<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended MARCH 31, 1997
--------------
or
[ ] Transition Report Pursuance to Section 13 or 15(d) of the Securities
Exchange act of 1934.
For the transition period from _______________ to _______________
Commission File Number 0-23782
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RENAISSANCE ENTERTAINMENT CORPORATION
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(Exact name of registrant as specified in its charter)
COLORADO 84-1094630
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4410 ARAPAHOE AVENUE, SUITE 200, BOULDER, COLORADO 80303
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 444-8273
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of May 11, 1997, Registrant had 9,636,262 shares of common stock, $.03 Par
Value, outstanding.
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INDEX
Page
Number
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Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of March 31, 1997 (Unaudited)
and December 31, 1996 3
Statements of Operations for the Three Months
Ended March 31, 1997 and 1996
(Unaudited) 4
Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996
(Unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. Other Information 10
2
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RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
March 31, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Current Assets:
Cash and equivalents $ 310,297 $ 374,289
Stock subscription receivable 133,749
Accounts receivable (net) 63,094 99,551
Note receivable, current portion
Inventory 184,494 184,695
Prepaid expenses and other 718,042 139,167
----------- -----------
Total Current Assets 1,275,927 931,451
Property and equipment, net of accumulated depreciation 6,950,514 7,176,755
Note receivable, net of current portion
Covenant not to compete 40,000 45,000
Goodwill 608,157 620,826
Restricted cash 902,387 890,116
Other assets 167,600 208,201
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TOTAL ASSETS $ 9,944,585 $ 9,872,349
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,119,252 $ 1,068,028
Notes payable, current portion 1,855,669 1,209,119
Unearned income 443,803 160,588
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Total Current Liabilities 3,418,724 2,437,735
Notes payable, net of current portion 2,315,918 2,341,987
Other 37,025 37,175
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Total Liabilities 5,771,667 4,816,897
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Stockholders' Equity:
Common stock, $.03 par value, 50,000,000
shares authorized, 9,614,287 shares
issued and outstanding at March 31, 1997 288,654 277,013
Additional paid-in capital 9,005,819 8,071,634
Accumulated earnings (deficit) (5,121,555) (3,293,195)
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Total Stockholders' Equity 4,172,918 5,055,452
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Total Liabilities and Stockholders' Equity $ 9,944,585 $ 9,872,349
----------- -----------
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</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
MARCH 31
--------------------------
1997 1996
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REVENUE:
Sales $ 14,873 $ (10,003)
Faire operating costs 23,319 15,884
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Gross Profit (8,446) (25,887)
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OPERATING EXPENSES:
Salaries 761,177 709,526
Depreciation and amortization 269,641 105,556
Advertising 12,495 17,033
Other operating expenses 701,787 609,276
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Total Operating Expenses 1,745,100 1,441,391
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Net Operating (Loss) Income (1,753,546) (1,467,278)
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Other Income (Expenses):
Interest income 14,711 13,731
Interest (expense) (91,432) (36,861)
Other income (expense) 1,908 (248,743)
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Total Other Income (Expenses) (74,813) (271,873)
----------- -----------
Net Income (Loss) before (Provision)
Credit for Income Taxes (1,828,359) (1,739,151)
(Provision) Credit for Income Taxes 239,273
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Net Income (Loss) to Common Stockholders $(1,828,359) $(1,499,878)
----------- -----------
----------- -----------
Net Income (Loss) per Common Share $ (.19) $ (.18)
----------- -----------
----------- -----------
Weighted Average Number of Common
Shares Outstanding 9,429,622 8,380,702
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----------- -----------
The accompanying notes are an integral part of the financial statements.
4
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RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months ended
March 31,
---------------------------
1997 1996
------------ ------------
Cash Flows from Operating Activities:
Net income (Loss) $(1,828,359) $(1,499,878)
----------- -----------
Adjustments to reconcile net income (Loss)
to net cash provided by operating
activities:
Depreciation and amortization 269,642 105,556
Gain (loss) on disposal of assets 1,563 21,919
(Increase) decrease in:
Income tax refund receivable (193,803)
Inventory 201 (20,187)
Receivables 50,600 33,721
Prepaid expenses and other (418,754) (675,493)
Increase (decrease) in:
Accounts payable and accrued expenses 51,223 805,688
Unearned revenue and other 283,065 302,119
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Total adjustments 237,540 379,520
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Net Cash Provided by Operating
Activities (1,590,819) (1,120,359)
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Cash Flows from Investing Activities:
Investment in restricted cash (12,271) (1,877)
Construction in progress costs (1,046,285)
Acquisition of property and equipment (27,210) (341,460)
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Net Cash (Used in) Investing Activities (39,481) (1,389,622)
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Cash Flows from Financing Activities:
Common stock issued and additional
paid-in capital 945,826 425,293
Proceeds from notes payable 750,000 1,983,198
Principal payments on notes payable (129,518)
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Net Cash Provided by Financing Activities 1,566,308 2,408,491
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Net Increase (Decrease) in Cash (63,992) (101,489)
Cash, beginning of period 374,289 732,552
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Cash, end of period $ 310,297 $ 631,063
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Interest paid $ 91,432 $ 11,981
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Income tax paid $ - $ 108,175
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The accompanying notes are an integral part of the financial statements.
5
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION AND
CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
March 31, 1997 (Unaudited)
1. UNAUDITED STATEMENTS
The balance sheet as of March 31, 1997 and December 31, 1996, the statement
of operations and the statement of cash flows for the three month periods
ended March 31, 1997 and 1996, have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and changes in financial position at March
31, 1997 and for all periods presented, have been made.
These statements should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 1996, filed with the
Securities and Exchange Commission.
2. CALCULATION OF EARNINGS (LOSS) PER SHARE
The earnings (loss) per share is calculated by dividing the net income
(loss) to common stockholders by the weighted average number of common
shares outstanding.
3. SUBSEQUENT EVENTS
During the quarter ended March 31, 1997, an officer/director and related
party loaned the Company $750,000 on a short-term basis. Subsequent to
March 31, 1997, the Company issued $1,000,000 principal amount of its 9%
Convertible Secured Debentures due 2002 (the "Debentures"), including
$750,000 in payment of the short-term loans. The Debentures are secured by
mortgages on the Company's Wisconsin and Virginia Faire sites and are
convertible into shares of the Company's Common Stock after April 30, 1998,
at the lesser of $4.50 per share or 70% of the market value of the
Company's Common Stock at the time of conversion. The Debenture holders
also were granted warrants representing the right to acquire up to 200,000
shares of the Company's Common Stock at an exercise price equal to the
lesser of $3.00 per share or the market value for the Company's Common
Stock at the time the warrants are exercised.
Subsequent to March 31, 1997, the Company also issued $350,000 principal
amount of its 10% Convertible Secured Notes due October 31, 1997 (the
"Notes"). The Notes are secured by a mortgage on the Company's Wisconsin
Faire site and are convertible into shares of the Company's Common Stock at
the lesser of $1.75 per share or 50% of the market value for the Company's
Common Stock at the time the Notes are converted.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements, including the footnotes.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE
MONTHS ENDED MARCH 31, 1996
The results of operations of the Company for the quarter ended March 31 always
reflect a significant loss, due to the fact that there are no substantial
revenues during this period, while some expenses at each of the company's five
faire locations continue throughout the year, as do corporate expenses.
Operating expenses increased $303,709 or 21%, from $1,441,391 in 1996 to
$1,745,100 in 1997. The primary cause of this increase was the inclusion of
New York in 1997 results. The 1996 results did not include any expenses for the
New York Faire, as a result of the acquisition being accounted for using the
pooling of interests method. Additionally, the Virginia Faire, which opened in
April 1996, had only minimal expenses in the first quarter of 1996, but had the
normal off-season complement of expenses during the first quarter 1997.
Salaries, included in operating expenses, increased 7%, from $709,526 in 1996 to
$761,177 in 1997, reflecting the additional personnel at both the New York and
Virginia Faires.
Depreciation and amortization increased 155%, from $105,556 in 1996 to $269,641
in 1997. This increase is primarily the result of depreciation on the
substantial investment in buildings and improvements to the Virginia Faire site.
Other operating expenses increased $92,511 or 15%, from $609,276 in 1996 to
$701,787 in 1997. This increase is primarily the result of operating expenses
relating to the New York and Virginia Faires.
As a result of the foregoing, net operating income (before interest charges and
other income) decreased $286,268 from a loss of $1,467,278 for the 1996 period
to a loss of $1,753,546 for the 1997 period.
A 148% increase in interest expense from $36,861 in 1996 to $91,432 in 1997
resulted from a large increase in the Company's borrowing levels throughout the
1997 period as compared to the 1996 period.
Combining net operating income (loss) with other income (expenses) resulted in
an $89,208 decrease in net income before taxes, from a loss of $1,739,151 for
the 1996 period to a loss of $1,828,359 for the 1997 period.
As a result of operating losses for the entire fiscal year ended March 31, 1996
(the Company's fiscal year, which previously ended March 31), a refund of taxes
paid in prior years was available in the 1996 period. This resulted in a credit
to Income Taxes of $239,273 for the quarter ended March 31, 1996.
Net income (loss) to common stockholders decreased $328,481, from a loss of
$1,499,878 for the 1996 period, to a loss of $1,828,359 for the 1997 period.
Finally, net income (loss) per common share decreased from a loss of $.18 for
the 1996 period to a loss of $.19 for the 1997 period, based on 8,380,702
weighted average shares outstanding during the 1996 period, and 9,429,622
weighted average shares outstanding during the 1997 period.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES - MARCH 31, 1997 COMPARED TO DECEMBER 31, 1996
The Company's working capital deficit widened during the quarter ended March 31,
1997, from $1,506,284 at December 31, 1996 to $2,142,797 at March 31, 1997. In
order to reduce the Company's working capital requirements, management has
implemented a number of cost reductions which will significantly reduce
operating expenses during the fiscal year ending December 31, 1997. Operating
expenses for the fiscal 1997 periods, when compared to the similar 1996 periods,
will reflect these savings offset by increased costs associated with a full
year's operating costs for the Virginia Faire which opened in late April 1996.
The Company's working capital requirements are greatest during the period from
January 1 through April 30, when it is incurring start-up expenses for its first
faires of the season, the Southern California and Virginia Faires. The company
has historically relied upon revolving credit facilities to meet its working
capital requirements during this period. At December 31, 1996, the Company has
outstanding $1,000,000 in short-term lines of credit borrowings, which was the
maximum amount available under the lines and did not, therefore, have any unused
credit available for the 1997 faire season. During the quarter ended March 31,
1997, the Company entered into a loan workout agreement with respect to the
lines of credit which permit the Company to pay these lines from 1997
operations. $100,000 of the lines were paid, leaving a balance of $900,000.
During the quarter ended March 31, 1997, the Company also raised $750,000 of
working capital through the issuance of short-term notes payable to an
officer/director of the Company and a related party. Subsequent to the end of
the quarter, these notes were converted into a like principal amount of the
Company's 9% Convertible Secured Debentures due 2002, an additional $250,000
principal amount of the Debentures were issued and $350,000 principal amount of
the Company's 10% Convertible Secured Notes due October 31, 1997 were issued.
See Note 3 of Notes to Consolidated Financial Statements for additional
information regarding the issuance of these convertible securities. While
Management believes that the Company currently has sufficient working capital to
fund its operations for the balance of the current fiscal year, Management
believes that the Company should raise additional working capital in order to
more adequately fund its operations. There can be no assurance that such funds
will be available to the Company or, if available, available on terms acceptable
to the Company.
Reviewing the change in financial position over the quarter, current assets,
largely comprised of cash and prepaid expenses, increased from $931,451 at
December 31, 1996 to $1,275,927 at March 31, 1997, an increase of $344,476 or
37%. Of these amounts, cash and cash equivalents decreased from $374,289 at
December 31, 1996 to $310,297 at March 31, 1997. Accounts receivable decreased
from $99,551 at December 31, 1996 to $63,094 at March 31, 1997. Prepaid
expenses (expenses incurred on behalf of the Southern California and Virginia
Faires) increased from $139,167 at December 3, 1996 to $718,042 at March 31,
1997. These costs are expensed once the Faires are operating.
Total assets increased from $9,872,349 at December 31, 1996 to $9,944,585 at
March 31, 1997, a nominal increase of $72,236 or 1%. Of this amount, the
increase in current assets of $344,476 was partially offset by moderate
decreases in the other non-current asset categories. Property, plant and
equipment (net of depreciation) decreased by $226,241 or 3% from $7,176,755 at
December 31, 1996 to $6,950,514 at March 31, 1997 as a result of depreciation of
assets for the quarter. Goodwill, which arose from the purchase of the two
California Faires and is being amortized over 15 years, decreased from $620,826
at December 31, 1996 to $608,157 at March 31, 1997, as the result of normal
amortization. Other miscellaneous assets (organizational costs and vendor
deposits) decreased from $253,201 at December 31, 1996 to $207,600 at March 31,
1997.
8
<PAGE>
Current liabilities increased from $ 2,437,735 at December 31, 1996, to
$3,418,724 at March 31, 1997, an increase of $980,989 or 40%. This increase is
due to increased indebtedness incurred to cover the Company's operating expenses
during the quarter prior to the opening of the 1997 faire season. Notes
payable, current portion increased from $1,209,119 at December 31, 1996 to
$1,855,669 at March 31, 1997, reflecting the $750,000 of short-term borrowing
described above. Unearned income, which consists of the sale of admission
tickets to upcoming faires, and deposits received from craft vendors for future
faires, increased from $160,588 at December 31, 1996 to $443,803 at March 31,
1997. The increase in total liabilities from $4,816,897 at December 31, 1996 to
$5,771,667 at March 31, 1997 is due to the increase in current liabilities.
Stockholders' Equity decreased from $5,055,452 at December 31, 1996 to
$4,172,918 at March 31, 1997, a decrease of $882,534 or 17%. This decrease
resulted from the net loss of $1,828,359, partially offset by additional
contributed capital received as the result of the exercise of 140,292 Class A
Warrants at $2.00 per share, the exercise of 58,000 Class B Warrants at $2.625
per share, and the exercise of 111,716 employee stock options at prices ranging
from $1.125 to $3.50 per share. As of March 31, 1997, the Company had
outstanding 10,787,387 shares of common stock, 1,681,064 Class A Warrants
representing the right to purchase common stock at $2.00 per share, and
1,992,742 Class B warrants representing the right to purchase common stock at
$2.625 per share.
The Company has no significant commitment for capital expenses during the fiscal
year ending December 31, 1997
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
See Note 3 of the Notes to Consolidated Financial Statements for
information regarding issuance of securities convertible into shares
of the Company's Common Stock and warrants to purchase Common Stock
issued subsequent to March 31, 1997.
Item 3. DEFAULTS UPON SENIOR SECURITIES
During the quarter ended March 31, 1997, the Company entered into a
Loan Workout Agreement with respect to the Company's bank lines of
credit and bank mortgages on the Company's Wisconsin Faire site.
