than the permitted
Encumbrances set forth on Schedule 2.1 (the "Permitted Encumbrances"), and the
Buyers shall purchase from the Seller, all of Seller's right, title and interest
in and to the following assets (collectively, the "Purchased Assets"):
<PAGE>
(a) Real Property. Good, marketable and insurable fee simple
title to the real property commonly known as "The Legends in Concert Theater"
and more particularly described on Schedule 2.1(a) (the "Real Property"),
together with the buildings, structures, improvements and fixtures located
thereon, and all rights, privileges, easements, licenses, hereditaments and
other appurtenances relating thereto, subject to the Permitted Encumbrances and
the items set forth as title exceptions on Schedule B-II of the title commitment
to be obtained by the Buyers in connection with the transaction;
(b) Leased Property. An insurable leasehold interest to the
leased property commonly known as the "Eddie Miles Theater" and more
particularly described on Schedule 2.1(b) (the "Leased Property"), together with
the Seller's interest in the buildings, structures, improvements and fixtures
located thereon, and all rights, privileges, easements, licenses, hereditaments
and other appurtenances relating thereto, subject to the Permitted Encumbrances
and the items set forth as title exceptions on Schedule B-II of the title
commitment to be obtained by the Buyers in connection with the transaction;
(c) Equipment and Other Tangible Personal Property. The
equipment, leasehold improvements, removable fixtures, trade fixtures, theater
related equipment, lighting fixtures, supplies, furniture and office equipment,
computers and telecommunications equipment and other items of personal property
described on Schedule 2.1(c);
(d) Contracts Relating to the Purchased Assets. All of
Seller's interest in all Contracts, leases of equipment and other personal
property, sale orders, purchase orders, commitments, instruments and all other
agreements, listed on Schedule 2.1(d);
(e) Permits. All rights under Permits listed on Schedule 2.1(e),
to the extent such Permits are transferable to the Buyers;
(f) Inventory. The Inventory listed on Schedule 2.1(f).
2.2 Assumed Liabilities. At the Closing, the Buyers shall assume and
thereafter in due course timely pay and fully satisfy the obligations specified
on Schedule 2.2 relating to the Purchase Assets (the "Assumed Liabilities").
2.3 Excluded Liabilities. Except as expressly set forth in Section 2.2,
the Buyers shall not, by virtue of their purchase of the Purchased Assets or
otherwise in connection with this transaction, assume or become responsible, in
whole or in part, for any Liabilities (the "Excluded Liabilities") of the
Seller, arising out of or in connection with the Purchased Assets, including,
without limitation: (a) Liabilities for any Taxes (other than those Taxes for
which the payment thereof is being prorated between the Buyers and the Seller
and which will be reflected as an adjustment to the Purchase Price pursuant to
Section 2.5(a) hereof; (b) Liabilities relating to any employment or labor
claim; (c) Liabilities relating to the violation of any Law; (d) tort
Liabilities; (e) Liabilities from claims arising under any Contract or Permit
not expressly assumed by the Buyers hereunder; (f) Liabilities for claims
arising under any Contract or Permit to the extent such claim is based on acts
or omissions of any Person which occurred prior to the Closing; (g) Liabilities
related to any litigation, the cause of action for which arose prior to the
Closing; and (h) Liabilities for any accounts payable or indebtedness for money
borrowed in relation to the Purchased Assets.
2.4 Consent of Third Parties. Nothing in this Agreement shall be
construed as an attempt by the Seller to assign to the Buyers any Contract or
Permit included in the Purchased Assets that is by its terms or by Law
nonassignable without the consent of any other party or parties, unless such
consent or approval shall have been given, or as to which all the remedies for
the enforcement thereof available to the Seller would not by Law pass to the
Buyers as an incident of the assignments provided for by this Agreement (a
"Non-Assignable Contract").
2.5 Purchase Price. In addition to assuming the Assumed Liabilities,
the aggregate price to be paid by the Buyers to the Seller (the "Purchase
Price") for the purchase of the Purchased Assets shall be the Purchase Cash plus
the Shares. The Buyers shall pay the Purchase Price as set forth below.
<PAGE>
(a) Purchase Cash. At the Closing, the Buyers shall pay the
Purchase Cash by a wire transfer of immediately available funds to an account
specified by the Seller. As used in this Agreement, the term "Purchase Cash"
shall mean the amount of $1,000,000 less all of the following amounts: (i) the
amount of all deposits held by or on behalf of the Seller respecting any of the
Purchased Assets, and all interest earned thereon as of the date of the Closing
and not heretofore paid to On Stage) (including, but not limited to; (x) the
$62,636.37 security deposit held by or on behalf of Seller pursuant to that
certain Lease Agreement dated January 11, 1995, between Great American
Entertainment Company and On Stage, and (y) the $60,000 security deposit held by
or on behalf of Seller pursuant to that certain Sublease Agreement dated August
22, 1996, between Calvin Gilmore Productions, Inc. and Eddie Miles
Entertainment, Inc., and which amount Buyer shall hold in escrow as security
deposit under the terms of the Sublease Agreement; (ii) prorations, determined
as of the Closing, of all real estate taxes and assessments, both general and
special, water charges and sewer rents, whether or not then due or payable, and
all other normally proratable items, based upon the latest assessments or actual
invoices available (should any such proration be inaccurate based upon the
actual tax bill or assessment when received, any party hereto may demand and
shall be entitled to receive on demand, a payment from the other correcting such
inaccuracy), (iii) any fees, taxes, impact fees, assessments, delinquent or
otherwise, attributable to a period prior to Closing, (iv) any other land use
charges attributable to any period prior to Closing, (v) all necessary State of
South Carolina, county and municipal transfer, document stamp and/or recording
taxes incident to the transaction contemplated in this Agreement normally
attributable to the grantor, (vi) one-half of the cost of any escrow fee and
charges of any escrow agent, regardless of whether or not such escrow agent is
also counsel for any party hereto, the issuer of the Commitments or the agent of
such issuer and (vii) any monies collected by Seller on behalf of On Stage from
prepaid ticket sales to shows at The Legends in Concert Theater. The Buyers will
indemnify the Seller in the event of any damages suffered by the Seller which
arise as a result of the failure by the Buyers to pay any item which was
prorated as provided in this Section 2.5(a), but only to the extent and not to
exceed the amount by which such item reduced the Purchase Price.
(b) Shares. At the Closing, On Stage shall issue and deliver to
the Seller a certificate for the Shares.
(c) Financing / Additional Shares. The Buyers shall obtain the
Purchase Cash through financing having terms reasonably satisfactory to the
Buyers and in an amount at least equal to $1,100,000. However, in the event the
Buyers are unable to obtain said financing, the Seller may at its option accept,
in lieu of the Purchase Cash, additional shares of On Stage Common Stock having
an aggregate value equal to the Purchase Cash (which value of said additional
shares shall be based on the average closing price per share of On Stage Common
Stock as quoted on the Nasdaq National Market for the five trading days
immediately prior to the date of execution of this Agreement).
2.6 Allocation of the Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets as set forth on Schedule 2.6 hereto. The
Seller and the Buyers shall prepare their respective Federal, state and local
tax returns employing the allocation set forth on Schedule 2.6 and shall not
take a position in any tax proceeding or otherwise that is inconsistent with
such allocation. The Seller and the Buyers shall give prompt notice to each
other of the commencement of any tax audit or the assertion of any proposed
deficiency or adjustment by any taxing authority or agency which challenges such
allocation.
2.7 Pledge Agreement. The Shares delivered to the Seller as a portion
of the Purchase Price will be subject to a Pledge Agreement in order to support
the indemnification obligations of the Seller.
3. Closing.
3.1 Location, Date. The closing of this transaction (the "Closing")
shall take place at the offices of Nelson, Mullins, Riley & Scarborough, LLP.,
Myrtle Beach, South Carolina, at 2:00 P.M. local time on June 30, 1998 or on
such earlier date upon the satisfaction of (or waiver by the party entitled to
the benefit of) the conditions set forth in Sections 7 and 8, or at such other
place, date and time as the Seller and the Buyers may agree in writing.
<PAGE>
3.2 Closing Deliveries. In connection with the completion of the
transactions contemplated in Section 2, at the Closing;
(a) the Buyers and On Stage, shall deliver or cause to be delivered to
the Seller:
(i) the cash portion of the Purchase Price;
(ii) the Shares;
(iii) the certificate specified in Section 8.5; and
(iv) the Pledge Agreement and such other agreements, documents and
instruments contemplated by this Agreement and such other
items as may be reasonably requested by the Seller.
(b) the Seller shall deliver or cause to be delivered to the Buyers and
On Stage:
(i) the certificate specified in Section 7.4;
(ii) a bill of sale and assignment and assumption agreement
transferring all of Seller's right, title and interest in and
to the Purchased Assets in form and substance reasonably
satisfactory to the Buyers;
(iii)a special warranty deed as to the Real Property owned by the
Seller in fee simple in form and substance reasonably
satisfactory to the Buyers;
(iv) an assignment and assumption agreement and the subordination,
attornment and non-disturbance agreement regarding the Leased
Property in form and substance reasonably satisfactory to the
Buyers;
(v) a termination agreement (in form and substance reasonably
satisfactory to On Stage) evidencing the termination of all of
the provisions of the On Stage Lease, with the exception of
Section 33. of said On Stage Lease which shall remain in full
force and effect notwithstanding the termination of the On
Stage Lease;
(vi) all estoppel certificates and consents to assignment from any
and all mortgagees, lessors, lessees and or sub-lessees as
Buyers may have requested in connection with the Real Property
or the Leased Property, in form and substance reasonably
satisfactory to the Buyers; and
(vii)the Pledge Agreement and such other agreements, documents and
instruments contemplated by this Agreement and such other
items as may be reasonably requested by the Buyers.
4. Representations and Warranties of the Seller. The Seller hereby
represents and warrants to the Buyers as follows:
4.1 Corporate Status. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of Delaware and is
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where failure to do so would have a material adverse effect on
its ability to convey the Purchased Assets. The Charter Documents and bylaws of
the Seller that have been delivered to the Buyers as of the date hereof are
effective under applicable Laws and are current, correct and complete.
4.2 Authorization. The Seller has the requisite power and authority to
own its property and carry on its business as currently conducted, and to
execute and deliver this Agreement and the documents related thereto and to
which it is a party and to perform the transactions to be performed by it. Such
execution, delivery and performance by the Seller has been duly authorized by
all necessary action. Each document executed and delivered by the Seller as of
the date hereof has been duly executed and delivered by the Seller and
constitutes a valid and binding obligation of the Seller, enforceable against it
in accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy or other similar laws and by general principles of equity.
<PAGE>
4.3 Consents and Approvals. Except for the consents specified in
Schedule 4.3 (the "Required Consents"), neither the execution nor delivery by
Seller of this Agreement or the documents related thereto to which it is a
party, nor the performance of the transactions to be performed by it thereunder,
will require any filing, consent or approval, constitute a Default or cause any
payment obligation to arise under (a) any Law or Court Order to which the Seller
is subject, (b) the Charter Documents or bylaws of the Seller or (c) any
Contract, Permit or other document to which Seller is a party or by which any of
the Purchased Assets may be subject.
4.4 Title to Assets and Related Matters. The Seller owns and will
transfer to the Buyers at the Closing good, marketable and indefeasible title
to, or with respect to leased assets included in the Purchased Assets, a valid
leasehold interest in, subject to the terms and conditions of such leases, all
of the Purchased Assets, free and clear of all Encumbrances other than Permitted
Encumbrances. The use of the Purchased Assets is not subject to any Encumbrances
(other than Permitted Encumbrances), and such use does not materially encroach
on the property or rights of any other Person. All Purchased Assets are in the
possession or under the control of the Seller, except to the extent that any
such Purchased Asset is currently under lease to Eddie Miles Entertainment,
Inc., or to On Stage or any affiliate thereof.
4.5 Real Property. Schedule 4.5 sets forth the complete legal
description of the Real Property described in Schedule 2.1(a) and a description
of the improvements (including buildings and other structures) located on the
Real Property. The Seller has received no notices, oral or written, and has no
actual knowledge, without any duty of inquiry, that any governmental body having
jurisdiction over the Real Property intends to exercise the power of
expropriation or eminent domain or a similar power with respect to all or any
part of the Real Property. The Seller has received no notices, oral or written,
from any governmental body, and has no actual knowledge, without any duty of
inquiry, that any of the Real Property or any improvements erected or situated
thereon, or the uses conducted thereon or therein, violate, or in the future
will violate, any Laws of any governmental body having jurisdiction over such
Real Property. The Seller has received no notice from the holder of any
mortgage, from any insurance company which has issued a policy with respect to
the Real Property or from any board of fire underwriters (or other body
exercising similar functions) claiming any defects or deficiencies in the Real
Property or suggesting or requesting the performance of any repairs, alterations
or other work to the Real Property. Except as stated in this section, the Real
Property and the tangible personal property located therein is being conveyed
"as is" with all defects.
4.6 Leased Property. Schedule 4.6(a) sets forth the complete legal
description of the Leased Property described in Schedule 2.1(b) and a
description of the improvements (including buildings and other structures)
located on the Leased Property. To the best of Seller's knowledge and belief,
and subject to the findings made by Rishel Engineers as set forth in their
report to On Stage dated April 20, 1998, all of the buildings and structures
included in the Leased Property are, in all material respects, structurally
sound, and all of the heating, ventilating, air conditioning, plumbing,
sprinkler, electrical and drainage systems, elevators and roofs, and all other
fixtures, equipment and systems at or serving the Leased Property are, in all
material respects, in working order and are adequate for the use of the Leased
Property by the Seller and its tenant in conducting business, and there is no
condition that will result in the termination of the present access from the
Leased Property to any utility services and other facilities that service the
Leased Property. To the best of Seller's knowledge and belief, there exists no
item or matter (other than normal wear and tear) that would prevent the Leased
Property from being operated in the future in the same manner in which it has
been operated in the past, whether or not the transactions contemplated by this
Agreement are consummated. Notwithstanding the foregoing, Seller makes no
representation or warranty regarding the impact that changes in the general
economic condition or an increase in competition may have on the operation of
the Leased Property.
<PAGE>
The Seller has received no notices, oral or written, and has no actual
knowledge, without any duty of inquiry, that any governmental body having
jurisdiction over the Leased Property intends to exercise the power of
expropriation or eminent domain or a similar power with respect to all or any
part of the Leased Property. The Seller has received no notices, oral or
written, from any governmental body and has no actual knowledge that any of the
Leased Property or any improvements erected or situated thereon, or the uses
conducted thereon or therein, violate, or in the future will violate, any Laws
of any governmental body having jurisdiction over such Leased Property. The
Seller has received no notice from the holder of any mortgage, from any
insurance company which has issued a policy with respect to the Leased Property
or from any board of fire underwriters (or other body exercising similar
functions) claiming any defects or deficiencies in the Leased Property or
suggesting or requesting the performance of any repairs, alterations or other
work to the Leased Property. Except as set forth on Schedule 4.6(b), each item
of tangible personal property included in the Purchased Assets, located within
the Leased Property and having a replacement value greater than $1,000 is in
working order.
4.7 Liabilities. Except as specified on Schedule 2.2, none of the
Purchased Assets are subject to any Liabilities.