Pursuant to the Agreement, the banks agreed to restructure the payment
schedule for the lines of credit to permit the Company to pay these
lines of credit from 1997 operations. Pursuant to the Agreement,
$100,000 of the lines of credit were paid during the quarter, leaving
a balance of $900,000 to be paid prior to September 30, 1997. The
bank also agreed that if the Company remains current on its
obligations through December 31, 1997, that the due date for the
mortgage on the Wisconsin site will be extended from January 31, 1998
to December 31, 1998.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The company was not required to file report on Form 8-K during the
quarter ended March 31, 1997.
Exhibit 10.1 Form of Subscription and Purchase Agreement, including
the appendix thereto, for the Company's 10% Convertible
Secured Notes, incorporated herein by reference to
Registration Statement on Form S-1, No. 333-26677.
Exhibit 10.2 Form of Subscription and Purchase Agreement, including
appendix thereto, for the Company's 9% Secured Debentures
due 2002 - filed herewith.
Exhibit 27. Financial Data Schedule - filed herewith.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RENAISSANCE ENTERTAINMENT CORPORATION
Dated: 5/15/97 /s/ James R. McDonald
-------------- ------------------------------------------
James R. McDonald, Chief Financial Officer
11
<PAGE>
EXHIBIT 10.2
SUBSCRIPTION AND PURCHASE AGREEMENT
9% Convertible Secured Debentures due 2002
Warrants to Purchase Common Stock
THIS SUBSCRIPTION AND PURCHASE AGREEMENT (the "Agreement") dated as of
the 8th day of May, 1997 by and between RENAISSANCE ENTERTAINMENT
CORPORATION, a Colorado corporation (the "Company"), and Charles S. Leavell
(the "Investor"). Investor and the other persons who have entered into
identical Subscription and Purchase Agreements with the Company are herein
collectively referred to as the "Investors."
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth in this Agreement, the Company and the
Investor mutually agree as follows:
ARTICLE 1
DESCRIPTION OF PROPOSED FINANCING
1.1 AUTHORIZATION OF THE DEBENTURES AND WARRANTS. The Company has
authorized the issuance and sale of (i) a maximum of $1,500,000 aggregate
principal amount of nine percent (9%) Convertible Secured Debentures due
2002, each in the principal amount of Fifty Thousand Dollars ($50,000) or an
integral multiple thereof (the debenture(s) issued pursuant to this Agreement
and the other debentures being issued pursuant to identical Subscription and
Purchase Agreements entered into between the Company and Investors being
herein referred to collectively as the "Debentures"), and (ii) warrants to
purchase up to 300,000 shares of the Company's Common Stock (the "Warrants").
The Debentures, which will be identical in all respects, except as to date,
name of Investor and amount of investment, shall be in the form attached
hereto as Appendix A and the Warrants shall be in the form attached hereto as
Appendix B.
1.2 PURCHASE AND SALE OF THE DEBENTURES; ISSUANCE OF WARRANTS.
Subject to the terms and conditions of this Agreement and in reliance upon
the representations and warranties contained herein, the Company agrees to
sell to Investors the principal amount of Debentures for which each such
Investor shall subscribe and to issue to Investor Warrants representing the
right to purchase Ten Thousand (10,000) shares of the Company's Common Stock
for each Fifty Thousand Dollars ($50,000) principal amount of Debentures
acquired. Investor, in reliance upon the representations and warranties of
the Company contained herein, agrees to purchase from the Company the
principal amount of the Debentures set forth in Section 15.2 hereof.
1.3 CLOSING. Closing(s) of the purchase and sale of the Debentures
contemplated by this Agreement (herein the "Closing") shall take place at
such times as agreed between the Company and the Investor. At the Closing,
the Company shall deliver to each Investor (i) one or more Debentures made
payable to the order of such Investor, against delivery to the Company by the
Investor of a certified or cashier's check or other form of payment
acceptable to the Company in the amount of the purchase price of the
Debenture(s) subscribed for in Section 15.2 below, and (ii) one or more
Warrants registered in Investor's name for the Warrants to be issued as
described above.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investors that:
2.1 MISLEADING STATEMENTS. No statement by the Company in this
Agreement or in any document, written statement or certificate furnished or
to be furnished to the Investors pursuant to this Agreement (including
<PAGE>
the Disclosure Schedule attached hereto and made a part hereof for all
purposes) or in connection with the transactions contemplated by this
Agreement, when taken together, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary
to make the statements therein made not misleading.
2.2 CORPORATE ORGANIZATION. (a) Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Colorado and has the corporate power and authority to carry on the
Company's business as it is now being conducted and to own and lease the
property and assets that it now owns and leases in connection with the
Company's business. Company is duly licensed or qualified and in good
standing as a foreign corporation in each jurisdiction in which the character
of the properties owned or leased by it or the nature of the business
conducted by it makes such licensing or qualification necessary. The
jurisdictions in which the Company and its subsidiary, Creative Faires
Limited, are qualified are listed in Section 2.2 of the Disclosure Schedule.
(b) True, accurate and complete copies of Company's Articles of
Incorporation and By-Laws, as in effect on the date hereof, have heretofore
been delivered to Investor.
2.3 CAPITALIZATION. (a) The authorized capital stock of Company
consists of 1,000,000 shares of Preferred Stock, $1.00 par value, and
50,000,000 shares of Common Stock, $.03 par value, and as of May 5, 1997, no
shares of Preferred Stock and 10,809,362 shares (including 1,173,100 shares
being held in escrow pending the potential sale of such shares to foreign
investors represented by Credit Bancorp) of Common Stock were issued and
outstanding. All of the issued and outstanding shares of Common Stock are
validly issued, fully paid, nonassessable and free of preemptive rights.
(b) As of the date hereof, there are no outstanding
subscriptions, options, calls, contracts, commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement obligating Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the capital stock or
obligating Company to grant, extend or enter into any such agreement or
commitment, except as set forth in Section 2.3 to the Disclosure Schedule,
and there are no voting trusts, proxies or other agreements or understandings
to which Company is a party or is bound with respect to the voting of any
shares of its capital stock.
2.4 AUTHORIZATION. (a) Company has all requisite corporate power and
authority to enter into, execute, deliver and consummate the transactions
contemplated by this Agreement, the Debenture, the Warrant, the Mortgage, the
Deed of Trust and any other instruments and agreements contemplated herein
required to be executed and delivered by it pursuant to this Agreement
(collectively, the "Related Instruments"). The Board of Directors of Company
has taken all action required by law, the Articles of Incorporation and
By-Laws of the Company or otherwise to authorize the execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby, including the execution, delivery and consummation of the Related
Instruments. No other corporate act or proceeding on the part of Company is
necessary to authorize this Agreement or any of the Related Instruments or
the transactions contemplated hereby or thereby. This Agreement is, and each
of the Related Instruments, when executed and delivered to Investor by
Company, will be, a valid and binding obligation of Company enforceable
against Company in accordance with its terms.
(b) Company has previously delivered to Investor true and
complete copies, certified by the Secretary or an Assistant Secretary of
Company, of the resolutions duly and validly adopted by the Board of
Directors of Company evidencing its authorization of the execution and
delivery of this Agreement and the Related Instruments and the consummation
of the transactions contemplated hereby and thereby (which resolutions have
not been modified, revoked or rescinded in any respect).
2.5 NO VIOLATION. Neither the execution and delivery by Company of
this Agreement or any of the Related Instruments, nor the consummation by
Company, of the transactions contemplated hereby or thereby will violate any
material provision of the General Corporation Law of the State of Colorado,
the Articles of Incorporation or By-Laws of Company, or, violate, or be in
conflict with, or constitute a default (or an event or
-2-
<PAGE>
condition which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or cause the acceleration of the maturity of any
liability or obligation pursuant to, or, violate any statute or law or any
judgment, decree, order, writ, injunction, regulation or rule of any court or
governmental authority.
2.6 REPORTS AND FINANCIAL STATEMENTS. Since December 31, 1996,
Company has filed all material forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto) required to be
filed by it under the federal securities laws ("Company's SEC Reports"),
copies of which have been previously delivered to Investor by Company. As of
their respective dates, the Company's SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Financial
Statements contained in Company's SEC Reports have been prepared in
accordance with Generally Accepted Accounting Principles (except as may be
indicated therein or in the notes thereto) and fairly present the financial
position of Company as of the dates thereof and the results of their
operations and changes in financial position for the periods then ended.
2.7 NO UNDISCLOSED OR CONTINGENT LIABILITIES. Except as and to the
extent set forth in Section 2.7 of the Disclosure Schedule, Company has no
material liabilities or obligations relating to the Company's business of any
nature (whether absolute, secured, contingent or otherwise and whether due or
to become due) which are not fully reflected or reserved against in the
financial statements for the nine-months ended December 31, 1996 (the
"Financial Statements") except for liabilities and obligations incurred in
the ordinary course of business and consistent with past practice since the
date thereof. The reserves for liabilities and obligations reflected in the
Financial Statements have been calculated in accordance with generally
accepted accounting principles.
2.8 ABSENCE OF CERTAIN CHANGES. Except as and to the extent set forth
in Section 2.8 of the Disclosure Schedule, since December 31, 1996, Company
in respect of the Company's business, has not taken any action not in the
ordinary course of business and consistent with past practices.
2.9 LITIGATION. Except as set forth in Section 2.9 of the Disclosure
Schedule, there are no claims, actions, suits, proceedings, investigations or
inquiries pending against the Company's business which would have a material
adverse effect on the Company's business taken as a whole.
2.10 TITLE TO PROPERTY, ENCUMBRANCES. Except as set forth on Section
2.10 to the Disclosure Schedule, Company has good, valid and marketable title
to each parcel of real property owned by it and is in possession of and has
good title to, or has valid leasehold interests in, all tangible personal
property used in or reasonably necessary for the conduct of its business.
2.11 PLANT AND EQUIPMENT. Except as set forth in Section 2.11 of the
Disclosure Schedule, all plants, structures, machinery, equipment and
personal property or real property improvements owned, leased or used by the
Company have no material defects (ordinary wear and tear excepted) and are in
good and normal operating condition and repair, and are adequate for the uses
to which they are being put.
2.12 LEASES. Section 2.12 of the Disclosure Schedule contains an
accurate and complete list of all material leases (including all material
amendments thereof and material modifications thereto) (the "Leases")
pursuant to which Company leases real or personal property for the exclusive
use or benefit of the Company's business. Company has not received any
written notification that it is in default with respect to any of the Leases;
and, except as set forth in Section 2.12 of the Disclosure Schedule, no event
or condition has occurred which (whether with or without notice, lapse of
time or the happening or occurrence of any other event) would constitute a
material default thereunder.
2.13 COMPLIANCE WITH APPLICABLE LAW. Except as set forth in Section
2.13 of the Disclosure Schedule, Company is presently complying in all
respects with all material laws, rules, regulations, orders, ordinances,
judgments, decrees, orders, writs and injunctions of all governmental
authorities.
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2.14 TAXES. Company has (i) timely filed all material returns required
to be filed by it with respect to all federal, state and local taxes
(collectively referred to as "Taxes"), (ii) paid all Taxes shown to have
become due pursuant to such returns, including federal and state payroll
taxes, and (iii) paid all other Taxes for which a notice of assessment or
demand for payment has been received.
2.15 EMPLOYEE PLANS. Section 2.15 of the Disclosure Schedule contains
an accurate and complete list of all employee benefit plans ("Plans").
Company has no commitment to provide any additional Plan, policy or
arrangement, or to modify an existing Plan covering employees engaged in the
Company's business.
2.16 LABOR MATTERS. Except as set forth in Section 2.16 of the
Disclosure Schedule, Company is presently complying in all material respects
with all material laws respecting employment and employment practices, and is
not engaged in any unfair labor practice or unlawful employment practice
relating to the Company's business.
2.17 ENVIRONMENTAL PROTECTION. Except as set forth in Section 2.17 of
the Disclosure Schedule, Company has obtained all material permits, licenses
and other authorizations which are required in respect of the operation of
the Company's business under federal, state and local laws relating to
pollution or protection of the environment (the "Environmental Laws"), other
than those permits, licenses and other authorizations, the failure to so have
obtained will not, individually or in the aggregate, have a material adverse
effect on the Company's business taken as a whole.
2.18 CONSENTS AND APPROVALS. Except as set forth in Section 2.18 of
the Disclosure Schedule, Company is not required to obtain, transfer or cause
to be transferred any material consent, approval, license, permit or
authorization of, or make any declaration, filing or registration with, any
third party in connection with (a) the execution and delivery by Company of
this Agreement or the Related Instruments or (b) the consummation by Company
of the transaction contemplated hereby or thereby.
2.19 CONTRACTS AND COMMITMENTS. Except as set forth in Section 2.19 of
the Disclosure Schedule:
(a) Company is not a party to or bound by any agreements, contracts
or commitments which are material to the Company's business taken as a
whole; and
(b) Company is not in default under or in violation of, nor is
there any basis for any valid claim of default under or violation of, any
material contract, agreement or commitment made or obligation relating to
the Company's business.
2.20 INSURANCE. Company's insurance contracts, including those
covering its properties, buildings, fixtures, equipment, inventory and
employees, are of types and in amounts considered adequate for similar
businesses. Such insurance contracts shall be maintained in full force and
effect.
2.21 COMPANY COVENANTS. So long as any Debentures are outstanding:
(a) Neither the Company nor any subsidiary (unless it is
wholly owned by the Company) will pay any dividends or distributions
to shareholders, except for dividends or distributions in Common Stock
of the Company;
(b) Company will deliver to the Investor, within 120 days
after the end of each fiscal year, an officer's certificate stating
whether or not to the best knowledge of the signers thereof the
Company is in default in the performance or compliance of any of the
provisions of this Agreement, the Debenture or the Mortgage;
(c) All of the Company's SEC Reports and filings and all of
the Company's communications with shareholders will be furnished to
investor at the same time as they are filed with the SEC or furnished
to shareholders; and
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(d) Notice will be given to Investors of the occurrence of any
Event of Default (as defined in Section 11.1) or any fact, condition
or event that with the giving of notice or passage of time or both
would become an Event of Default or if Company becomes aware of any
material adverse change in the business prospects, financial condition
(including, without limitation, a proceeding in bankruptcy,
insolvency, reorganization or the appointment of a receiver or
trustee).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants that:
3.1 HIGH RISK INVESTMENT. The Investor is aware that investment in
the Debentures (the "Offering") involves risks. The Investor represents that
Investor has read and carefully considered the disclosures set forth in this
Subscription and Purchase Agreement and all documents furnished pursuant to
this Agreement, and understands that an investment in this Offering should be
considered only by a person able to withstand a total loss of such investment.
3.2 BINDING OBLIGATION. This Agreement and any other agreement
between the Company and the Investor expressly contemplated by this
Agreement, constitute a valid and legally binding obligation of the Investor.
3.3 CORPORATE INVESTORS. If the Investor is a corporation, it hereby
represents and warrants that:
(a) ORGANIZATION AND STANDING. The Investor is a corporation
duly and validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all requisite corporate power and
authority to own its properties and to carry on its business as now
conducted.
(b) AUTHORIZATION. All corporate action on the part of the
Investor, its officers and directors necessary for the authorization,
execution and delivery of this Agreement and all additional agreements
expressly contemplated by this Agreement and the performance of all
obligations of the Investor hereunder have been taken.