4.8 Taxes. Except as set forth on Schedule 4.8, the Seller has duly
filed all returns for Taxes that are required to be filed and has paid all Taxes
shown as being due pursuant to such returns or pursuant to any assessment
received, that relate to the Purchased Assets. All Taxes related to the
Purchased Assets that Seller has been required by Law to withhold or to collect
have been duly withheld and collected and have been paid or will be paid over to
the proper governmental authorities on or before Closing. There are no
proceedings or other actions, nor to Seller's knowledge, is there any basis for
any proceedings or other actions, for the assessment and collection of
additional Taxes of any kind with respect to the Purchased Assets.
4.9 Legal Proceedings and Compliance with Law.
(a) Except as set forth on Schedule 4.9(a), there is no
Litigation that is pending or, to Seller's knowledge without duty of inquiry,
threatened against or related to Seller with respect to the Purchased Assets. To
Seller's knowledge, there has been no material Default under any Law applicable
to the Purchased Assets, including any Law relating to protection or quality of
the environment, and Seller has received no notice from any governmental entity
regarding any alleged Default or investigation under any written order,
instruction or direction pursuant to, any Law. There has been no Default with
respect to any Court Order applicable to the Purchased Assets.
(b) Without limiting the generality of Section 4.9(a), except
as described on Schedule 4.9(b), and subject to those items set forth in the
Phase I Environmental Site Assessment Reports of the Real Property and the
Leased Property dated May 4, 1998 and prepared by Paul Booth, Jr. Ph.D., of
Wetland and Environmental Services, to the best of Seller's knowledge without
duty of inquiry, there has not been any Environmental Condition at the Real
Property or the Leased Property, nor has Seller received written notice of any
such Environmental Condition or any investigation, to determine whether any such
Environmental Condition exists. "Environmental Condition" means any condition or
circumstance, including the presence of Hazardous Substances, whether created by
the Seller or any third party, at or relating to the Real Property or the Leased
Property that would (i) require abatement or correction under an Environmental
Law, (ii) give rise to any civil or criminal liability under an Environmental
Law, or (iii) create a public or private nuisance. "Environmental Law" means all
Laws and Court Orders relating to protection or quality of the environment as
well as any principles of common law under which a Person may be held liable for
the release or discharge of any materials into the environment.
(c) The Seller has delivered to the Buyers correct and
complete copies of all written reports, studies or assessments in Seller's
possession or control that relate to any Environmental Condition. The Seller
knows of no other written reports, studies or assessments, whether in Seller's
possession or control, that relate to any Environmental Condition.
<PAGE>
(d) To the best of Seller's knowledge without duty of inquiry,
Seller has obtained and is in material compliance with all Permits, all of which
are listed on Schedule 2.1(e) along with their respective expiration dates, that
are required for the ownership of the Purchased Assets. The Permits are
currently valid and in full force and Seller has filed such timely and complete
renewal applications as may be required with respect to the respective Permits.
To Seller's knowledge, no revocation, cancellation or withdrawal of a Permit has
been threatened.
4.10 Seller Not in Default under any Contract. Seller has not received
any communication from, or given any communication to, any other party
indicating that Seller or such other party, as the case may be, is in Default
under any Contract relating to the Purchased Assets and, to the best of Seller's
actual knowledge without duty of inquiry, none of the other parties to any such
Contract to which Seller is a party is in Default thereunder.
4.11 Finder's Fees. No Person, retained by Seller is or will be
entitled to any commission or finder's or similar fee in connection with this
transaction.
4.12 Investment Representations.
(a) Seller has not relied on any purchaser representative, On Stage
or the Buyers, in connection with the acquisition of the Shares hereunder.
Seller (i) has such knowledge, sophistication and experience in business and
financial matters that it is capable of evaluating the merits and risks of an
investment in the Shares, (ii) fully understands the nature, scope and duration
of the limitations on transfer contained in this Agreement and (iii) can bear
the economic risk of an investment in the Shares and can afford a complete loss
of such investment. Seller has had an adequate opportunity to ask questions and
receive answers from the officers of On Stage and the Buyers concerning any and
all matters relating to the transactions described herein including without
limitation the background and experience of the officers and directors of On
Stage, the plans for the operations of the business of On Stage and the Buyers,
the business, operations and financial condition of On Stage and the Buyers, and
any plans for additional acquisitions and the like. Seller has asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to its satisfaction. Seller acknowledges that neither the
officers of On Stage or the Buyers have assured, guaranteed or otherwise led
Seller to expect any particular level of performance in the market value or
other value of the Shares.
(b) Seller further represents, warrants, acknowledges and
agrees that it (i) is acquiring the Shares under this Agreement for its own
account, and not on behalf of other persons, and for investment and not with a
view to the resale or distribution of all or any part of such Shares and (ii)
will not sell or otherwise transfer the Shares unless, in the opinion of counsel
who is satisfactory to On Stage, the transfer can be made without violating the
registration provisions of the Securities Act and the rules and regulations
promulgated thereunder. Notwithstanding the foregoing, the Seller shall be
entitled from time to time, as may be required under certain loan agreements, to
assign the Shares to its lenders or lenders' agents as collateral.
(c) Seller further represents, warrants, acknowledges and
agrees that it is making an investment decision based solely on its review of
the SEC Reports (as defined in Section 5.5) and the terms of this Agreement and
is not relying, and has not relied, upon anything outside of the immediately
aforementioned sources in making its investment decision.
4.13 Restricted Stock. The Seller acknowledges and agrees that the
Shares will not be registered under the Securities Act and, therefore, may not
be sold, assigned or transferred until duly registered under the Securities Act
or in a transaction exempt from registration. The parties agree that the
certificates representing Shares shall bear the following legend:
TRANSFER RESTRICTED
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be sold, assigned or otherwise transferred unless duly
registered under such Act or upon receipt by On Stage of an
opinion of counsel satisfactory to On Stage that such sale,
assignment or transfer may be made exempt from the
registration requirements of such Act.
<PAGE>
4.14 Full Disclosure. There are and will be no materially misleading
statements in any of the representations and warranties made by Seller in this
Agreement (including the Schedules and Exhibits attached hereto) or in any of
the documents, certificates and instruments delivered or to be delivered by
Seller pursuant to this Agreement and Seller has not omitted to state any fact
necessary to make statements made herein or therein not materially misleading.
50 Representations and Warranties of On Stage and the Buyers. On
Stage and the Buyers hereby represent and warrant to Seller as follows:
5.1 Corporate Status.
(a) The Buyers are corporations duly organized, validly existing
and in good standing under the laws of the State of Nevada and are qualified to
do business as foreign corporations and are in good standing in each
jurisdiction where failure to do so would have a material adverse effect on
their ability to comply with their obligations to Seller under this Agreement.
They have the requisite power and authority to execute and deliver this
Agreement and the documents related thereto and to which they are parties and to
perform the transactions to be performed by them thereunder, and such execution,
delivery and performance by them has been duly authorized by all necessary
corporate action.
(b) On Stage is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada and is qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where failure to do so would have a material adverse effect on its ability to
comply with its obligations to Seller under this Agreement. It has the requisite
power and authority to execute and deliver all the documents to which it is a
party and to perform the transactions to be performed by it thereunder, and such
execution, delivery and performance by it have been duly authorized by all
necessary corporate action.
5.2 Enforceability. This Agreement to which the Buyers and On Stage are
a party constitutes their valid and binding obligation, enforceable against them
in accordance with its terms except to the extent such enforcement may be
limited by the applications of bankruptcy laws and similar laws relating to
creditor's rights or the application of equitable principles.