ARTICLE 4
FEDERAL AND OTHER SECURITIES LAWS
4.1 INVESTMENT REPRESENTATIONS AND WARRANTIES. The Investor further
represents and warrants that:
(a) INVESTMENT EXPERIENCE. The Investor represents that
Investor is experienced in evaluating and extending financing to companies
such as the Company, has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of the
investment, and has the ability to bear the economic risks of the
investment and to make an informed investment decision with respect
thereto. The Investor further represents that Investor has had, during the
course of the transaction and prior to the purchase of the Debentures, the
opportunity to ask questions of, and receive answers from, the Company
concerning the terms and conditions of the Offering and to obtain
additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to or to
which Investor had access.
(b) INVESTOR REPRESENTATIVE. If the Investor has used the
services of a Purchaser Representative, the Investor has received
confirmation in writing from such Purchaser Representative concerning the
specific details of any and all past, present or future relationships,
actual or contemplated, between himself
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or his affiliates and the Company or any of its affiliates, and any
compensation received or to be received as a result of any such
relationships.
(c) ACQUISITION FOR INVESTMENT FOR INVESTOR'S OWN ACCOUNT. This
Agreement is made with the Investor in reliance upon Investor's
representation to the Company, which by its acceptance hereof the Investor
hereby confirms and which by acceptance of any Debenture, the Holder
thereof shall also confirm, that the Debentures are being and the shares of
Common Stock issuable upon conversion of the Debentures will be, unless
such shares have been registered pursuant to the Securities Act of 1933, as
amended (the "1933 Act") and applicable state blue sky laws, acquired for
investment for Investor's (Debenture Holder's) own account, not as a
nominee or agent and not with a view to the sale or distribution of any
part thereof, and that Investor (Debenture Holder) has no present intention
of selling, granting participation in, or otherwise distributing the same.
Any resales of the Debentures or any shares of Common Stock issued upon the
conversion thereof will be in conformity with applicable law. By executing
this Agreement (or a Debenture), Investor (Debenture Holder) further
represents that Investor (Debenture Holder) does not have any contract,
undertaking, agreement, or arrangement with any person in violation of any
United States federal or state law to sell, transfer, or grant
participation to such person, or to any third person, with respect to the
Debentures or any shares of Common Stock issued upon the conversion
thereof. Investor (Debenture Holder) realizes that the basis for the
exemption from the registration requirements of the 1933 Act, relied upon
by the Company in connection with the Offering, may not be present if,
notwithstanding such representation, the Investor (Debenture Holder) has in
mind merely acquiring the Debentures for a fixed or determinable period and
selling the Debentures in the future, and Investor hereby confirms the
absence of any such intention.
(d) TRANSFER OR DISPOSITION OF SECURITIES. The Investor
understands that the Debentures and any shares of Common Stock issued upon
the conversion thereof may not be sold, transferred, or otherwise disposed
of without registration under the 1933 Act, and that in the absence of an
effective registration statement, such securities must be held
indefinitely. The Investor represents that, in the absence of an effective
registration statement, it will sell, transfer, or otherwise dispose of
such securities only in a manner consistent with the representations set
forth herein and in accordance with the provisions of this Agreement.
4.2 CERTIFICATE LEGENDS. The Investor agrees that all certificates
evidencing the Debentures, the Warrants and any shares of Common Stock issued
in respect thereto shall bear a legend in substantially the following form,
and by which the Investor agrees to be bound:
THE SECURITY DESCRIBED HEREIN HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR UNDER THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO SALE OR
DISTRIBUTION OF THIS SECURITY MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE 1933 ACT AND APPLICABLE STATE BLUE SKY LAWS.
4.3 STOP TRANSFER INSTRUCTION. The Company shall make a notation
regarding the restrictions on transfer of the Debentures and Warrants in its
stock books, and the Company shall not be required to transfer on its books
any of such securities that have been sold or transferred in violation of any
of the provisions of this Agreement, or to treat as the owner of such
securities any transferee to whom such securities have been so transferred.
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ARTICLE 5
CONDITIONS TO INVESTOR'S OBLIGATIONS AT THE CLOSING
The obligations of the Investor under Section 1.2 of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE. The
representations and warranties of the Company contained in Article 2 shall be
true on and as of the Closing with the same force and effect as if they had
been made at the Closing.
5.2 PERFORMANCE. The Company shall have conformed and complied with
all agreements and conditions contained in this Agreement required to be
performed or complied with by it on or before the Closing.
5.3 QUALIFICATIONS. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state, that are required in connection with the lawful issuance and
sale of the Debentures pursuant to this Agreement shall have been duly
obtained and shall be effective on and as of the Closing.
5.4 OPINIONS AND CERTIFICATES. All opinions of counsel to the Company
and all corporate certificates or documents in connection with the
transactions contemplated hereby and all documents and instruments incident
to such transactions shall be in form and substance satisfactory to the
Investor, and the Investor shall have received all such counterpart originals
or certified or other copies of such documents as Investor may reasonably
request.
5.5 DELIVERY OF DEBENTURES AND WARRANTS. The Investor shall have
received one or more properly executed Debenture and Warrant certificates
representing the Debentures and Warrants which the Investor is purchasing at
the Closing.
5.6 OFFICERS' CERTIFICATE. Company shall have delivered to the
Investor a certificate, dated the Closing Date, executed by its chief
executive and chief financial officers certifying the fulfillment of the
conditions specified in Sections 5.1 and 5.2 hereof.
5.7 MORTGAGE/TITLE POLICY. The Debentures shall be secured by a valid
Security Agreement and Fixture Financing Statement on the Company's faire
sites in Kenosha, Wisconsin and Fredericksburg, Virginia, including a
Mortgage (the "Mortgage") subject to prior mortgage liens in favor of Bank
One, Kenosha N.A., with respect to the Wisconsin site, and a Deed of Trust,
Assignment of Leases and Security Agreement (the "Deed of Trust") subject to
a prior deed of trust, assignment of leases and security agreement in favor
of Union Bank and Trust Company, with respect to the Virginia site. The
Mortgage shall be insured by Landmark Title Corporation and evidenced by a
Mortgagee's Policy in the amount of the Debentures.
ARTICLE 6
CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING
The obligations of the Company under Section 1.2 of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions as to the Investor:
6.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING. The
representations and warranties of the Investor contained in Articles 3 and 4
shall be true on and as of the Closing with the same force and effect as if
they had been made at the Closing.
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6.2 QUALIFICATIONS. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and
sale of the Debentures and Warrants pursuant to this Agreement shall have
been duly obtained and shall be effective on and as of the Closing.
6.3 PAYMENT OF PURCHASE PRICE. Investor shall have delivered to the
Company the total consideration for the Debentures and Warrants which the
Investor is purchasing at the Closing.
ARTICLE 7
DEBENTURES
7.1 PRINCIPAL AND INTEREST PAYMENTS. The Company shall pay interest
to the registered holders of the Debentures (the "Holders") on the principal
amount of the Debentures on the first business day of each calendar quarter
(the "Interest Payment Dates") of each year commencing on the first such day
to occur after Closing with respect to the purchase of such Debenture, at the
rate of Nine Percent (9%) per annum, accruing from the date of issuance after
as well as before maturity and default and after judgment. Accrued but
unpaid interest shall bear interest at the rate of Nine Percent (9%) per
annum until paid, commencing with the date on which such interest was due and
payable. Unless earlier converted into Common Stock in accordance with
Article 8 hereof, or accelerated in accordance with Article 11, the entire
outstanding amount of the Debentures and all accrued but unpaid interest
shall be due and payable in full on April 1, 2002.
7.2 REISSUE OF DEBENTURES. No Debenture shall be reissued with
respect to the principal amount of any Debentures which are paid pursuant to
this Agreement, and the Company shall cancel and terminate any Debenture
which has been fully paid or presented to it for exchange pursuant to any of
the provisions of this Agreement.
7.3 REGISTRATION AND TRANSFER OF DEBENTURES.
(a) The Company shall, at all times while any Debentures are
outstanding, act as the registrar of the Debentures and shall cause to be
kept at its principal office in the City of Boulder, Colorado, or in such
other place or places and by such other registrar or registrars, if any, as
the Company may designate, a register in which shall be entered the names
and addresses of the Holders of Debentures and particulars of the
Debentures held by them respectively and of all transfers of Debentures.
The name of the Holder shall be noted on the Debentures by the Company or
other registrar.
(b) No transfer of a Debenture shall be valid unless made by the
Holder or his executors or administrators or other legal representatives or
his or their attorney duly appointed by an instrument in writing in form
and execution satisfactory to the Company, upon compliance with the
provisions of this Agreement and the Debentures and such other requirements
as the Company and/or other registrar may reasonably prescribe, and unless
such transfer shall have been duly entered on the appropriate register
and/or noted on such Debenture by the Company or other registrar. The
person in whose name a Debenture is registered shall be deemed to be the
owner thereof.
7.4 EXCHANGES OF DEBENTURES. Debentures are issuable in denominations
of Fifty Thousand Dollars ($50,000) and integral multiples thereof.
Debentures of any authorized denomination may be exchanged for Debentures of
any other authorized denomination or denominations, any such exchange to be
for Debentures of an equivalent aggregate principal amount, as requested by
the Holders, and bearing the same interest rate and date of maturity as the
original Debentures. Any exchange of Debentures may be made at the offices of
the Company or at the offices of any registrar where a register is maintained
for the Debentures pursuant to the provisions of Section 7.3. Any Debentures
tendered for exchange together with a sum sufficient to cover any tax or
other governmental charge payable in connection with the transfer shall be
surrendered to the Company or appropriate registrar and shall be canceled.
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ARTICLE 8
CONVERSION
8.1 RIGHT OF CONVERSION. At any time after April 30, 1998 and prior
to maturity, the Holders of the Debentures shall have the right from time to
time to convert all or a portion of the principal balance thereof unpaid and
outstanding from time to time into shares of the Common Stock of the Company;
such conversion shall be made at the conversion price in effect at the time
of conversion, determined as hereinafter provided (the "Conversion Price").
The initial Conversion Price shall be Four Dollars Fifty Cents ($4.50) per
share (the "Initial Conversion Price"). The Conversion Price shall be the
lesser of the Initial Conversion Price (adjusted as set forth below) or
Seventy percent (70%) of the fair market value (as defined below) of the
Company's Common Stock on the Date of Conversion (as hereinafter defined).
Such right of conversion is conditioned upon the Holder's agreement to
convert a minimum principal amount of the Debentures of Ten Thousand Dollars
($10,000) at any time such Holder elects to exercise Holder's conversion
rights unless, at the time the Holder elects to convert the Debenture, Holder
holds less than Ten Thousand Dollars ($10,000) in principal amount of the
Debentures, in which instance, the entire amount shall be converted.
The fair market value per share of Common Stock at any date shall be (i)
the average of the mean of the closing bid and asked prices of the Common
Stock for the last 10 consecutive trading days before the relevant date, as
reported in the Wall Street Journal (or, if not so reported, as otherwise
reported by the National Association of Securities Dealers, Inc. (the "NASD")
or the NASD's Automated Quotation System ("NASDAQ")), or, (ii) in the event
the Common Stock is listed on a stock exchange or on the NASDAQ National
Market System (or other national market system), the fair market value per
share shall be the average of the closing prices on the exchange or on the
NASDAQ National Market System (or other national market system), as the case
may be, for the last 10 consecutive trading days before the relevant date, as
reported in the Wall Street Journal (or, if not so reported, as otherwise
reported by the stock exchange, NASDAQ or other national market system).
8.2 EXERCISE OF CONVERSION RIGHT.
(a) In order to exercise the conversion right provided in
Section 8.1, a Holder of the Debentures shall surrender the Debentures at
the office of the Company or other registrar appointed by the Company,
together with a conversion notice in the form attached to the Debenture as
Exhibit A thereto. Such Holder shall thereupon be deemed the holder of the
underlying shares of Common Stock, and the principal amount so converted of
such Debentures shall be deemed to have been paid in full. No adjustments
with respect to interest or dividends shall be made on the portion of any
Debenture converted under this Section. Thereupon such Holder and/or,
subject to the terms of this Agreement, including payment of all applicable
stamp or security transfer taxes or other governmental charges, Holder's
nominee(s) or assignee(s), shall be entitled to be entered in the books of
the Company as of the Date of Conversion (or such later date as is
specified in subsection 8.2(b)) as the holder of the number of shares of
Common Stock into which the applicable principal amount of such Debenture
is convertible in accordance with the provisions of this Article 8 and, as
soon as practicable thereafter, the Company shall deliver to such Debenture
Holder and/or, subject as aforesaid, the Holder's nominee(s) or
assignee(s), a certificate or certificates for such shares of Common Stock
and, if applicable, a check for any amount payable under Section 8.5.
(b) For the purposes of this Article 8, a Debenture shall be
deemed to be surrendered for conversion in the case of Section 8.1, on the
date (herein called "Date of Conversion") on which it is surrendered by
delivery to the Company at its principal office in Boulder, Colorado, or
other registrar, if any, appointed by the Company and of which the Holder
of the Debenture is notified in writing, and, in the case of a Debenture
surrendered by mailing or other means of transmission, on the date on which
it is received by the Company at its principal office in Boulder, Colorado,
or other registrar, if any, appointed by the Company and of which the
Holder of the Debenture is notified in writing; provided that if a
Debenture is surrendered for conversion on a day on which the register of
Common Stock is closed, the person or persons
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entitled to receive Common Stock shall become the holder or holders of
record of such shares or Common Stock as at the date on which such register
is next reopened.
(c) Except as otherwise provided herein, any part, being Ten
Thousand Dollars ($10,000) or an integral multiple thereof, of a Debenture
of a denomination in excess of Ten Thousand Dollars ($10,000) may be
converted as provided in this Article 8 and all references in this
Agreement to conversion of Debentures shall be deemed to include conversion
of such parts.
(d) The Holder of any Debenture of which part only is converted
shall upon the exercise of its right of conversion, surrender the said
Debenture to the Company or other registrar, if any, and the Company or
other registrar, if any, shall cancel the same and shall without charge
forthwith certify and deliver to the Holder a new Debenture or Debentures
in an aggregate principal amount equal to the unconverted part of the
principal amount of the Debenture so surrendered, provided that such new
Debenture(s) shall be issued only in denominations of Ten Thousand Dollars
($10,000) or integral multiples thereof.
(e) The Holder of a Debenture surrendered for conversion in
accordance with this Section shall be entitled to receive accrued and
unpaid interest on the principal amount thereof being converted to the
Interest Payment Date on or next preceding the Date of Conversion thereof,
but there shall be no payment or adjustment by the Company on account of
any interest accrued or accruing thereon from the latest Interest Payment
Date and the Common Stock issued upon such conversion shall rank only in
respect of dividends declared in favor of shareholders of record on and
after the Date of Conversion or such later date as such Holder shall become
the holder of record of such Common Stock pursuant to subsection 8.2(b),
from which applicable date they will for all purposes be and be deemed to
be issued and outstanding as fully paid and nonassessable shares of Common
Stock.