5.3 Consents and Approvals. Neither the execution and delivery by the
Buyers and On Stage of this Agreement or the related documents to which they are
a party, nor their performance of the transactions to be performed by them
hereunder or thereunder, will require any filing, consent or approval or
constitute a Default under (a) any Law or Court Order to which they are subject,
(b) their Charter Documents or bylaws or (c) any Contract, Permit or other
document to which they are a party or by which their properties or other assets
may be subject.
5.4 Capital Stock Ownership. The total authorized capital stock of On
Stage consists of 25,000,000 shares of Common Stock (of which approximately
7,190,738 shares were issued and outstanding as of December 31, 1997), 1,000,000
shares of preferred stock, par value $.01 per share (of which no shares are
outstanding). As of April 21, 1998, On Stage had outstanding options and
warrants to purchase 3,354,828 shares of Common Stock. All of On Stage's
outstanding shares of Common Stock are and will be, upon consummation of the
transactions contemplated by this Agreement, duly and validly authorized and
issued, fully paid and non-assessable. Upon completion of this transaction at
the Closing, the Seller shall have received valid title to the Shares (which
Shares shall represent 2.79% of the 7,397,350 number of shares of On Stage
Common Stock then issued and outstanding) free and clear of all Encumbrances
(other than restrictions imposed generally by applicable securities laws). The
Shares when issued shall be duly and validly authorized and issued, fully paid
and non-assessable.
<PAGE>
5.5 SEC Filings. On Stage has heretofore delivered or made available to
Seller, in the form filed with the Commission, together with any amendments
thereto, (i) its final prospectus dated August 13, 1997, (ii) its Year End
Report on Form 10-KSB, as amended, for the fiscal year ended December 31, 1997,
(iii) the Form 8-K report, as amended, reflecting the financial information of
Gedco USA, Inc., and (iv) the Quarterly Report on Form 10-QSB for the fiscal
quarter ended March 31, 1998 (collectively, the "SEC Reports"). The SEC Reports
were prepared substantially in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated under such act, and did not at the time they were filed
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and there have occurred no material changes since such disclosures
were made.
5.6 Finder's Fees. No Person retained by either the Buyers or On Stage
is or will be entitled to any commission or finder's or similar fee in
connection with this transaction.
5.7 Full Disclosure. There are and will be, at the time of Closing, no
materially misleading statements in any of the representations and warranties
made by the Buyers or On Stage in this Agreement, the SEC Reports (including the
Schedules and Exhibits, attached hereto and thereto), or in any of the
documents, certificates and instruments delivered or to be delivered by them
pursuant to this Agreement and they have not omitted to state any fact necessary
to make statements made herein or therein not materially misleading.
5.8 Financing. The Buyers have applied for financing and will use
reasonable efforts to obtain the same under terms reasonably satisfactory to the
Buyers and in an amount at least equal to $1,100,000.
60 Certain Agreements.
6.1 Access. Between the date of this Agreement and the Closing Date,
the Seller, upon reasonable advance notice from the Buyers, shall (a) give the
Buyers and their authorized representatives and legal counsel reasonable access
during normal business hours to the Real Property, the Leased Property, the
Purchased Assets, and to all books, contracts and records related to the
Purchased Assets, (b) permit the Buyers to make inspections thereof, and (c)
cause their officers and advisors to furnish the Buyers with such financial and
operating data and other information with respect to the Purchased Assets and to
discuss with the Buyers and their authorized representatives and legal counsel
issues relating to the Purchased Assets, all as the Buyers may from time to time
reasonably request. For a period of three years following Closing, the Seller
shall give the Buyers access to all records relating to the Purchased Assets and
allow the Buyers to make copies, at the Buyers' expense, of such records. In the
event the Seller, subsequent to having provided the Buyers with access to said
records, needs to obtain copies of said records, the Buyers will allow the
Seller to make such copies, at the Seller's expense.
6.2 Exclusivity. From the date hereof until the earlier of the
consummation of the Closing or the termination of this Agreement, neither Seller
nor any of its respective agents shall, directly or indirectly, solicit or
negotiate or enter into any agreement with any other Person, or provide any
nonpublic information to any other Person, with respect to or in furtherance of
any proposal for a merger or business combination involving, an acquisition of
any interest in, or (except in the ordinary course of business) sale of the
Purchased Assets except for the acquisition of the Purchased Assets by the
Buyers.
6.3 Update Schedules. Between the date hereof and the Closing Date,
Seller shall promptly disclose to the Buyers in writing any information set
forth in the Schedules that is no longer complete, true or applicable and any
information of the nature of that set forth in the Schedules that arises after
the date hereof and that would have been required to be included in the
Schedules if such information had been obtained on the date of delivery thereof.
<PAGE>
6.4 Required Consents, Regulatory and other Approvals. The Seller shall
(i) take all commercially reasonable steps necessary or desirable, and proceed
diligently and in good faith and use all commercially reasonable efforts, as
promptly as practicable to obtain the Required Consents, approvals or actions
of, to make all filings with, and to give all notices to, governmental or
regulatory authorities or any other Person required of the Seller to consummate
the transactions contemplated hereby, (ii) provide such other information and
communications to such governmental or regulatory authorities or other Persons
as the Buyers or such governmental or regulatory authorities or other Persons
may reasonably request in connection therewith and (iii) cooperate with the
Buyers as promptly as practicable in obtaining the Required Consents, approvals
or actions of, making all filings with, and giving all notices to, governmental
or regulatory authorities or other Persons required in order to enable the
Buyers to operate the Purchased Assets as they were operated on the date hereof
by the Seller and consummate the transactions contemplated hereby. The Seller
shall provide prompt notification to the Buyers when any Required Consent,
approval, action, filing or notice referred to in clause (i) above is obtained,
taken, made or given, as applicable, and will advise the Buyers of any
communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any governmental or regulatory
authority or other Person regarding any of the transactions contemplated by this
Agreement or any of the documents related thereto. Additionally, the Buyers
shall take all commercially reasonable steps necessary or desirable, and proceed
diligently and in good faith and use all commercially reasonable efforts, as
promptly as practicable to assist the Seller in obtaining the Required Consents.
6.5 Publicity. For so long as this Agreement is in effect or Seller
owns any shares of On Stage, neither the Seller nor On Stage nor the Buyers nor
any Affiliates which they respectively control shall issue or cause the
publication of any press release or other public statement or announcement with
respect to this Agreement or the transactions contemplated hereby or thereby
without the prior consultation and mutual approval of the other parties hereto,
which such approval shall not be unreasonably withheld.
6.6 Satisfaction of Liabilities. The Seller shall at the Closing, fully
satisfy or cause to have been satisfied all third party Liabilities and
obligations related to the Purchased Assets which are not also Assumed
Liabilities.
6.7 Restrictions on Transfer. The Seller shall not, other than through
a private sale, until one year from the Closing Date, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any of the Shares or (ii) enter
into any swap or other agreement that transfers, in whole or in part, any of the
economic consequences of ownership of the Shares, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of any of the
Shares, in cash or otherwise, without the prior written consent of On Stage,
which consent is not to be unreasonably withheld.
6.8 Piggyback Registration.
(a) Commencing on the 366th day after the Closing Date, and
continuing thereafter for a period of fifteen years, whenever On Stage proposes
to register any of its shares of the Common Stock under the Securities Act, it
will give prompt notice to the Seller and, if permitted by the proposed form of
registration statement, will include in such registration (the "Piggyback
Registration"), subject to the allocation provisions discussed in Sections
6.8(c), any of Seller's Shares acquired as part of the Purchase Price or
otherwise acquired within thirty (30) days from the Closing Date (collectively,
the "Eligible Shares") with respect to which it has received written request for
inclusion within 20 days after such notice is given by On Stage. (b) In all
Piggyback Registrations, On Stage will pay the expenses related to registration
of the Eligible Shares (including, without limitation, On Stage's legal fees for
said registration); provided, however, that Seller shall pay the underwriting
commissions related to the registration of the Eligible Shares and the expenses
of Seller's counsel, if any.
<PAGE>
(c) If a Piggyback Registration is an underwritten
registration on behalf of On Stage and the managing underwriter advises On Stage
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, On Stage will allocate
the securities to be included as follows: first, the securities On Stage
proposes to sell on its own behalf; and second, pro rata on the basis of the
number of shares of Common Stock owned among (i) the other Persons selling in
the registration and (ii) the Seller.
(d) 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 solely by On Stage.
6.9 Registration Rights. Commencing on the 731st day after the Closing
Date, and continuing thereafter for so long as Seller owns Eligible Shares, the
Seller may, upon written notice (a "Demand Notice") to On Stage, request that On
Stage effect the registration (at On Stage's expense) under the Securities Act
of all or part of the Eligible Shares held by the Seller. On Stage will use all
reasonable efforts to effect (at the earliest possible date) the registration,
under the Securities Act, of such Eligible Shares (each, a "Registration"). Any
request for a Registration pursuant to this Section 6.9 (a "Demand
Registration") shall specify the number of Seller's Eligible Shares requested to
be registered and the intended method or methods of disposition. On Stage shall
pay all registration expenses in connection with any Registration initiated as a
Demand Registration, provided, however, that Seller may make one demand for
registration under this Section 6.9.
6.10 Option. In each event that On Stage shall sell shares of its
Common Stock prior to May 31, 2003, the Seller shall have and is hereby granted
the right and option to purchase from On Stage the number of shares of Common
Stock which shall be equal to the number of shares sold by On Stage (in the
aggregate, to the third party and the Seller) multiplied times the Seller's
Ownership Percentage. "Seller's Ownership Percentage" shall mean the number of
shares of Common Stock then owned by the Seller divided by the number of shares
of Common Stock issued and outstanding prior to such sale. In each event that On
Stage sells shares of Common Stock prior to May 31, 2003, it shall give the
Seller written notice of the number of shares sold and the purchase price per
share. In the event that On Stage sold the shares for other than for cash, the
Seller, upon exercise of the right and option contained in this Section 6.10,
shall pay for each share a price equal to the average closing price per share as
quoted on the Nasdaq National Market for the five days immediately prior to the
purchase of such shares. The option set forth in this Section 6.10 may be
exercised by the Seller at any time within 20 days of the date of receipt of
such notice from On Stage. In order to exercise such option, the Seller shall
deliver a written notice of exercise to On Stage together with a check for the
aggregate purchase price of the shares to be purchased by it.
6.11 Appointment to Board of Directors. Within thirty (30) days
from the Closing Date, On Stage will cause a nominee of the Seller or its
successor or assign, subject to the approval of On Stage's Board of Directors in
its reasonable discretion, to be elected to On Stage's Board of Directors and to
serve in such capacity until such director's seat is up for re-election by its
shareholders. Notwithstanding the foregoing, (i) Mr. Mel Woods, the President
and COO of FFWW is hereby approved as a nominee, (ii) any other officer of FFWW
holding the rank of vice president or higher (unless On Stage's Board of
Directors, in its reasonable discretion, has reason to believe that appointing
said officer would be materially detrimental to the ongoing business of On
Stage) is hereby approved as a nominee, and (iii) Seller shall not nominate (x)
any of Seller's employees, (y) any person whose election as director would have
an adverse effect on Buyer's licenses or (z) any casino owner or employee. For
so long as Seller and or any of its affiliates owns 2.79% or more of the issued
and outstanding shares of Common Stock of On Stage, On Stage's inside directors
will continue to nominate and recommend to its shareholders the election, as a
director, Seller's or any of its affiliates' nominee (subject to the above
conditions).
70 Conditions Precedent to Obligations of On Stage and the Buyers.
All obligations of the Buyers and On Stage to consummate this
transaction are subject to the satisfaction prior thereto of each of the
following conditions (unless waived by the Buyers and On Stage or the Buyers and
On Stage agree in writing to extend the Closing Date, all at their sole and
absolute discretion):
<PAGE>
7.1 Legality. No Law or Court Order shall be pending or threatened that
prevents or that seeks to restrain the consummation, or challenges the validity
or legality, of this Agreement or that would materially limit or adversely
affect the Buyers' acquisition of the Purchased Assets.
7.2 Representations and Warranties. The Seller's representations and
warranties set forth in this Agreement shall be true and correct in all material
respects on the date hereof and (except to the extent such representations and
warranties speak as of an earlier date) shall also be true and correct in all
material respects on and as of the Closing Date (except as otherwise
contemplated by this Agreement) with the same force and effect as if made on and
as of the Closing Date.
7.3 Agreements, Conditions and Covenants. The Seller shall have
substantially performed or complied with all agreements, conditions and
covenants required by this Agreement to be performed or complied with by Seller
on or before the Closing Date.
7.4 Certificates. The Buyers shall have received a certificate from
Seller's Secretary as to the effect set forth in Sections 7.2 and 7.3 hereof.
7.5 Required Consents and Approvals. All Required Consents, approvals
and actions of, filings with and notices to any governmental or regulatory
authority necessary to permit the Buyers and the Seller to perform their
obligations under this Agreement (i) shall have been duly obtained, made or
given, (ii) shall be in form and substance reasonably satisfactory to the
Buyers, (iii) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (iv) shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any governmental or
regulatory authority necessary for the consummation of the transactions
contemplated by this Agreement and the documents related thereto shall have
occurred.
7.6 Third Party Consents. All consents (or in lieu thereof waivers)
to the performance by the Buyers and the Seller of their obligations under this
Agreement or to the consummation of the transactions contemplated hereby as are
required under any Contract to which the Buyers or the Seller are a party or by
which any of the Purchased Assets are bound (i) shall have been obtained, (ii)
shall be in form and substance reasonably satisfactory to the Buyers, (iii)
shall not be subject to the satisfaction of any condition that has not been
satisfied or waived and (iv) shall be in full force and effect, except where the
failure to obtain any such consent (or in lieu thereof waiver) could not
reasonably be expected, individually or in the aggregate with other such
failures, to materially adversely affect the Buyers, the Purchased Assets, the
Assumed Liabilities or otherwise result in a material diminution of the benefits
of the transactions contemplated by this Agreement to the Buyers.
7.7 Other Agreements. The Seller shall have executed and delivered to
the Buyers and On Stage, in form and substance reasonably satisfactory to On
Stage and the Buyers, (i) the termination agreement regarding the On Stage
Lease, (ii) the assignment and assumption agreement and the subordination,
attornment and non-disturbance agreement regarding the Leased Property and (iii)
the assignment and assumption agreement regarding the Eddie Miles Sublease,
which sublease shall be amended such that both parties shall have to agree to
extend the term of the sublease in order for the subtenant thereunder to
exercise a renewal option and, furthermore, shall have the payment obligations
of the subtenant thereunder guaranteed by Charles Dean.