8.3 ADJUSTMENT OF CONVERSION PRICE. The Conversion Price shall be
subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend in shares of
its capital stock (other than an issuance of shares of capital stock to
holders of Common Stock who have elected to receive a dividend in shares in
lieu of cash), (ii) subdivide its outstanding shares of Common Stock, (iii)
reduce, consolidate or combine its outstanding shares of Common Stock into
a smaller number of shares, or (iv) issue by reclassification of its shares
of Common Stock any shares of the Company, the number of shares a Holder of
a Debenture thereafter surrendered for conversion shall be entitled to
receive shall be the number of shares of Common Stock of the Company which
he would have owned or would have been entitled to receive after the
happening of any of the events described above had such Debenture been
converted immediately prior to the happening of such event. Such
adjustment shall be made successively whenever any such effective date or
record date shall occur. An adjustment made pursuant to this subsection
(a) shall become effective retroactively, immediately after the record date
in the case of a dividend and shall become effective immediately after the
effective date in the case of a subdivision, reduction, consolidation,
combination or reclassification.
(b) If the Company shall at any time issue or sell or be deemed
pursuant to the provisions of subsections 8.3(c) and (d) hereof to have
issued or sold shares of its Common Stock for consideration per share less
than the Initial Conversion Price then in effect with respect to such
Common Stock, then the Initial Conversion Price shall be reduced by
multiplying it by a fraction, the numerator of which equals the number of
shares of Common Stock outstanding prior to the sale or issuance plus the
number of shares of Common Stock which would have been issued in the
transaction if the Initial Conversion Price had been applied, and the
denominator of which equals the number of shares of Common Stock
outstanding after the sale or issuance plus the number of shares of Common
Stock actually issued in the transaction.
(c) In case at any time after the date hereof the Company shall
in any manner grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase, or any options for
the purchase of, Common Stock or any stock or other securities convertible
into or exchangeable for Common Stock (such rights or options being herein
called "Options" and such convertible or exchangeable
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stock or securities being herein called "Convertible Securities") at an
option or conversion price per share of Common Stock (determined by
dividing: (i) the total amount, if any, received or receivable by the
Company as consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable upon the exercise of
such Options, plus, in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if
any, payable upon the issue or sale of such Convertible Securities and upon
the conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock of the Company, issuable upon the exercise of such
Options and in the case of Convertible Securities, upon conversion thereof)
less than the Initial Conversion Price then in effect with respect to such
Common Stock, then the total maximum number of shares of Common Stock
issuable upon the exercise and conversion of such Options and Convertible
Securities shall be deemed to be outstanding and to have been issued and
sold by the Company as of the date of the issue or sale of the Options, for
such price per share. No sale, issuance or transfer of shares of Common
Stock shall be deemed to have been made upon the actual issuance of such
Common Stock except as otherwise provided in subsection 8.3(e) hereof.
(d) In case at any time after the date hereof the Company shall
in any manner issue or sell (whether directly or by assumption in merger or
otherwise) any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price
per share of Common Stock issuable upon such conversion or exchange
(determined by dividing: (i) the total amount received or receivable by the
Company, as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be less
than the Initial Conversion Price then in effect with respect to such
Common Stock, then the total maximum number of shares of Common Stock
issuable upon conversion of all such Convertible Securities shall be deemed
to be outstanding and to have been issued and sold by the Company as of the
date of the issue or sale of the Convertible Securities, for such price per
share. No sale, issuance or transfer of shares of Common Stock shall be
deemed to have been made upon the actual issuance of such Common Stock
except as otherwise provided in subsection 8.3(e) hereof.
(e) If the purchase price payable or number of shares of Common
Stock subject to purchase as provided for in any Options referred to in
subsection 8.3(c) hereof, the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities referred to
in subsections 8.3(c) or (d), or the rate at which any Convertible
Securities referred to in subsections 8.3(c) or (d) are convertible into
Common Stock shall change so as to reduce the deemed sale price of Common
Stock previously calculated under subsections 8.3(c) and/or (d), then a
sale of shares of Common Stock shall be deemed to have occurred for the
purposes of subsections 8.3(c) and/or (d), as applicable, with appropriate
adjustments to be made to the number of shares of Common Stock deemed to
have been sold to reflect the prior related deemed sale and such
adjustments by the adjustment of the Initial Conversion Rate and Initial
Conversion Price pursuant to subsections 8.3(c) or (d), as applicable.
(f) In case of any consolidation of the Company with or merger
of the Company with or into another corporation or in case of any sale,
transfer or lease to another corporation of all or substantially all of the
property of the Company, the Company or such successor or purchasing
corporation, as the case may be, shall execute an agreement that the Holder
of a Debenture shall have the right thereafter upon payment of the Initial
Conversion Price in effect immediately prior to such action to purchase
upon conversion of the Debenture the kind and amount of shares and other
securities and property which the Holder would have owned or would have
been entitled to receive after the happening of such consolidation, merger,
sale, transfer or lease had the Debenture been converted immediately prior
to such action. The Company shall give prompt written notice of the
execution of any such agreement to the Holder of each Debenture at the
address of such Holder as shown on the records of the Company. Such
agreement shall provide for subsequent adjustments, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Section 8.3, after the happening of such consolidation, merger, sale,
transfer or lease.
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The provisions of this subsection 8.3(f) shall similarly apply to successive
consolidations, mergers, sales, transfers or leases.
(g) The provisions of this Section 8.3 shall not apply to any
currently outstanding securities of the Company or any management stock
grants or sales, stock options or shares of Common Stock issued upon
exercise of stock options issued to officers, directors, employees or
consultants of the Company pursuant to a plan heretofore adopted and
approved by the Board of Directors of the Company.
(h) Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities without the
issuance of shares of Common Stock, the Initial Conversion Price shall be
readjusted to the Initial Conversion Price which would have prevailed
absent the adjustment made as a result of the issuance of such Options or
Convertible Securities.
(i) In case any Options shall be issued in connection with the
issue or sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to have
been issued without consideration.
(j) In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the
amount received therefor by the Company. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair market value of such
consideration, as determined by the Board of Directors of the Company.
(k) If the Common Stock issuable upon the conversion of the
Debentures shall be changed into the same or a different number of shares
of any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a reorganization, merger,
consolidation or sale of assets provided for in this Section 8.3), then,
and in each such event, each Holder of Debentures shall have the right
thereafter to convert such Debentures into the kind and amount of shares of
Common Stock and other securities and property receivable upon such
reorganization, reclassification, or other change by the Holders of the
number of shares of Common Stock into which such Debentures might have been
converted, as reasonably determined by the Company's board of directors,
immediately prior to such reorganization, reclassification, or change, all
subject to further adjustment as provided herein.
(l) If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this
Section 8.3) or a merger or consolidation of the Company with or into
another corporation, or the sale of all or substantially all of the
Company's properties and assets to any other person, then, as a part of
such reorganization, merger, consolidation or sale, provision shall be made
as reasonably determined by the Company's board of directors so that the
Holders of the Debentures shall thereafter be entitled to receive upon
conversion of such Debentures, the number of shares of stock or other
securities or property of the Company or of the successor corporation
resulting from such merger or consolidation or sale, to which a Holder of
Common Stock deliverable upon conversion would have been entitled on such
capital reorganization, merger, consolidation or sale.
(m) The adjustments provided for in this Section 8.3 are
cumulative and shall apply to successive divisions, subdivisions,
reductions, combinations, consolidations, issues, distributions or other
events contemplated herein resulting in any adjustment under the provisions
of this Section, provided that, notwithstanding any other provision of this
Section, no adjustment of the Initial Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least
one (1) percent in the Initial Conversion Price then in effect; provided,
however, that any adjustments which by reason of this subsection (l) are
not required to be made shall be carried forward and taken into account in
any subsequent adjustment.
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(n) Upon each adjustment of the Initial Conversion Price, the
Company shall give prompt written notice thereof addressed to the
registered Holders at the address of such Holders as shown on the records
of the Company, which notice shall state the Initial Conversion Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares issuable upon the conversion of such Holder's Debentures,
setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based.
(o) In the event of any question arising with respect to the
adjustments provided for in this Section 8.3, such question shall be
conclusively determined by a firm of independent certified public
accountants appointed by the Company (who may be the auditors of the
Company) and acceptable to the holders of at least 50% of the principal
amount of the Debentures outstanding; such accountants shall have access to
all necessary records of the Company and such determination shall be
binding upon the Company, and the Debenture Holders.
8.4 RESERVATION OF SHARES. The Company agrees that, so long as any
Debenture shall remain outstanding, the Company shall at all times reserve and
keep available, free from preemptive rights, out of its authorized capital stock
for the purpose of issue upon conversion of the Debentures, the full number of
shares of Common Stock then issuable upon conversion of the Debentures.
8.5 FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of the Debentures. If,
upon conversion of any Debenture as an entirety, the registered Holder would,
except for the provisions of this Section 8.5, be entitled to receive a
fractional share of Common Stock, then an amount equal to such fractional share
multiplied by the then fair market value of shares of the Company's Common Stock
shall be paid by the Company to such registered Holder. For purposes of such
valuation, fair market value shall be determined as provided by Section 8.1
hereof.
8.6 VALIDITY OF SHARES. The Company agrees that all shares of Common
Stock which may be issued upon conversion of the Debentures will, upon issuance,
be legally and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof.
8.7 SHAREHOLDER RIGHTS. Until conversion, and then only to the extent
that a portion of the principal of the Debentures remains unconverted, the
Holders of the Debentures (in that capacity) shall have no rights as
shareholders of the Company.
8.8 NOTICE OF CERTAIN EVENTS. If at the time:
(a) the Company shall declare any dividend or distribution
payable to the Holders of its Common Stock;
(b) the Company shall offer for subscription pro rata to the
Holders of Common Stock any additional shares of stock of any class or
other rights;
(c) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation or business organization; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give the registered
Holders of the Debentures written notice, by certified or registered mail, of
the date on which a record shall be taken for such dividend, distribution or
subscription rights or for determining shareholders entitled to vote upon
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up and of the date when any such
transaction shall
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take place, as the case may be. Such notice shall also specify the date as
of which the Holders of Common Stock of record shall participate in such
dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, or winding up, as the case may be. Such written
notice shall be given at least thirty (30) days prior to the transaction in
question and not less than twenty (20) days prior to the record date in
respect thereto.
ARTICLE 9
SECURITY AGREEMENT
9.1 GRANT OF SECURITY INTEREST. (a) In order to secure the payment of
the Debentures and the performance by the Company of its obligations
hereunder and such other obligations of the Company to the Debenture Holders
which may arise from time to time during the term of the Debentures (all of
which are referred to herein as the "Obligations") the Company hereby grants
to the Debenture Holders a security interest in two parcels of real estate of
the Company, one situated in the County of Kenosha, State of Wisconsin (the
"Wisconsin real estate"), and the other situated in the County of Stafford,
State of Virginia (the "Virginia real estate"), such security interests to be
in substantially the form of the Real Estate Mortgage attached hereto as
Appendix C (the "Mortgage") and the Deed of Trust, Assignment of Leases and
Security Agreement attached hereto as Appendix D (the "Trust Agreement") (the
Wisconsin real estate and the Virginia real estate being hereinafter referred
to as the "Collateral").
(b) The Wisconsin real estate is currently subject to three outstanding
mortgages to Bank One, the first in the amount of $1,000,000 (with an
outstanding balance of approximately $800,000), the second in the amount of
$250,000 (with an outstanding balance of approximately $200,000) and the
third in the amount of approximately $690,190, and a mortgage in the amount
of $350,000 with respect to certain outstanding Convertible Secured Notes
(the "Notes") of the Company (the mortgage to be filed with respect to the
Notes being hereinafter referred to as the "Secured Note Mortgage"). Bank
One has agreed to subordinate the third Bank One mortgage to the Mortgage and
the Secured Note Mortgage. Investors acknowledge that while the Secured Note
Mortgage will be filed subsequent to the filing of the Mortgage, the
indebtedness represented by the Notes is pari passu to the indebtedness
represented by the Debentures and that the Wisconsin real estate secures
payment of the Notes and the Debentures on a pro-rata basis. The Company
represents and warrants that the aggregate outstanding balance of the first
two mortgages to Bank One shall not, so long as any Debentures remain
outstanding, exceed $1,000,000.
(c) The Virginia real estate is currently subject to two outstanding
Deeds of Trust, Assignment of Leases and Security Agreements to the Union
Bank and Trust Company in the aggregate amount of $1,750,000 (with an
aggregate outstanding balance of $1,716,753). The Company has also deposited
with the Union Bank and Trust Company as additional security for the bank
loans a CD in the amount of $825,000. The Note holders do not have a
security interest in the Virginia real estate.
9.2 FILINGS. The Company shall, at its expense, execute, deliver, file
and record the Mortgage and Trust Agreement and other documents that are
reasonably required in order to perfect the Debenture Holders' security
interest in the Collateral. In the event that the Mortgage and Trust
Agreement initially filed in connection with the Collateral are in an amount
less than One Million Five Hundred Thousand Dollars ($1,500,000), Investor
agrees to consent to and to provide any and all written agreements necessary
to file a new or amended Mortgage and new or amended Trust Agreement with
respect to the Collateral, provided that such new or amended Mortgage and
Trust Agreement are being filed in connection with the sale of Debentures and
are for not more than One Million Five Hundred Thousand Dollars ($1,500,000).
9.3 TERMINATION/AMENDMENT OF SECURITY INTEREST. Upon full and
punctual payment and performance of the Obligations, the security interest
created hereby shall terminate and all rights of the Debenture Holders in the
Collateral shall revert to the Company.
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ARTICLE 10
REDEMPTION
10.1 RIGHT OF REDEMPTION. The Company may, at its option, redeem the
Debentures as a whole or from time to time in part, at Redemption Prices
which shall consist of the applicable percentage of the principal amount of
the Debentures redeemed set forth below.
If redeemed during the periods set forth below:
PERIOD PERCENTAGE
------------------------------- -----------------------------
May 1, 1997 to January 31, 1998 100% plus each Investor shall
relinquish Warrants representing
the right to acquire 5,000 shares
of the Company's Common Stock for
every $50,000 principal amount of
Debentures redeemed
February 1, 1998 to April 29, 1998 110%
April 30, 1998 to April 29, 1999 107%
April 30, 1999 to April 29, 2000 104%
April 30, 2000 and Thereafter 100%
plus, in each case, any interest accrued on the Debentures so redeemed to the
Redemption Date.
10.2 SELECTION OF DEBENTURES TO BE REDEEMED. If less than all the
Debentures are to be redeemed, the particular Debentures to be redeemed shall
be selected pro-rata not more than 60 days prior to the Redemption Date by
the Company, from the outstanding Debentures not previously called for
redemption.
For all purposes of this Agreement, unless the context otherwise
requires, all provisions relating to the redemption of Debentures shall
relate, in the case of any Debenture redeemed or to be redeemed only in part,
to the portion of the principal of such Debentures which has been or is to be
redeemed.
10.3 NOTICE OF REDEMPTION; CONVERSION OF DEBENTURES. Notice of
redemption shall be given simultaneously by facsimile transmission or
overnight courier and by certified mail, postage prepaid, return receipt
requested, mailed not less than 30 nor more than 60 days prior to the date
selected by the Company for redemption (the "Redemption Date"), to each
Holder of Debentures to be redeemed. All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all outstanding Debentures are to be redeemed,
the identification (and, in the case of partial redemption, the respective
principal amounts) of the Debentures to be redeemed from the Holder to whom
the notice is given,
(4) that on the Redemption Date the Redemption Price will become
due and payable upon each such Debenture, and that interest thereon shall
cease to accrue on said date, and
(5) the place where such Debentures are to be surrendered for
payment of the Redemption Price.