<PAGE>
7.8 Title Insurance. The Seller shall have obtained and delivered to
the Buyers, at the Buyer's sole cost and expense, the following title insurance
commitments issued by Commonwealth Land Title Insurance Company, or another
title insurance company acceptable to the Buyers in their reasonable discretion:
(i) as to the Real Property, (a) a commitment for issuance of an ALTA Form B
Owner's Policy of Title Insurance with extended coverage showing all
endorsements thereto which the Buyers may request, along with the legible copies
of all documents shown as exceptions thereto and (b) a commitment for issuance
of a 1970 ALTA Form B Mortgagee's Policy of Title Insurance with extended
coverage showing all endorsements thereto which the Buyers' lender may request,
along with the legible copies of all documents shown as exceptions thereto; and
(ii) as to the Leased Property, (a) a commitment for issuance of an ALTA Form B
Leasehold Owner's Policy of Title Insurance with extended coverage showing all
endorsements thereto which the Buyers may request, along with the legible copies
of all documents shown as exceptions thereto and (b) a commitment for issuance
of a 1970 ALTA Form B Leasehold Mortgagee's Policy of Title Insurance with
extended coverage showing all endorsements thereto which the Buyers' lender may
request, along with the legible copies of all documents shown as exceptions
thereto (all of the foregoing title commitments may hereinafter be referred to
collectively as the "Commitments"). In order to satisfy the provisions of this
Section 7.8, each of the Commitments must (w) be satisfactory, in form and
substance, to the Buyers in their reasonable discretion and the Buyers' lender,
in its sole and absolute discretion, (x) contain no exceptions to title or the
survey, except for Permitted Encumbrances and those exceptions approved by the
Buyers (subject to the last sentence of this Section 7.8) and Buyers' lender, at
any time prior to Closing, and (y) have the appropriate policies of title
insurance issued pursuant to and in strict accordance with each of the
Commitments at or immediately following Closing, provided that if the title
insurance policies are to be issued immediately following Closing, the Buyers
and their lender shall each receive at Closing, for each Commitment, a "mark-up"
of the Commitment evidencing the form of the title insurance policy to be issued
pursuant to said Commitment and written evidence that gap coverage will be
provided. Anything set forth in this Agreement to the contrary notwithstanding,
the Buyers shall have the right to terminate this Agreement by delivering notice
of such termination to the Seller prior to the Closing if the Buyers in their
reasonable discretion determine that any one or more of the Encumbrances (other
than the Permitted Encumbrances) or any title exception or other matters shown
on any of the Commitments or the surveys are not acceptable to the Buyers. The
Seller covenants that it shall cure all title exceptions (other than the
Permitted Encumbrances) and other matters shown on any of the Commitments which
may be cured by payment of a sum of money not to exceed the Purchase Price or by
execution of a document requiring the signature of no party other than the
Seller or Seller's mortgagee, including any affidavits which may reasonably be
required by the title insurer (including, but not limited to, a standard title
insurance company form of owner's affidavit to induce the deletion from the
Commitments of any exception for parties in possession and for mechanics' or
materialmen's liens).
7.9 Estoppel Certificates. The Seller shall have delivered to the
Buyers all estoppel certificates and consents to assignment from any and all
mortgagees, lessors, lessees and or sub-lessees as Buyers may have reasonably
requested in connection with the Real Property or the Leased Property, in form
and substance reasonably satisfactory to the Buyers.
7.10 Regulatory and other Approvals. The Buyers shall have obtained all
governmental and regulatory approvals, actions, Permits, notices, licenses or
other authorizations required to operate the Purchased Assets in accordance with
their existing use.
7.11 Right of First Negotiation with FFWW. The Seller shall have caused
FFWW to grant to On Stage a thirty (30) day right of first negotiation to
acquire live theatrical/stage rights in all properties (other than ice shows,
character appearances and promotional tours) owned and controlled by FFWW and to
which FFWW desires to exploit such rights with a third party during a period of
five years from the Closing Date. 7.12 Financing. The Buyers shall have obtained
financing having terms reasonably satisfactory to the Buyers and in an amount at
least equal to $1,100,000, or, in the alternative, the Seller, at its sole
option and discretion, shall have agreed to obtain additional shares of On Stage
Common Stock, in lieu of the Purchase Cash, as provided in Section 2.5(c).
7.13 Pledge Agreement. The Seller shall have executed the Pledge
Agreement.
80 Conditions Precedent to Obligations of the Seller.
<PAGE>
All of Seller's obligations to consummate this transaction are subject
to the satisfaction prior thereto of each of the following conditions (unless
waived by the Seller or the Seller agrees in writing to extend the Closing Date,
all at the Seller's sole and absolute discretion):
8.1 Legality. No Law or Court Order shall be pending or threatened that
prevents or that seeks to restrain the consummation, or challenges the validity
or legality, of this Agreement or the transactions contemplated hereunder.
8.2 Representations and Warranties. The representations and warranties
of the Buyers and On Stage set forth in this Agreement shall be true and correct
on the date hereof and (except to the extent such representations and warranties
speak as of an earlier date) shall also be true and correct in all material
respects on and as of the Closing Date (except as otherwise contemplated by this
Agreement) with the same force and effect as if made on and as of the Closing
Date.
8.3 Agreements, Conditions and Covenants. The Buyers and On Stage shall
have substantially performed or complied with all agreements, conditions and
covenants required by this Agreement to be performed or complied with on or
before the Closing Date, including the delivery of the Purchase Price.
8.4 Purchase Price. The Buyers shall have delivered to the Seller the
Purchase Price and On Stage shall have delivered a certificate representing the
Shares, free and clear of all liens and encumbrances.
8.5 Officer's Certificates. The Seller shall have received certificates
of the Secretary of the Buyers and On Stage as to the effect set forth in
Sections 8.2 and 8.3 hereof.
8.6 Other Agreements. The Buyers and On Stage shall have executed and
delivered to the Seller the termination agreement regarding the On Stage Lease
and the assignment and assumption agreement regarding the Leased Property, in
form and substance reasonably satisfactory to the Seller.
8.7 Pledge Agreement. The Buyers and On Stage shall have executed the
Pledge Agreement.
90 Indemnification.
9.1 Seller's Indemnification . The Seller shall indemnify and hold
harmless the Buyers, On Stage, and their Affiliates, officers, directors,
employees, agents, successors and assigns (each, an "Indemnified Party") from,
against and in respect of any and all Liabilities, claims, demands, judgments,
settlement payments, losses, costs, damages, deficiencies and expenses
whatsoever (including reasonable attorneys', consultants' and other professional
fees and disbursements of every kind, nature and description incurred by such
Indemnified Party in connection therewith) (collectively, "Damages") that such
Indemnified Party may sustain, suffer or incur and that result from, arise out
of or relate to (a) the Purchased Assets if any of such Liabilities, claims,
demands, judgments, settlement payments, losses, costs, damages, or deficiencies
arise or result out of an event, situation or condition which occurred on or
prior to the Closing Date, (b) any breach of or any inaccuracy in any
representation, warranty, covenant or agreement of the Seller contained in this
Agreement, including any breach of the obligation to indemnify hereunder, (c)
any Environmental Condition existing on or prior to the Closing Date, and (d)
any Liability or obligation of the Seller arising out of the Purchased Assets
and involving taxes due and payable by, or imposed on the Seller for any taxable
periods ending on or prior to the Closing Date which are open to examination by
the Internal Revenue Service pursuant to any applicable statute of limitations
under the Code (whether or not such taxes have been due and payable).
9.2 Buyer's Indemnification . The Buyers and On Stage shall indemnify
and hold harmless the Seller and its Affiliates, officers, directors, employees,
agents, successors and assigns (each, an "Indemnified Party") from and against
any Damages that such Indemnified Party sustains, suffers or incurs and that
result from or arise out of (a) any breach of any representation, warranty,
covenant or agreement of the Buyer or On Stage contained in this Agreement and
(b) the operation of the Purchased Assets if such Damages arise or result out of
an event, situation or condition which occurs after the Closing Date.
<PAGE>
Notwithstanding any other provision of this Section 9, an Indemnified Party
shall be entitled to indemnification hereunder only when the aggregate of all
Damages to such Indemnified Party exceeds $50,000 (the "Threshold Amount") and
then such Indemnified Party shall be entitled to indemnification for all of its
Damages including the Threshold Amount; provided, however, that the Threshold
Amount shall not apply to Damages resulting from a breach of representations or
warranties with respect to any Taxes or any pending litigation described in
Schedule 4.9.