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10.4 DEBENTURES REDEEMED IN PART. Any Debenture which is to be redeemed
only in part shall be surrendered at the office or agency of the Company and
the Company shall execute and deliver to the Holder of such Debenture without
service charge, a new Debenture or Debentures, of any authorized denomination
as requested by such Holder in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Debentures so
surrendered.
ARTICLE 11
REMEDIES
11.1 EVENTS OF DEFAULT. "Event of Default," wherever used herein, means
any one of the following events (whatever the reason for such Event of
Default and whether it shall be occasioned by the provisions of this Article
11 or be voluntary or involuntary or be effected by operation of law pursuant
to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Debenture
when the same becomes due and payable, and continuance of such default for
a period of ten (10) days;
(2) default in the payment of the principal of any Debenture
when the same becomes due and payable;
(3) default in the performance, or breach, of any covenant or
warranty of the Company in this Agreement (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and continuance of such default or
breach for a period of thirty (30) days after there has been given, by
registered or certified mail, to the Company by the Holders of at least Ten
Percent (10%) in principal amount of the outstanding Debentures, a written
notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" hereunder;
(4) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or
for any substantial part of its property, or ordering the winding-up or
liquidation of its affairs and such decree or order shall remain unstayed
and in effect for a period of thirty (30) consecutive days;
(5) the Company shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) of the Company or for
any substantial part of its property, or shall make any general assignment
for the benefit of creditors, or shall fail generally to pay its debts as
they become due, or shall take any corporate action in furtherance of any
of the foregoing.
(6) the failure of the Company to pay any indebtedness due any
other person or entity and such failure shall continue beyond any
applicable grace period and result in the acceleration of maturity of such
indebtedness;
(7) the Company shall suffer to exist beyond any applicable
grace period any other event of default under any material agreement
binding the Company, provided such event of default has not been waived in
writing by the appropriate party or parties to such agreement; or
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(8) the Company shall admit its inability to pay its debts as
they mature or shall make an assignment for the benefit of its creditors.
11.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of
Default occurs and is continuing, then and in every such case the Holders of
not less than Fifteen Percent (15%) in principal amount of the Debentures
outstanding may declare the principal of all the Debentures to be immediately
due and payable, by a notice in writing to the Company and upon any such
declaration such principal shall become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained,
the Holders of a majority in principal amount of Debentures outstanding, by
written notice to the Company, may rescind and annul such declaration and its
consequences if:
(1) the Company has paid or deposited into a trust account a sum
sufficient to pay:
(a) all overdue installments of interest on all Debentures,
(b) the principal of any Debentures which have become due
otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Debentures,
(c) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest at the rate borne by
the Debentures, and
(2) all Events of Default, other than the non-payment of the
principal of Debentures which have become due solely by such acceleration,
have been cured or waived as provided in Section 11.8.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
11.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY HOLDERS. The
Company covenants that if:
(1) default is made in the payment of any installment of
interest on any Debenture when such interest becomes due and payable and
such default continues for a period of ten (10) days, or
(2) default is made in the payment of the principal of any
Debenture at the maturity thereof,
the Company, will, upon demand of the Holders hereof pursuant to Section
11.2, pay to such Holders, the whole amount then due and payable on this
Debenture for principal and interest, with interest upon the overdue
principal and, to the extent that payment of such interest shall be legally
enforceable, upon overdue installments of interest, at the rate borne by the
Debenture.
If the Company falls to pay such amounts forthwith upon such demand, the
Holder may institute a judicial proceeding for the collection of the sums so
due and unpaid, and may prosecute such proceeding to judgment or final
decree, and may enforce the same against the Company or any other obligor
upon this Debenture and collect the monies adjudged or decreed to be payable
in the manner provided by law out of the property of the Company or any other
obligor upon this Debenture, wherever situated.
11.4 REMEDIES WITH RESPECT TO COLLATERAL ON DEFAULT. (a) If an Event
of Default occurs and is continuing, then and in every such case the Holders
of not less than Fifteen Percent (15%) in principal of the Debentures
outstanding may, in addition to their other rights hereunder and in the
Mortgage and Trust Agreement, exercise any one of the following rights and
remedies with respect to the Collateral: (1) exercise and enforce any and all
of the rights and remedies available after default to a secured party under
the Uniform Commercial Code as adopted in Wisconsin, with respect to the
Wisconsin real estate, and Virginia, with respect to the Virginia real
estate, in which case notice to the Company of any public or private sale or
any other disposition of the Collateral or
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any other action shall be deemed commercially reasonable if given at least
ten (10) calendar days prior to the date of such disposition or other action;
(2) with respect to any portion of the Collateral constituting a right to
payment, notify the person or entity obligated to make such payment that such
right has been assigned to the Debenture Holders for security and shall be
paid directly to the nominee of the Debenture Holders. The Company will join
in giving such notice if requested by the Debenture Holders.
(b) At any time after the occurrence of an Event of Default, the
Debenture Holders may, but need not, (i) demand, sue for, collect or receive
any money or property constituting the Collateral which is payable to the
Company, or grant an extension to, compromise, settle, modify, waive, amend
or change such obligation; and (ii) give receipt for any payment received
from such obligor, which receipt shall be deemed conclusive evidence of such
payment as against the Company.
11.5 UNCONDITIONAL RIGHT OF DEBENTURE HOLDERS TO RECEIVE PRINCIPAL AND
INTEREST. Subject to the provisions of this Agreement, the Holder of any
Debenture shall have the right which is absolute and unconditional to receive
payment of the principal of and interest on such Debenture on the respective
dates expressed in such Debenture and to institute suit for the enforcement
of any such payment and such right shall not be impaired without the consent
of such Holder.
11.6 RESTORATION OF RIGHTS AND REMEDIES. If any Debenture Holder has
instituted any proceeding to enforce any right or remedy under this Agreement
and such proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to such Debenture Holder, then and in every such
case the Company and the Debenture Holder shall, subject to any determination
in such proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Debenture
Holder shall continue as though no such proceeding had been instituted.
11.7 RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Debenture Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
11.8 DELAY OR OMISSION NOT WAIVER. No delay or omission of the Holder
of this Debenture to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein. Every right and remedy
given by this Article or by law or the Holder may be exercised from time to
time, and as often as may be deemed expedient, by such Holder.
11.9 WAIVER OF PAST DEFAULTS. The Holders of eighty-five percent (85%)
in principal amount of the outstanding Debentures may on behalf of the
Holders of all the Debentures waive any past default hereunder and its
consequences, except a default
(1) in the payment of the principal of or interest on any
Debenture; or
(2) in respect of a covenant or provision of this Agreement
which under Article 12 cannot be modified or amended without the consent of
the Holder of each outstanding Debenture affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every
purpose of this Agreement; but no such waiver shall extend to any subsequent
or other default or impair any right consequent thereon.
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ARTICLE 12
SUPPLEMENTAL AGREEMENTS REGARDING DEBENTURES
12.1 SUPPLEMENTAL AGREEMENTS WITH CONSENT OF DEBENTURE HOLDERS. With or
without notice to any Debenture Holder but with the consent of the Holders of
not less than 85% in principal amount of the then outstanding Debentures, the
Company, when authorized by a duly adopted board resolution, and the
Debenture Holders may enter into an agreement or agreements supplemental
hereto for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of the Debentures under this Agreement;
provided, however, that no such supplemental agreement as it relates to the
Debentures and the terms and conditions thereof shall, without the consent of
the Holder of each outstanding Debenture affected thereby:
(1) change the date of maturity of the principal of, or any
installment of interest on, any Debenture, or reduce the principal amount
thereof or the rate of interest thereon, or change the coin or currency in
which, the principal of any Debenture or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the date of maturity thereof;
(2) reduce the percentage in principal amount of the outstanding
Debentures, the consent of whose Holders is required for any such
supplemental agreement or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Agreement or certain
defaults hereunder and their consequences) provided for in this Agreement;
(3) modify any of the provisions of this Section or Section
11.5, except to increase any such percentage or to provide that certain
other provisions of this Agreement cannot be modified or waived without the
consent of the Holder of each Debenture affected thereby; or
(4) adversely affect the right to convert the Debentures as
provided in Article 8 hereof.
It shall not be necessary for any consent or authorization of Debenture
Holders under this Section to approve the particular form of any proposed
supplemental agreement, but it shall be sufficient if such consent or
authorization shall approve the substance thereof.
12.2 EFFECT OF SUPPLEMENTAL AGREEMENTS. Upon the execution of any
supplemental agreement under this Article, this Agreement shall be modified
in accordance therewith, and such supplemental agreement shall form a part of
this Agreement for all purposes; and every holder of Debentures theretofore
or thereafter delivered hereunder shall be bound thereby.
12.3 REFERENCE IN DEBENTURES TO SUPPLEMENTAL AGREEMENTS. Debentures
delivered after the execution of any supplemental agreement pursuant to this
Article may bear a notation as to any matter provided for in such
supplemental agreement. If the Company shall so determine, new Debentures so
modified as to conform, in the opinion of the board of directors, to any such
supplemental agreement may be prepared, executed and delivered by the Company
in exchange for outstanding Debentures.
ARTICLE 13
COVENANTS
13.1 PAYMENT OF PRINCIPAL, PREMIUMS AND INTEREST. The Company will duly
and punctually pay the principal of and interest on the Debentures in
accordance with the terms of the Debentures and this Agreement.
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13.2 MONEY FOR DEBENTURE PAYMENTS TO BE HELD IN TRUST.
(a) COMPANY AS PAYING AGENT. While the Company acts as its own
paying agent, it will, on or before each due date of the principal of, and
premium, if any, or interest on any of the Debentures, segregate and hold
in trust for the benefit of the persons entitled thereto a sum sufficient
to pay the principal, and premium, if any, or interest so becoming due
until such sums shall be paid to such persons or otherwise disposed of as
herein provided.
(b) OUTSIDE PAYING AGENT. Whenever the Company shall have one
or more paying agents, it will, on or prior to each due date of the
principal of, and premium, if any, or interest on any Debentures, deposit
with, or make available to, the paying agent a sum sufficient to pay the
principal, or interest so becoming due, such sum to be held in trust for
the benefit of the persons entitled to such principal, or interest.
(c) UNCLAIMED PAYMENTS. If any money deposited with any paying
agent, or then held by the Company, in trust, for the payment of the
principal of or interest on any Debenture is undeliverable and remains
unclaimed for three years after such principal or interest has become due
and payable, such money shall be paid to the Company on the written request
of the Company, or, if then held by the Company, shall be discharged from
such trust; and the Holder of such Debenture shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof,
and all liability of such paying agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that such paying agent, before being required to make
any such repayment, may at the expense of the Company cause to be published
once, in a newspaper of general circulation in the county in which the
Company then has its principal place of business, notice that such money
remains unclaimed and that, after a date specified therein, which shall be
not less than thirty (30) days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the
Company.
13.3 CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, including the corporate existence of any successor corporation,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any right or franchise if the
Company shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and that the loss thereof is
not disadvantageous in any material respect to the Debenture Holders.
13.4 OTHER OBLIGATIONS. The Company will perform all of its
undertakings, obligations, and covenants as set forth in this Agreement, the
Debentures and the Warrants.
ARTICLE 14
MISCELLANEOUS
14.1 REGISTRATION RIGHTS. The Company will use its best efforts to cause
the shares of Common Stock issued upon conversion of the Debentures and
issuable upon exercise of the Warrants (the "Registerable Securities") to be
registered with the Securities and Exchange Commission, at the Company's
expense, under the Securities Act of 1933 (the "1933 Act") prior to March 1,
1998. The Company will use its best efforts to keep such Registration
Statement effective until the earlier of May 1, 2002 or until all of the
Registerable Securities have been sold pursuant to such Registration
Statement. In the event that the Registration Statement to be filed with the
Commission as set forth in this Section 14.1 has not been declared effective
by the Commission by March 1, 1998, (i) the Company will pay Debenture Holder
a penalty in cash equal to 2% of the principal amount of the Debentures
relating thereto for every 30 days following February 1, 1998, until the
Registration Statement is declared effective by the Commission, and (ii) the
purchase price of the Warrants shall be reduced as follows: the Initial
Purchase Price shall be reduced by 2% for every 30 days following February 1,
1998, until the Registration Statement is declared effective and the
alternative percentage of fair market value (initially 70%) shall be reduced
in increments
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of 2% (e.g., 68%, 66%, etc.) for every 30 days following February 1, 1998,
until the Registration Statement is declared effective by the Commission. In
connection with such registration:
(1) The Company will pay all costs and expenses incurred in
connection with the registration of the Registerable Securities,
including all registration filing fees, printing fees, fees and
disbursements of counsel and accountants of the Company and one set of
counsel for the Investors. Transfer taxes, brokerage commissions and
underwriters' discounts attributable to the Registerable Securities
shall be for the account of the Investors;
(2) The Company will furnish at its expense to the
Investors such number of copies of the preliminary, final,
supplemental or amended prospectus in conformity with the requirements
of the 1933 Act and rules and regulations thereunder, as may be
reasonably required in order to facilitate the disposition of the
Registerable Securities;
(3) Unless preempted by Federal law, the Company will
register or qualify the Registerable Securities under any applicable
state securities or blue sky laws in such jurisdictions as the
Investors shall reasonably request;
(4) The Company will cause the Registerable Securities to
be listed on the NASDAQ National Market (or principal exchange if
applicable) on which the Common Stock is then listed; and
(5) The Company shall indemnify and hold harmless, to the
full extent permitted by law, each Investor, its officers and
directors and each person who controls such Investor within the
meaning of the 1933 Act and any investment adviser against all losses,
claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of a material fact contained in any
registration statement, prospectus or preliminary prospectus or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in
any information with respect to the Investor furnished in writing to
the Company by such Investor expressly for use therein. The Company
will indemnify the underwriters, if any, of the Registerable
Securities, their officers and directors and each person who controls
any such underwriter to the same extent. The Company will reimburse
each indemnified party for all legal expenses incurred in connection
with investigating or defending any such claims. Each Investor
severally, but not jointly, shall indemnify and hold harmless the
Company against all losses, claims, damages, liabilities, and expenses
caused by any untrue or alleged untrue statement or a material fact in
any registration statement, prospectus or preliminary prospectus or
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading; except that such indemnification shall be
available in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon information and in
conformity with written information furnished to the Company by
Investor specifically for use in the preparation thereof. If the
indemnification provided for herein is unavailable or insufficient to
hold harmless an indemnified party, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as
a result of the losses, claims, damages, or liabilities referred to
above (a) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Investors on
the other; or (b) if the allocation provided by clause (a) above is
not permitted by applicable law, in such proportion as is appropriate
to reflect the relative benefits referred to in clause (a) above but
also the relative fault of the Company on the one hand and the
Investors on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, or liabilities, as
well as any other relevant equitable considerations. Relative fault
shall be determined by reference to, among other things, whether the
untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company or the
Investor and the parties' relative intent, knowledge, access to
information,
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and opportunity to correct or prevent such untrue statement or
omission. For purposes of this subsection, the term "damages" shall
include any counsel fees or other expenses reasonably incurred by the
Company or the Investors in connection with investigating or defending
any action or claim which is the subject of the contribution provisions
of this section.
Each party entitled to contribution agrees that upon the
service of a summons or other initial legal process upon it in any
action instituted against it in respect of which contribution may be
sought, it shall promptly give written notice of such service to the
party or parties from whom contribution may be sought, but the
omission so to notify such party or parties of any such service shall
not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise.
14.2 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants contained in or made pursuant to this Agreement shall survive
the execution and delivery of this Agreement and the Closing(s) and
shall in no way be affected by any investigation of the subject matter
thereof made by or on behalf of the Company or the Investors, as the
case may be.
14.3 ENTIRE AGREEMENT. This Agreement, the Debentures, the
Warrants and Appendix hereto constitute the entire agreement between the
parties, and no party shall be liable or bound to another party in any
manner by any warranties, representations or covenants except as
specifically set forth herein or therein. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any third
party any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement.
14.4 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Colorado.
14.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
14.6 NOTICES. Any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery or seven (7) days after deposit with the
United States Post Office, by registered or certified mail, postage
prepaid, addressed to the Company at 4440 Arapahoe Road, Suite 200,
Boulder Colorado 80303, and to the Investor at the address specified
below or at such other address as a party may designate by ten (10)
days' advance written notice to the other parties.
14.7 EXPENSES. The Company shall pay the reasonable costs and
expenses that the Investors shall incur with respect to the negotiation,
execution and delivery of this Agreement.
14.8 EFFECT OF AMENDMENT OR WAIVER. The Investor hereby
acknowledges that, by the operation of Articles 11 and 12 hereof, the
Holders of Debentures have certain rights and powers to diminish or
change certain rights of the Holders of Debentures, including Holders
who have not agreed or consented thereto, under this Agreement.
14.9 RIGHTS OF INVESTORS. Each Holder of Debentures shall have the
absolute right to exercise or refrain from exercising any right or
rights that such holder may have by reason of this Agreement or any
Debenture or share of Common Stock, including without limitation the
right to consent to the waiver of any obligation of the Company under
this Agreement and to enter into an agreement with the Company for the
purpose of modifying this Agreement or any agreement effecting any such
modification, and such holder shall not incur any liability to any other
holder or holders of such securities with respect to exercising or
refraining from exercising any such right or rights.
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<PAGE>
14.10 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provisions shall
be excluded from this Agreement, and the balance of this Agreement shall
be interpreted as if such provisions were so excluded and shall be
enforceable in accordance with its terms.
14.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The term
this "Agreement" as used herein includes this and similar Subscription
and Purchase Agreements entered into in connection with the offering of
up to $1,500,000 aggregate principal amount of Debentures.
ARTICLE 15
SUBSCRIPTION
15.1 OFFERING. The minimum subscription per Investor permitted in
this Offering is $100,000; provided, however, that the Company may, in
its sole discretion, lower the minimum investment in accordance with
applicable law.
15.2 SUBSCRIPTION AMOUNT. The undersigned hereby subscribes for
$250,000 in principal amount of Debentures and shall tender at Closing a
certified check or bank draft in the amount of Two Hundred Fifty
Thousand Dollars ($250,000) payable to the Company in full payment for
such subscription.
15.3 RESALE COMPLIANCE. The undersigned agrees to comply with the
1933 Act and the rules and regulations promulgated thereunder, and any
other relevant securities legislation and policies governing the
purchase, holding and resale of the Debentures subscribed for,
including, without limitation, applicable state blue sky laws.
The undersigned acknowledges that this subscription shall not be
effective unless accepted by the Company as indicated below.
Entered into this 8th day of May, 1997.
Charles S. Leavell
-------------------------------------
(Name) (Please Print)
-------------------------------------
(Signature)
-------------------------------------
(Mailing Address)
-------------------------------------
(Registration Instructions)
-------------------------------------
(Social Security or Tax Identification No.)
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE 8TH DAY OF MAY, 1997.
RENAISSANCE ENTERTAINMENT CORPORATION
By:
-------------------------------------------
Charles S. Leavell, Chief Executive Officer
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<PAGE>
APPENDIX A
THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE 1933 ACT") OR UNDER THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES. NO REGULATORY BODY HAS ENDORSED THESE
SECURITIES. NO SALE OR DISTRIBUTION OF THE SECURITIES MAY BE EFFECTED WITHOUT
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE 1933 ACT AND APPLICABLE STATE BLUE SKY LAWS.
No. D-1 $500,000.00
RENAISSANCE ENTERTAINMENT CORPORATION
9% CONVERTIBLE SECURED DEBENTURE DUE 2002
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Renaissance Entertainment Corporation, a corporation duly organized and
existing under the laws of the State of Colorado (the "Company"), designated
as its 9% Convertible Secured Debentures Due 2002, in an aggregate principal
amount not exceeding $1,500,000, issued pursuant to that certain Subscription
and Purchase Agreement dated May 8, 1997, between the Company and the
original purchasers of the Debentures (the "Purchase Agreement"). Reference
is hereby made to the Purchase Agreement for a complete description of the
rights and obligations of, and limitations and restrictions on, the Company
and the Holder of this Debenture. The terms and conditions of the Debenture
noted hereinafter are subject in every respect to the terms and conditions of
the Purchase Agreement. In the event of a conflict between the provisions of
this Debenture and the Purchase Agreement, the Purchase Agreement shall
control.
FOR VALUE RECEIVED, the Company promises to pay to Charles H. Leavell the
registered holder hereof (the "Holder"), the principal sum of Five Hundred
Thousand Dollars ($500,000.00), on April 1, 2002, subject to acceleration in
certain events, and to pay interest on the principal sum outstanding from
time to time quarterly in arrears on the first business day of each calendar
quarter of each year ("Interest Payment Dates"), after as well as before
maturity and default and after judgment, at the rate of 9% per annum accruing
from the date of initial issuance. Payment of interest shall commence on the
first such business day to occur after the date hereof (and shall be pro
rated for such period from the date of initial issuance) and shall continue
on the first business day of each succeeding calendar quarter until payment
in full of the principal sum has been made or duly provided for. All accrued
and unpaid interest shall bear interest at the same rate as the due date of
the interest payment until paid but shall not be subject to conversion.
December 15, March 15, June 15 and September 15 of each year shall serve as
the record date (the "Record Date") for determining ownership of this
Debenture with respect to payments of interest to be made on the following
Interest Payment Date. The interest so payable on any Interest Payment Date
will, as provided in the Purchase Agreement, be paid to the person in whose
name this Debenture (or one or more predecessor Debentures) is registered on
the records of the Company regarding registration and transfers of the
Debentures (the "Debenture Register") at the Record Date for such Interest
Payment Date; provided, however, that the Company's obligation to a
transferee of this Debenture arises only if such transfer, sale or other
disposition is made in accordance with the terms and conditions of the
Purchase Agreement. The principal of, and interest on, this Debenture are
payable in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts, at
the address last appearing on the Debenture Register of the
A-1
<PAGE>
Company as designated in writing by the Holder from time to time. The
Company will pay interest on this Debenture by sending a check for such
interest due, less any amounts required by law to be deducted, to the
registered holder of this Debenture and addressed to such holder at the last
address appearing on the Debenture Register. The forwarding of such check
shall constitute a payment of interest hereunder and shall satisfy and
discharge the liability for interest on this Debenture to the extent of the
sum represented by such check plus any amounts so deducted unless such check
is not paid at par.
This Debenture is subject to the following additional provisions:
1. All terms used in this Debenture which are defined in the Purchase
Agreement shall have the meanings assigned to them in the Purchase Agreement.
2. The Debentures are issuable in denominations of Fifty Thousand
Dollars ($50,000) and integral multiples thereof. As provided in the
Purchase Agreement, the Debentures are exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holders surrendering the same. No service charge will be
made for such registration of transfer or exchange; however, the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection with the transfer or exchange of this Debenture.
3. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws
or other applicable laws at the time of such payments.
4. This Debenture has been issued and, subject to the exercise of
certain registration rights as provided in the Purchase Agreement, any shares
of Common Stock issued upon conversion hereof, will be issued subject to
investment representations and may be transferred or exchanged only as
provided in the Purchase Agreement. Prior to due presentment for transfer of
this Debenture, the Company and any agent of the Company may treat the Person
in whose name this Debenture is duly registered on the Company's Debenture
Register as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Debenture be
overdue, and neither the Company nor any such agent shall be affected by
notice to the contrary.
5. If an Event of Default occurs and is continuing, the Holders of
not less than Fifteen Percent (15%) in principal amount of the 9% Convertible
Secured Debentures then outstanding may declare the principal of all such
Debentures to be immediately due and payable in the manner and to the extent
provided in the Purchase Agreement, and such declarations may be in certain
events rescinded, in the manner and with the effect provided in the Purchase
Agreement.
6. Subject to the provisions of the Purchase Agreement, the Holder of
this Debenture is entitled, at its option, at any time after April 30, 1998,
until maturity hereof to convert the principal amount of this Debenture or
any portion of the principal amount hereof which is at least Ten Thousand
Dollars ($10,000) or, if at the time of such election to convert the
aggregate principal amount of all Debentures registered to the Holder is less
than Ten Thousand Dollars ($10,000), then the whole amount thereof, into
shares of Common Stock of the Company at the lesser of Four Dollars Fifty
Cents ($4.50) per share (subject to adjustment as provided in the Purchase
Agreement) or Seventy (70) percent of the fair market value (as defined) of
the Company's Common Stock on the Date of Conversion, upon surrender of this
Debenture to the Company at its office in Boulder, Colorado, with the form of
conversion notice attached hereto as Exhibit A executed by the Holder of this
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion (as above provided) hereof, and accompanied, if required by
the Company, by proper assignment hereof in blank. No amount of accrued but
unpaid interest shall be subject to conversion. As provided in the Purchase
Agreement, the conversion price is subject to adjustment in certain events.
7. The Purchase Agreement contains provisions permitting the Holders
of a majority of the aggregate principal amount of all such Debentures at the
time outstanding, on behalf of the Holders of all the Debentures, to waive
compliance by the Company with certain provisions of the Purchase Agreement
and certain past defaults
A-2
<PAGE>
under the Purchase Agreement and their consequences. Any such consent or
waiver shall be conclusive and binding upon all Holders and upon all future
Holders of this Debenture and of any debenture issued upon registration of
transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent or waiver is made upon this Debenture.
8. No reference herein to the Purchase Agreement and no provision of
this Debenture or of the Purchase Agreement shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place and rate,
and in the coin or currency, herein prescribed. This Debenture and all other
Debentures now or hereafter issued under the Purchase Agreement are direct
obligations of the Company. This Debenture ranks equally and ratably with
all other Debentures now or hereafter issued under the Purchase Agreement.
9. No recourse shall be had for the payment of the principal of, or
the interest on, this Debenture, or for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Purchase Agreement or any
Purchase Agreement supplemental thereto, against any incorporator,
shareholder, officer or director, as such, past, present or future, of the
Company or any successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of
the consideration for the issue hereof, expressly waived and released.
10. The Holder of this Debenture, by acceptance hereof, agrees that
this Debenture is being and any shares of Common Stock acquired pursuant to
the conversion of this Debenture will, unless such condition is waived by the
Company, be acquired for investment and that such Holder will not offer, sell
or otherwise dispose of this Debenture or such Common Stock except under
circumstances which will not result in a violation of the 1933 Act or any
applicable state Blue Sky law. This Debenture and any certificate for shares
of Common Stock issued upon conversion hereof, unless such requirement is
waived by the Company, shall bear a legend in substantially the following
form:
THE SECURITIES DESCRIBED HEREIN, HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT",) OR UNDER THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO SALE OR
DISTRIBUTION OF THESE SECURITIES MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE 1933 ACT AND APPLICABLE STATE BLUE SKY LAWS.
11. This Debenture shall be governed by and construed in accordance
with the laws of the State of Colorado.
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
RENAISSANCE ENTERTAINMENT CORPORATION
By:
-------------------------------------
James R. McDonald
Chief Financial Officer
Dated May 14, 1997
A-4
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
TO: RENAISSANCE ENTERTAINMENT CORPORATION
The undersigned Holder of this Debenture hereby irrevocably elects to
convert this Debenture, or portion hereof (which is at least $10,000, unless
the undersigned holds Debentures aggregating less than $10,000, in which
event, the amount converted shall be the entire amount of principal of such
Debentures) below designated, into shares of Common Stock of Renaissance
Entertainment Corporation in accordance with the terms of the Purchase
Agreement dated May 8, 1997, and directs that the shares issuable and
deliverable upon such conversion, together with any check in payment for
fractional shares and any Debentures representing any unconverted principal
amount hereof, be issued and delivered to the undersigned unless a different
name has been indicated below. If shares are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer
taxes, if any, payable with respect thereto.
Dated
--------------------------------
----------------------------------------
Signature of Holder
Principal Amount to be Converted
----------------------------------------
THE DEBENTURES AND SHARES OF COMMON STOCK ACQUIRED UPON CONVERSION THEREOF
ARE TRANSFERABLE ONLY AS PROVIDED IN THE PURCHASE AGREEMENT.
Provide the following information if shares of Common Stock and/or Debentures
are to be issued otherwise than to the Holder. Please print name and address
(including zip code) of other person.
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Social Security or Other Taxpayer
Identifying Number
A-5
<PAGE>
APPENDIX B
No. W-1
Warrant to
Purchase 100,000 Shares
WARRANT TO PURCHASE COMMON STOCK OF
RENAISSANCE ENTERTAINMENT CORPORATION
THIS CERTIFIES THAT for value received Charles H. Leavell is entitled,
subject to the terms and conditions hereinafter set forth, to purchase from
RENAISSANCE ENTERTAINMENT CORPORATION, a Colorado corporation (the
"Company"), 100,000 fully paid and non-assessable shares of Common Stock of
the Company (herein called the "Common Stock"), upon presentation and
surrender of this Warrant with the Subscription Form duly executed, at any
time during the term hereof, at the principal office of the Company or at
such other office as shall have theretofore been designated by the Company by
notice pursuant hereto and upon payment therefor of the Purchase Price, in
lawful money of the United States of America, determined as set forth below.
The term of this Warrant shall commence on the date hereof, and terminate, if
not exercised prior thereto, at 5:00 p.m. Mountain Time, on April 30, 2002
(the "Expiration Date").
This Warrant is one of a series of Warrants issued pursuant to that
certain Subscription and Purchase Agreement dated May 8, 1997, (the "Purchase
Agreement").
This Warrant is subject to the following terms and conditions:
1. The purchase rights represented by this Warrant are exercisable at
any time after April 30, 1998 and prior to 5:00 p.m. Mountain Time on the
Expiration Date, at the option of the registered holder hereof (the
"Holder"), in whole or in part (but not as to a fractional share of Common
Stock). In the case of the purchase of less than all the shares purchasable
under this Warrant, the Company shall cancel this Warrant upon the surrender
hereof and shall execute and deliver a new Warrant of like tenor for the
balance of the shares purchasable hereunder.