9.3 Claims Period. Any claim for indemnification under this Section 9
shall be made in good faith and, other than a claim based on a breach of
representations or warranties with respect to any Taxes, shall be made by giving
notice of such claim on or before the second anniversary of the Closing Date;
any such claim otherwise made under this Section 9, including, without
limitation, any such claim made after the second anniversary of the Closing
Date, shall be invalid. Any claim based on a breach of representations or
warranties with respect to any Taxes, shall be made by giving notice of such
claim on or before the third anniversary of the Closing Date.
9.4 Procedure for Claims.
(a) An Indemnified Party that desires to seek indemnification
under any part of this Section 9 shall give notice (a "Claim Notice") as soon as
practicable to the other party responsible or alleged to be responsible for
indemnification hereunder (an "Indemnitor") and to the Escrow Agent, prior to
the expiration of the claim period specified above. Such Claim Notice shall
briefly explain the nature of the claim and the parties known to be involved,
and shall specify the amount thereof. If the matter to which a claim relates
shall not have been resolved as of the date of the Claim Notice, the Indemnified
Party shall estimate the amount of the claim in the Claim Notice, but also
specify therein that the claim has not yet been liquidated (an "Unliquidated
Claim"). If an Indemnified Party gives a Claim Notice for an Unliquidated Claim,
the Indemnified Party shall also give a second Claim Notice (the "Liquidated
Claim Notice") within 60 days after the matter giving rise to the claim becomes
finally resolved, and the Liquidated Claim Notice shall specify the amount of
the claim. The Indemnitor to which a Claim Notice is given shall respond to any
Indemnified Party that has given a Claim Notice (a "Claim Response") within 30
days (the "Response Period") after the later of (i) the date that the Claim
Notice is given or (ii) if a Claim Notice is first given with respect to an
Unliquidated Claim, the date on which the Liquidated Claim Notice is given. Any
Claim Notice or Claim Response shall be given in accordance with the notice
requirements hereunder, and any Claim Response shall specify whether or not the
Indemnitor giving the Claim Response disputes the claim described in the Claim
Notice. If any Indemnitor fails to give a Claim Response within the Response
Period, such Indemnitor shall be deemed not to dispute the claim described in
the related Claim Notice. If any Indemnitor elects not to dispute a claim
described in a Claim Notice, whether by failing to give a timely Claim Response
or otherwise, then the amount ofsuch claim shall be presumptively deemed to be
an obligation of such Indemnitor.
(b) If any Indemnitor shall be obligated to indemnify an
Indemnified Party hereunder, such Indemnitor shall pay to such Indemnified Party
within 30 days after the last day of the applicable Response Period the amount
to which such Indemnified Party shall be entitled.
(c) If the Buyers or On Stage are the Indemnified Party and
the Seller fails to indemnify them within 30 days after the last day of the
applicable Response Period, then the Buyers and On Stage shall seek payment of
the related Damages in accordance with the terms of the Pledge Agreement. To the
extent that the shares being held under the Pledge Agreement are insufficient to
cover the Damages, the Seller shall be liable for the payment of any remaining
Damages. Notwithstanding the foregoing, in no event shall the aggregate amount
of Damages for which Seller shall be liable shall exceed $1,000,000 unless such
excess in Damages arises out of a breach of representations or warranties with
respect to any Taxes.
(d) If the Seller shall be the Indemnified Party, it shall
seek indemnification directly from the Buyers and On Stage.
<PAGE>
(e) If there shall be a dispute as to the amount or manner of
indemnification under this Section 9, the Indemnitor and the Indemnified Party
shall seek to resolve such dispute through negotiations and, if such dispute is
not resolved within twenty days, the Indemnified Party may pursue whatever legal
remedies may be available for recovery of the Damages claimed from any
Indemnitor. If any Indemnified Party fails to receive all or part of any
indemnification obligation when due, then such Indemnified Party shall also be
entitled to receive from the Indemnitor interest on the unpaid amount for each
day during which the obligation remains unpaid at an annual rate equal to 10%.
100 Termination.
10.1 Grounds for Termination. This Agreement may be terminated at any
time prior to the Closing
Date:
(a) by mutual written consent of the Buyers, On Stage and the
Seller;
(b) by the Seller or by On Stage or the Buyers, if the Closing
has not occurred on or before the date that is 30 Business Days from the date of
this Agreement; provided, however, that such right to terminate this Agreement
shall not be available to any party that has breached any of its covenants,
representations or warranties in this Agreement in any material respect (which
breach has not been cured);
(c) by the Seller, On Stage or the Buyers, if there shall be
any Law that makes consummation of this transaction illegal or otherwise
prohibited or if any Court Order enjoining the Seller, On Stage or the Buyers
from consummating this transaction is entered and such Court Order shall become
final and nonappealable;
(d) by On Stage or the Buyers, if the Seller shall have
breached any of its covenants hereunder or if the representations and warranties
of the Seller contained in this Agreement or in any certificate or other writing
delivered by the Seller pursuant hereto shall not be true and correct in any
material respect; or
(e) by the Seller, if On Stage or the Buyers shall have
breached any of their covenants hereunder or if their representations and
warranties contained in this Agreement or in any certificate or other writing
delivered by them pursuant hereto shall not be true and correct in any material
respect.
10.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 10.1, any party may pursue any legal or equitable remedies that may be
available if such termination is based on a breach of the other party.
110 Exclusive Dealing and Recoupment of Expenses.
11.1 Exclusive Dealing. Until the earlier of (i) seventy-five (75) days
after the execution hereof or (ii) if this Agreement is terminated by On Stage
or the Buyers pursuant to Section 10.1(a), (b) or (d) above, the Seller will
not, directly or indirectly, through any representative or otherwise, solicit or
entertain offers from, negotiate with or in any manner encourage, accept, or
consider any proposal of any other person relating to the purchase of the
Purchased Assets. The Seller will immediately notify On Stage and the Buyers
regarding any written proposal made to the Seller's Board of Directors for any
such offer. On Stage and the Buyers agree that, except as otherwise prohibited
by law or pursuant to the terms of any confidentiality agreement entered into
prior to the execution hereof and binding on On Stage or the Buyers, to disclose
to the Seller the terms of any material acquisition or divestiture intended by
On Stage or the Buyers, prior to any public announcement of the same. On Stage
and the Buyers also agrees to use their reasonable best efforts to obtain the
consent to disclose such information to the Seller from any third party to which
On Stage or the Buyers are bound to such confidentiality. Each party agrees that
in the event such party breaches its obligations under this Section 11.1, such
breaching party shall pay to the non-breaching party, such non-breaching party's
reasonable out-of-pocket expenses incurred in connection with evaluating the
proposed purchase of the Purchased Assets, in an amount not to exceed $50,000,
which shall be such non-breaching party's sole remedy under this Section 11.1.
<PAGE>
11.2 Recoupment of Expenses. If, within six (6) months of the
termination of this Agreement as provided for in Section 10. above, (i) the
Seller has not reimbursed the Buyers for the out-of-pocket expenses they may be
entitled to in accordance with Section 11.1, (ii) the Buyers have indicated
their ability and willingness to consummate the proposed purchase of the
Purchased Assets on the terms set forth herein, and (iii) the Seller enters into
an agreement or agreements (whether written or oral), which are ultimately
consummated, relating to the sale of the Purchased Assets, whether directly or
indirectly, through sale, merger, consolidation or otherwise, for a purchase
price (the "Aggregate Purchase Price") having a fair market value in excess of
$2,000,000, the Seller shall pay to the Buyers an amount equal, in the
aggregate, to the lesser of (i) all reasonable out-of-pocket expenses of the
Buyers incurred in connection with evaluating the proposed purchase of the
Purchases Assets and (ii) the amount by which the Aggregate Purchase Price
exceeds $2,000,000 (the "Breakup Fee"); provided, however, in no event shall
such Breakup Fee exceed $100,000.