2. The purchase price for each share of Common Stock purchasable
pursuant to the exercise of this Warrant shall be the lesser of Three Dollars
($3.00) per share (the "Initial Purchase Price") or Seventy percent (70%) of
the fair market value (as defined in the Purchase Agreement) of the Company's
Common Stock on the date of exercise of the Warrant. The Initial Purchase
Price, and from time to time the number of shares of Common Stock subject to
purchase hereunder are subject to adjustment in certain circumstances
provided for below. The purchase price, as defined above, is hereinafter
referred to as the "Purchase Price".
(a) In case the Company shall (i) pay a dividend in shares of
its capital stock (other than an issuance of shares of capital stock to
holders of Common Stock who have elected to receive a dividend in shares in
lieu of cash), (ii) subdivide its outstanding shares of Common Stock, (iii)
reduce, consolidate or combine its outstanding shares of Common Stock into
a smaller number of shares, or (iv) issue by reclassification of its shares
of Common Stock any shares of the Company, the number of shares of Common
Stock issuable upon exercise of this Warrant shall be the number of shares
of Common Stock of the Company which the Warrant Holder would have owned or
would have been entitled to receive after the happening of any of the
events described above had this Warrant been exercised immediately prior to
the happening of such event. Such adjustment shall be made successively
whenever any such effective date or record date shall occur. An adjustment
made pursuant to this subsection (a) shall become effective retroactively,
immediately after the record date in the case of a dividend and shall
become effective immediately after the effective date in the case of a
subdivision, reduction, consolidation, combination or reclassification.
b-1
<PAGE>
(b) If the Company shall at any time issue or sell or be deemed
pursuant to the provisions of subsections 2(c) and (d) hereof to have
issued or sold shares of its Common Stock for consideration per share less
than the Initial Purchase Price then in effect with respect to such Common
Stock, then the Initial Purchase Price shall be reduced by multiplying it
by a fraction, the numerator of which equals the number of shares of Common
Stock outstanding prior to the sale or issuance plus the number of shares
of Common Stock which would have been issued in the transaction if the
Initial Purchase Price had been applied, and the denominator of which
equals the number of shares of Common Stock outstanding after the sale or
issuance plus the number of shares of Common Stock actually issued in the
transaction.
(c) In case at any time after the date hereof the Company shall
in any manner grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase, or any options for
the purchase of, Common Stock or any stock or other securities convertible
into or exchangeable for Common Stock (such rights or options being herein
called "Options" and such convertible or exchangeable stock or securities
being herein called "Convertible Securities") at an option or conversion
price per share of Common Stock (determined by dividing: (i) the total
amount, if any, received or receivable by the Company as consideration for
the granting of such Options, plus the minimum aggregate amount of
additional consideration payable upon the exercise of such Options, plus,
in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon
the issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common
Stock of the Company, issuable upon the exercise of such Options and in the
case of Convertible Securities, upon conversion thereof) less than the
Initial Purchase Price then in effect with respect to such Common Stock,
then the total maximum number of shares of Common Stock issuable upon the
exercise and conversion of such Options and Convertible Securities shall be
deemed to be outstanding and to have been issued and sold by the Company as
of the date of the issue or sale of the Options, for such price per share.
No sale, issuance or transfer of shares of Common Stock shall be deemed to
have been made upon the actual issuance of such Common Stock except as
otherwise provided in subsection 2(e) hereof.
(d) In case at any time after the date hereof the Company shall
in any manner issue or sell (whether directly or by assumption in merger or
otherwise) any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price
per share of Common Stock issuable upon such conversion or exchange
(determined by dividing: (i) the total amount received or receivable by the
Company, as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be less
than the Initial Purchase Price then in effect with respect to such Common
Stock, then the total maximum number of shares of Common Stock issuable
upon conversion of all such Convertible Securities shall be deemed to be
outstanding and to have been issued and sold by the Company as of the date
of the issue or sale of the Convertible Securities, for such price per
share. No sale, issuance or transfer of shares of Common Stock shall be
deemed to have been made upon the actual issuance of such Common Stock
except as otherwise provided in subsection 2(e) hereof.
(e) If the purchase price payable or number of shares of Common
Stock subject to purchase as provided for in any Options referred to in
subsection 2(c) hereof, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities referred to in
subsections 2(c) or (d), or the rate at which any Convertible Securities
referred to in subsections 2(c) or (d) are convertible into Common Stock
shall change so as to reduce the deemed sale price of Common Stock
previously calculated under subsections 2(c) and/or (d), then a sale of
shares of Common Stock shall be deemed to have occurred for the purposes of
subsections 2(c) and/or (d), as applicable, with appropriate adjustments to
be made to the number of shares of Common Stock deemed to have been sold to
reflect the prior related deemed sale and such adjustments by the
adjustment of the Initial Purchase Rate and Initial Purchase Price pursuant
to subsections 2(c) or (d), as applicable.
B-2
<PAGE>
(f) In case of any consolidation of the Company with or merger
of the Company with or into another corporation or in case of any sale,
transfer or lease to another corporation of all or substantially all of the
property of the Company, the Company or such successor or purchasing
corporation, as the case may be, shall execute an agreement that the Holder
of a Warrant shall have the right thereafter upon payment of the Initial
Purchase Price in effect immediately prior to such action to purchase upon
exercise of the Warrant the kind and amount of shares and other securities
and property which the Holder would have owned or would have been entitled
to receive after the happening of such consolidation, merger, sale,
transfer or lease had the Warrant been exercised immediately prior to such
action. The Company shall give prompt written notice of the execution of
any such agreement to the Holder of each Warrant at the address of such
Holder as shown on the records of the Company. Such agreement shall
provide for subsequent adjustments, which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this section 2, after
the happening of such consolidation, merger, sale, transfer or lease. The
provisions of this subsection 2(f) shall similarly apply to successive
consolidations, mergers, sales, transfers or leases.
(g) The provisions of this section 2 shall not apply to any
currently outstanding securities of the Company or any management stock
grants or sales, stock options or shares of Common Stock issued upon
exercise of stock options issued to officers, directors, employees or
consultants of the Company pursuant to a plan heretofore adopted and
approved by the Board of Directors of the Company.
(h) Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities without the
issuance of shares of Common Stock, then with respect to any Warrants which
then remain outstanding, the Initial Purchase Price shall be readjusted to
the Initial Purchase Price which would have prevailed absent the adjustment
made as a result of the issuance of such Options or Convertible Securities.
(i) In case any Options shall be issued in connection with the
issue or sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to have
been issued without consideration.
(j) In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the
amount received therefor by the Company. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair market value of such
consideration, as determined by the Board of Directors of the Company.
3. In case at any time:
(a) The Company shall declare any cash dividend on its Common
Stock at a rate in excess of the rate of the last cash dividend theretofore
paid;
(b) The Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution (other than regular cash dividends)
to the holders of its Common stock;
(c) The Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or
other rights;
(d) There shall be any capital reorganization, or
reclassification of the capital stock of the Company or consolidation or
merger of the Company with, or sales of all or substantially all of its
assets to, another corporation; or
(e) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
B-3
<PAGE>
then, in any one or more of said cases, the Company shall give written
notice, by first class mail, postage prepaid, addressed to the Holder at the
address of such holder as shown on the books of the Company, of the date on
which (1) the books of the Company shall close or a record shall be taken for
such dividend, distribution or subscription rights, or (2) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding up, as the
case may be. Such written notice shall be given at least 20 days prior to
the action in question and not less than 20 days prior to the record date or
the date on which the Company's transfer books are closed in respect thereto.
4. If any event occurs as to which, in the sole opinion of the Board
of Directors of the Company, the other provisions of this Warrant are not
strictly applicable or if strictly applicable would not fairly protect the
rights of the Holder in accordance with the essential intent and principles
of such provisions, then the Board of Directors shall make such adjustment in
the application of such provisions as may be necessary, in the sole judgment
of such Board, in accordance with such essential intent and principles, to
protect such rights as aforesaid.
5. Exercise of this Warrant shall be made by the surrender hereof by
the Holder to the Company at its principal office together with (i) the
attached Subscription Form designating the number of shares of Common Stock
being purchased, (ii) a certified check or cash in payment for such shares
and (iii) a letter of transmittal setting forth the computation of the amount
of said payment. The Company shall thereafter promptly (in any event within
seven (7) business days after such exercise) issue certificates for the
number of shares of the Common Stock of the Company purchased at the Purchase
Price in effect at the time of such exercise. The Holder shall be deemed to
be the record owner of such shares of Common Stock as of the close of
business on the date of such exercise. The Holder shall not be entitled to
receive a fractional share, but in lieu thereof the Company shall pay in cash
an amount equal to the market value of such fractional share if the Common
Stock has a market value, or if not, the book value of such fractional share.
The Company shall thereupon cancel this Warrant; and in the event that less
than the entire number of shares purchasable are purchased, shall issue a new
Warrant for the number not so purchased.
6. The Company covenants and agrees that all shares which may be
issued upon the exercise of this Warrant will, upon issuance, be duly and
validly authorized and issued, fully paid and nonassessable, and free from
all taxes, liens and charges with respect to the issue thereof; and without
limiting the generality of the foregoing, the Company covenants and agrees
that it will, from time to time, take all such action as may be requisite to
assure that the par value or stated value per share of the Common Stock to be
acquired upon the exercise of this Warrant is at all times equal to or less
than the then effective Purchase Price per share of the Common Stock issuable
pursuant to exercise of this Warrant. The Company further covenants and
agrees that during the period within which this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of the
issue upon exercise of this Warrant a sufficient number of shares of its
Common Stock to provide for such exercise.
7. (a) The Holder represents that he is acquiring this Warrant
and, in the absence of an effective registration statement under the
Securities Act of 1993 (the "1933 Act") for the shares of Common Stock
issuable hereunder, such shares for the purpose of investment and not with a
view to or for sale in connection with any distribution thereof. The Holder
and the holder of any shares of Common Stock issued upon exercise hereof, by
his acceptance hereof, agrees that he will notify the Company in writing
before selling or otherwise disposing of this Warrant or any shares of Common
Stock issued to him upon exercise hereof, describing briefly the nature of
any such sale or other disposition, and no such sale or other disposition
shall be made unless and until (i) the Company has received an opinion of
counsel reasonably acceptable to it that no registration (or perfection of an
exemption) under the 1933 Act is required with respect to such sale or
disposition (which opinion may be conditioned upon the transferee's assuming
the Holder's obligation under this paragraph 7) or (ii) an appropriate
registration statement with respect to such Warrant or such Common Stock, or
both, has been filed with the Securities and Exchange Commission (the
"Commission") and declared effective by the Commission. The Company may
require that this Warrant and certificates representing shares of Common
Stock issued upon exercise hereof be stamped or imprinted with an appropriate
legend reflecting the foregoing restrictions. For the purposes of this
paragraph 7, the
B-4
<PAGE>
term "Securities" shall include this Warrant and the shares of Common Stock
issued or issuable upon the exercise hereof.
(b) The restrictions imposed by this paragraph 7 on the transfer of
the Securities shall terminate as to any portion of the Securities when:
(i) Such portion of the Securities shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance
with such registration or exemption; or
(ii) Written opinions to the effect that such a registration is
no longer required or necessary under any Federal or State law or
regulation of governmental authority shall have been received from legal
counsel for the Company and counsel for the holder of such portion of the
Securities; or, if a favorable opinion is obtained from holder's counsel,
and counsel for the Company declines to render such an opinion, upon the
holder's undertaking to indemnify the Company, on terms satisfactory to the
Company, against all liability or loss the Company may sustain in
connection with such transfer; or
Whenever the restrictions imposed by this paragraph 7 shall terminate, as
provided above, any holder of the Securities as to which such restrictions
shall have terminated shall be entitled to receive promptly from the Company,
without expense to him, a new certificate, not bearing the restrictive legend
referred to in clause (a) hereof.
8. This Warrant shall be redeemable, in whole or in part, at the
option of the Company by resolution of its Board of Directors, at any time
and from time to time prior to any exercise thereof at a redemption price in
cash equal to Twenty Cents ($.20) per Warrant to be redeemed (the "Redemption
Price"). If less than all of the Warrants then outstanding are to be
redeemed, the particular Warrants to be redeemed shall be selected pro-rata
from the then outstanding Warrants. Not less than 30 nor more than 60 days
prior to the date fixed for redemption, a notice (the "Redemption Notice")
specifying the time and place thereof and the Redemption Price per Warrant to
be redeemed shall be given by mail to the holders of record of the Warrants
selected for redemption at their respective addresses as the same shall
appear on the books of the Company. The holders of the Warrants to be
redeemed shall have the right to exercise such Warrants at any time prior to
any such redemption (including a redemption that occurs prior to April 30,
1998). Upon tender of the Redemption Price in accordance with the Redemption
Notice, the Warrants to be redeemed as indicated in the Redemption Notice
shall no longer be deemed to be outstanding and the holders thereof shall
have no claim against the Company, except the right to receive the Redemption
Price payable upon such redemption, without interest, upon surrender (and
endorsement, if required by the Company) of the Warrant certificates.
9. The Holder has been granted certain rights to have the shares of
Common Stock issuable upon exercise of the Warrant registered under the 1933
Act, all as more fully described in the Purchase Agreement.
10. This Warrant is exchangeable, upon the surrender hereof by the
Holder at the principal office of the Company, for new warrants of like tenor
and date representing in the aggregate the right to purchase the number of
shares purchasable hereunder, each of such new Warrants to represent the
right to purchase such number of shares as shall be designated by said Holder
at the time of such surrender. Subject to paragraph 7 hereof, this Warrant
and all rights hereunder are transferable in whole or in part by the Holder,
in person or by duly authorized attorney, upon surrender of this Warrant duly
endorsed, at the principal office of the Company.
11. Upon the receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation
of this Warrant, if mutilated, the Company will make and deliver a new
Warrant of like tenor, in lieu of this Warrant.
B-5
<PAGE>
12. All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid or delivered to a telegraph office for
transmission:
(a) If to the Holder at such address as may have been furnished
by such holder to the Company in writing; and
(b) If to the Company at such address as may have been furnished
by the Company to the Holder of this Warrant in writing.
13. This Warrant shall be binding upon any successors or assigns of
the Company.
14. This Warrant shall be construed in accordance with and governed by
the laws of the State of Colorado.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and delivered as of the date set forth below by one of its officers
thereunto duly authorized.
Dated: May 14, 1997.
RENAISSANCE ENTERTAINMENT CORPORATION
By
----------------------------------------
Its Chief Financial Officer
B-6
<PAGE>
--------------------
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant
The undersigned the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ______________ of the shares of Common Stock of
RENAISSANCE ENTERTAINMENT CORPORATION to which such Warrant relates and
herewith makes payment of $________, therefor in cash or by certified check
and requests that the certificates for such shares be issued in the name of,
and be delivered to, ____________________________, the address for which is
set forth below the signature of the undersigned.
Dated:
------------------------
----------------------------------------
(Signature)
----------------------------------------
----------------------------------------
(Address)
----------------------------------------
To be signed only upon transfer of Warrant
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________ the right to purchase shares of Common
Stock of RENAISSANCE ENTERTAINMENT CORPORATION to which the within Warrant
relates and appoints _______________, attorney, to transfer said right on the
books of RENAISSANCE ENTERTAINMENT CORPORATION with full power of
substitution in the premises.