120 Payment of Expenses; Sales and Transfer Taxes. Each party hereto
shall pay its own expenses for lawyers, accountants, consultants, investment
bankers, brokers, finders and other advisers with respect to this Agreement and
the transactions contemplated hereunder. The Seller shall indemnify On Stage and
the Buyers and their officers, directors, employees, agents and Affiliates in
respect of, and hold each of them harmless from and against, any and all Damages
suffered, occurred or sustained by any of them or to which any of them becomes
subject, resulting from, arising out of or relating to the failure of the Seller
to comply with the terms of any such provisions applicable to the transactions
contemplated by this Agreement. It is further agreed by the parties hereto that
all taxes due in the States of South Carolina as a result of the transfer of
title of real estate or the sale of assets occasioned by the transactions
contemplated herein shall be paid by the Seller.
130 Contents of Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to this transaction and
supersedes all prior agreements or understandings among the parties regarding
those matters.
140 Amendment, Parties in Interest, Assignment, Etc. This Agreement may
be amended, modified, supplemented, or assigned only by a written instrument
duly executed by each of the parties hereto. If any provision of this Agreement
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect any
other provision hereof, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective heirs, legal representatives, successors and
assigns of the parties hereto. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a written
instrument duly executed by such party. The parties hereto shall execute and
deliver any and all documents and take any and all other actions that may be
deemed reasonably necessary by their respective counsel to complete this
transaction.
150 Interpretation. Unless the context of this Agreement clearly
requires otherwise, (a) references to the plural include the singular, the
singular the plural, and the part the whole, (b) references to any gender
include all genders (c) "or" has the inclusive meaning frequently identified
with the phrase "and/or," (d) "including" has the inclusive meaning frequently
identified with the phrase "but not limited to," (e) references to "hereunder"
or "herein" relate to this Agreement and (f) all currencies refer to United
States dollars. The section and other headings contained in this Agreement are
for reference purposes only and shall not control or affect the construction of
this Agreement or the interpretation thereof in any respect. Section,
subsection, schedule and exhibit references are to this Agreement unless
otherwise specified. Each accounting term used herein that is not specifically
defined herein shall have the meaning given to it under GAAP.
16. Remedies. The parties hereto shall be entitled to such rights and
remedies as such party may have at law or in equity or otherwise for any breach
of this Agreement, including the right to seek specific performance, rescission
<PAGE>
17. Notices. All notices that are required or permitted hereunder shall
be in writing and shall be sufficient if personally delivered or sent by mail,
facsimile message or Federal Express or other delivery service. Any notices
shall be deemed given upon the earlier of the date when received at, or the
third day after the date when sent by registered or certified mail or the day
after the date when sent by Federal Express to, the address or fax number set
forth below, unless such address or fax number is changed by notice to the other
party hereto: If to the Buyers and On Stage:
c/o On Stage Entertainment, Inc.
4625 West Nevso Drive
Las Vegas, NV 89103
FAX: 702-364-1072
Attn: Christopher Grobl, General Counsel
with a required copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
FAX: 215-963-5299
Attn: James W. McKenzie, Esquire
If to the Seller:
Calvin Gilmore Productions, Inc.
2877 Guardian Lane
P. O. Box 2050
Virginia Beach, VA 23450
FAX: (757) 459-6422
Attn: General Counsel
In each case, with a required copy to:
Fox Family Worldwide, Inc.
10960 Wilshire Blvd.
Los Angeles, CA 90024
FAX: (310) 235-5116
Attn: Fred Ordower
18. Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of South Carolina, without regard to its
provisions concerning conflict of laws.
19. Consent to Jurisdiction; Service of Process, etc.
(a Each party hereto irrevocably and unconditionally (i) agrees
that any suit, action or other legal proceeding (collectively, "Suit") arising
out of this Agreement may be brought and adjudicated in the United States
District Court for the District of Nevada, if such court does not have
jurisdiction or will not accept jurisdiction, in any court of competent civil
jurisdiction in Columbia, South Carolina, (ii) consents and submits to the
non-exclusive jurisdiction of any such court for the purposes of any such Suit
and (iii) waives and agrees not to assert by way of motion, as a defense or
otherwise in any such Suit, any claim that he, she or it is not subject to the
jurisdiction of the above courts, that such Suit is brought in an inconvenient
forum or that the venue of such Suit is improper.
(b Each party hereto also irrevocably consents to the service of
any process, pleadings, notices or other papers in a manner permitted by the
notice provisions of Section 16 or by any other method provided or permitted
under applicable law. Each party hereto agrees that final judgment in any Suit
(with all right of appeal having either expired or been waived or exhausted)
shall be conclusive and that On Stage and the Buyers shall be entitled to
enforce such judgment in any other jurisdiction of the world by suit on the
judgment, a certified or exemplified copy of which shall be conclusive evidence
of the fact and amount of indebtedness arising from such judgment.
20. Headings; Gender. All section headings contained herein are for
convenience of reference only, do not form a part of this Agreement and shall
not affect in any way the meaning or interpretation hereof. Words used herein,
regardless of the number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context requires.
<PAGE>
21. Further Assurances. At any time and from time to time after the
Closing, the parties agree to cooperate with each other, to execute and deliver
such other documents, instruments to transfer or assignment, files, books and
records and do all such further acts and things as may be reasonably required to
carry out the intent of the parties hereunder.
22. Exhibits and Schedules. The Exhibits hereto, and the Schedules
referred to herein and therein are intended to be and hereby are specifically
made a part of this Agreement. Notwithstanding any other provision of this
Agreement, each exception set forth in the Schedules herein shall be deemed to
qualify each representation and warranty set forth in this Agreement as the
context requires.
23. No Benefit to Others. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto and the heirs, administrators, personal representatives,
successors, assigns, and they shall not be construed as conferring any rights on
any other persons.
24. Counterparts. This Agreement may be executed in counterparts,
each of which shall be binding as of the date first written above, and all of
which shall constitute one and the same instrument. Each such copy shall be
deemed to be an original, and it shall not be necessary in making proof this
Agreement to produce or account for more than one such counterpart.
25. Survival. Except as expressly set forth in this Agreement to
the contrary, all of the terms and provisions hereof, including all agreements,
covenants, representations and warranties set forth herein, shall survive the
Closing.
[Signatures on Next Page]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto on the day and year first written above.
ON STAGE THEATERS SURFSIDE BEACH, INC.
By: ________________________________
Name:
Title:
ON STAGE THEATERS NORTH MYRTLE
BEACH, INC.
By: ________________________________
Name:
Title:
ON STAGE ENTERTAINMENT, INC.
By: ________________________________
Name:
Title:
CALVIN GILMORE PRODUCTIONS, INC.
By: ________________________________
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATIN EXTRACTED FORM THE JUNE 30,
1998 10-Q OF ON STAGE ENTERTAINMENT, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,088
<SECURITIES> 0
<RECEIVABLES> 1,354
<ALLOWANCES> 0
<INVENTORY> 227
<CURRENT-ASSETS> 5,033
<PP&E> 23,434
<DEPRECIATION> 2,853
<TOTAL-ASSETS> 27,073
<CURRENT-LIABILITIES> 5,145
<BONDS> 14,671
0
0
<COMMON> 74
<OTHER-SE> 7,184
<TOTAL-LIABILITY-AND-EQUITY> 27,073
<SALES> 14,450
<TOTAL-REVENUES> 14,533
<CGS> 10,922
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,340
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 445
<INCOME-PRETAX> (541)
<INCOME-TAX> 1
<INCOME-CONTINUING> (542)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (542)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