Dated:
- ------------------------------
----------------------------------------
(Signature)
----------------------------------------
----------------------------------------
(Address)
B-7
<PAGE>
MORTGAGE DEED
AND
SECURITY AGREEMENT
AND
FIXTURE FINANCING STATEMENT
THIS INDENTURE, made as of the 14th day of May, 1997, by and between
Renaissance Entertainment Corporation, a Colorado corporation, having its
principal office at 4410 Arapahoe Avenue, Suite 200, Boulder, Colorado 80303
("Mortgagor"), and Dorsar Partners, L.P., a Texas Limited Partnership having
an address at c/o Steven L. Feinberg, 1855 North Mesa, Suite 120, El Paso,
Texas 79912-5939, Charles H. Leavell having an address at c/o The Leavell
Company, 4487 North Mesa, Suite 204, El Paso, Texas 79902 and Charles S.
Leavell having an address at c/o Renaissance Entertainment Corporation, 4440
Arapahoe Avenue, Suite 200, Boulder, Colorado 80303 (collectively,
"Mortgagee"),
W I T N E S S E T H:
That Mortgagor, in consideration of the sum of ONE MILLION and 00/100THS
($1,000,000.00) DOLLARS, the receipt whereof is hereby acknowledged, and all
additions, increases, modifications and renewals thereof does hereby GRANT,
BARGAIN, SELL, MORTGAGE, WARRANT AND CONVEY unto Mortgagee, its successors
and assigns, forever, all that tract or parcel of land situate in the County
of Kenosha, and State of Wisconsin, described in Exhibit A attached hereto
and by this reference made a part hereof, (the "Land");
TOGETHER with all of the buildings and improvements of every kind and
description now or hereafter located on the Land (the "Improvements");
TOGETHER with all of the following property, rights and interests (the
Land, the Improvements and such property, rights and interests being
collectively called the "Premises"):
(a) Mortgagor's right, title and interest, including all mineral
and water rights as well as any after-acquired title or reversion, in and
to the beds of the ways, roads, streets, avenues and alleys adjoining the
Land; and
(b) all and singular the tenements, hereditaments, easements,
appurtenances, passages, waters, water rights, water courses, riparian
rights, other rights, liberties and privileges thereof or in any way now or
hereafter appertaining thereto, including homestead and any other claim at
law or in equity as well as any after-acquired title, franchise or license
and the reversion and reversions and remainder and remainders thereof; and
(c) all rents, issues, proceeds and profits accruing and to
accrue from the Premises; and
<PAGE>
(d) all materials intended for construction, reconstruction,
alteration and repair of the Improvements, all of which materials shall be
deemed to be included within the Premises immediately upon the delivery
thereof to the Premises and all fixtures and articles of personal property
now or hereafter owned by Mortgagor and attached to or contained in and
used in connection with the Premises, including, but not limited to, all
furniture, furnishings, apparatus, machinery, motors, transformers,
elevators, fittings, radiators, gas ranges, ovens, dishwashers, ice boxes,
mechanical refrigerators, awnings, shades, screens, blinds, office
equipment, carpeting, furniture and other furnishings, and all plumbing,
heating, fireplaces, and fireplace equipment, lighting, cooking, laundry,
ventilating, refrigerating, incinerating, air-conditioning and sprinkler
equipment, cabanas, swimming pool equipment and fixtures and all
appurtenances to any of the foregoing; and all renewals or replacements
thereof or articles in substitution therefor, whether or not the same are
or shall be attached to the Improvements in any manner; it being mutually
agreed that all the aforesaid property owned by Mortgagor and placed by it
on the Premises shall, so far as permitted by law, be deemed to be affixed
to the realty, security for the said indebtedness and covered by this
Mortgage.
(e) All proceeds of any insurance payable to Mortgagor and all
subsequent owners of the Premises as a result of the damage or destruction
thereto.
(f) Together with all awards and other compensation hereafter
paid to Mortgagor and all subsequent owners of the Premises for any taking
by eminent domain or condemnation, either permanent or temporary, of all or
any part of the Premises or any easement or appurtenance thereof, including
severance and consequential damages and change in grade of streets, and any
conveyance by private sale in lieu thereof.
This Mortgage shall also constitute a security agreement as defined in the
Uniform Commercial Code with respect to (and the Mortgagor hereby grants
Mortgagee a security interest in) all personal property and fixtures owned by
Mortgagor and included in the Premises. The Mortgagor shall, from time to time,
at the request of Mortgagee, execute any and all financing statements covering
such personal property and fixtures (in a form satisfactory to Mortgagee) which
Mortgagee may reasonably consider necessary or appropriate to perfect its
security interest. The Mortgagor will pay to Mortgagee, on demand, the amount
of any and all costs and expenses (including reasonable attorneys' fees and
legal expenses) paid or incurred by Mortgagee in connection with the exercise of
any right or remedy referred to in this paragraph. As to those items of
collateral described in this Mortgage that are or are to become fixtures, it is
intended that THIS MORTGAGE SHALL BE EFFECTIVE AS A FINANCING STATEMENT FILED AS
A FIXTURE FILING from the date of its filing in the real estate records of the
County where the Premises are situated. The name of the record owner of the
Premises is the Mortgagor set forth in page one of this Mortgage. Information
concerning the security interest created by this instrument may be obtained from
Mortgagee, as secured party, at its address as set forth in page one of this
Mortgage. The address of the Mortgagor, as debtor, is as set forth in page one
to this Mortgage. The Mortgagor's federal identification number is 84-1094630.
This document covers goods which are or are to become fixtures. Upon the
occurrence of a default, the giving of any
2
<PAGE>
required notice and the expiration of any applicable grace or cure period,
Mortgagee may, at its option, sell or otherwise dispose of such personal
property and fixtures by public or private proceedings, separate from or
together with the sale of the Premises, in accordance with the provisions of
the Wisconsin Uniform Commercial Code, and Mortgagee may with respect to such
fixtures or personal property, exercise any other rights or remedies of a
secured party under the Wisconsin Uniform Commercial Code. Unless such
personal property and/or fixtures are perishable or threatened to decline
speedily in value or are of a type customarily sold on a recognized market,
Mortgagee shall give Mortgagor at least ten (10) days prior written notice of
the time and place of any public sale of such fixtures or personal property
or other intended disposition thereof. Upon occurrence of any event of
default, the Mortgagee reserves the option, pursuant to the appropriate
provisions of the Wisconsin Uniform Commercial Code to proceed with respect
to such personal property and/or fixtures as part of the Premises in
accordance with its rights and remedies with respect to the Premises, in
which event the default provisions of the Wisconsin Uniform Commercial Code
shall not apply.
TO HAVE AND TO HOLD the same unto Mortgagee and its successors and
assigns forever.
AND MORTGAGOR COVENANTS AND WARRANTS that Mortgagor is lawfully seized of
an indefeasible estate in fee simple of the Premises; that the same is free
from all encumbrances and liens whatsoever, except the "Permitted Exceptions"
identified on Exhibit B hereto, that Mortgagor has good and legal right,
power and authority to so convey the same and that Mortgagor and its
successors and assigns in interest will forever WARRANT AND DEFEND the title
of the Premises and the lien and priority of this Mortgage against the lawful
claims and demands of all persons whomsoever, subject to the Permitted
Exceptions; and that Mortgagor will execute, acknowledge and deliver all and
every such further assurances unto Mortgagee of the title to all and singular
the Premises hereby conveyed and intended so to be, or which Mortgagor may be
or shall become hereinafter bound so to do. All such covenants and
warranties shall run with the land solely for the benefit of Mortgagee, its
successors and assigns.
PROVIDED, NEVERTHELESS, that if Mortgagor shall well and truly pay to
Mortgagee, or order, the principal sum of ONE MILLION and 00/100THS
($1,000,000.00) DOLLARS, evidenced by: (i) that certain 9% Convertible
Secured Debenture Due 2002 dated May 14, 1997 and issued by Mortgagor to
Dorsar Partners, L. P.; (ii) that certain 9% Convertible Secured Debenture
Due 2002 dated May 14, 1997 and issued by Mortgagor to Charles S. Leavell and
(iii) that certain 9% Convertible Secured Debenture Due 2002 dated May 14,
1997 and issued by Mortgagor to Charles H. Leavell (collectively the
"Debentures") with interest on such principal sum from the date of the
Debentures at the rate specified in the Debentures. The Debentures are being
issued, respectively, pursuant to: (i) that certain Subscription and Purchase
Agreement dated as of May 8, 1997 and executed between Mortgagor and Dorsar
Partners, L. P.; (ii) that certain Subscription and Purchase Agreement dated
May 8, 1997 and executed between Mortgagor and Charles S. Leavell and (iii)
that certain Subscription and Purchase Agreement dated as of May 8, 1997 and
executed between Mortgagor and Charles H. Leavell (collectively the
"Subscription Agreements"). The Debentures mature not later than April 1,
2002. The provisions of the Debentures are incorporated herein by reference.
3
<PAGE>
AND PROVIDED, that if Mortgagor shall fully perform all of the terms,
covenants, conditions and warranties of this Mortgage, then this indenture is
to be NULL AND VOID and shall be released of record at the expense of
Mortgagor, OTHERWISE to remain in full force and effect.
MORTGAGOR FURTHER COVENANTS AND AGREES AS FOLLOWS:
1. To pay promptly the principal of, premium, if any, and interest,
fixed, contingent or otherwise, on the indebtedness evidenced by the
Debentures together with all other sums arising under the Debentures, the
Subscription Agreements and this Mortgage and secured hereby, at the times
and in the manner herein and in the Debentures provided.
2. To keep the Premises free from statutory liens of every kind; to
pay, (except when payment for all such items has been made under Paragraph 3
hereof) before delinquent and before any interest or penalty for non-payment
attaches thereto, all taxes, assessments, water rates, sewer rentals and
other governmental charges, fines, or impositions of every nature and to
whomever assessed that may now or hereafter be levied or assessed upon the
Premises or any part thereof, or upon the rents, issues, income or profits
thereof, whether any or all said taxes, assessments, water rates, sewer
rentals or charges, fines or impositions be levied directly or indirectly or
as excise taxes or income taxes; to deliver to Mortgagee, at least ten (10)
days before delinquent, receipted bills evidencing payment therefor; to pay
in full, under protest in the manner provided by statute, any tax,
assessment, rate, rental, fine, imposition or charge aforesaid which
Mortgagor may desire to contest; and in the event of the passage, after the
date of this Mortgage, of any law of the State of Wisconsin, deducting from
the value of land for the purpose of taxation, any lien thereon or changing
in any way the laws for the taxation of mortgages or debts secured by
mortgage for state or local purposes, or the manner of the collection of any
such taxes, so as to impose a tax or otherwise to affect this Mortgage, or
upon the rendition of any Court of competent jurisdiction of a decision that
any undertaking by Mortgagor as in this paragraph or elsewhere in this
Mortgage provided is legally inoperative, then the principal indebtedness
together with accrued interest and all other sums due hereunder (but not
including any prepayment premium) and under the Debentures will be due and
payable at the election of Mortgagee thirty (30) days' after written notice
to the Mortgagor, of such election, provided, however, said option and right
shall be unavailing and the Debentures and Mortgage shall remain in effect as
though said law had not been enacted, if, notwithstanding such law, Mortgagor
lawfully may pay any such tax or taxes assessment, rate, rental, fine,
imposition or charge to or for Mortgagee and does in fact pay same when
payable. An assessment which is payable in installments at the application
of Mortgagor or any lessee of the Premises shall nevertheless, for the
purpose of this paragraph, be deemed due and payable in its entirety on the
day the first installment becomes due and payable or a lien unless Mortgagee
agrees that such assessment may be paid in installments, which agreement
shall not be unreasonably withheld. Except when payment has been made under
Paragraph 3 hereof, Mortgagor shall deliver to Mortgagee receipted bills
evidencing payment of such installments at least ten (10) days before
delinquent. In the event of a default under this Mortgage, including a
default under the foregoing, Mortgagee shall have the option, in addition to
its other remedies, to
4
<PAGE>
require the Mortgagor to pay immediately the outstanding balance of any
assessments being paid in installments.
3. To keep the Improvements insured against loss or damage resulting
from fire, windstorm and other hazards, casualties and contingencies
(including but not limited to War Risk Insurance, if available) in an amount
equal to the replacement cost thereof, and to pay promptly, when due, any
premiums on such insurance. All insurance policies shall be in such form and
with such endorsements as shall be reasonably acceptable to Mortgagee and
shall be carried in companies approved by Mortgagee and policies and
renewals, marked 'Paid', shall be delivered to Mortgagee at least ten (10)
days before the expiration of the old policies and shall have attached
thereto standard non-contributing mortgagee clause (in favor of and, subject
to the rights of the prior mortgage holder, entitling Mortgagee to collect
any and all of the proceeds payable under all such insurance) as well as
standard waiver of subrogation endorsement, all to be in form acceptable to
Mortgagee. In the event of a change in ownership or occupancy of the
Premises immediate notice thereof by mail shall be delivered by Mortgagor to
all insurers and in the event of loss, Mortgagor will give immediate notice
by mail to Mortgagee. The Mortgagor hereby authorizes Mortgagee, at its
option, but subject to the rights of the prior mortgage holder, to collect,
adjust and compromise any losses under any of the insurance aforesaid and
after deducting costs of collection to apply the proceeds at its option as
follows: (1) As a credit upon any portion as selected by Mortgagee, of the
indebtedness secured hereby, or (2) To restoring the improvements in which
event Mortgagee shall not be obligated to see the proper application thereof
nor shall the amount so released or used be deemed a payment on any
indebtedness secured hereby, or (3) To deliver same to the owner of the
premises. In the event of foreclosure of this Mortgage, or other transfer of
title to the Premises in extinguishment of the indebtedness secured hereby,
all right, title and interest of Mortgagor in and to any insurance policies
then in force shall pass to the purchaser or grantee of the Premises subject
to the rights of the prior mortgage holder. Mortgagor shall not carry
separate insurance, concurrent in kind or form and contributing, in the event
of loss, with any insurance policies required hereunder. Mortgagor shall at
all times be in compliance with the terms and provisions of all insurance
policies required hereunder or in fact maintained by Mortgagor with respect
to the Premises whether or not required hereunder.
That notwithstanding any provisions herein to the contrary and in
particular the foregoing provisions of this Section 3, in the event of any
such loss or damage as therein described to the improvements upon the
Premises, it is hereby understood, covenanted and agreed that, subject to the
rights of the prior mortgage holder, the Mortgagee shall make the proceeds
received under any such insurance policies as therein described available for
the restoration of the improvements so damaged, subject to the following
conditions: (a) that Mortgagor is not then in default under any of the
terms, covenants and conditions hereof; (b) that Mortgagee shall first be
given satisfactory proof that such improvements have been fully restored or
that by the expenditure of such money will be fully restored, free and clear
of all liens, except as to the lien of this Mortgage; (c) that in the event
such proceeds shall be insufficient to restore or rebuild the said
improvements, Mortgagor shall deposit promptly with Mortgagee funds which,
together with the insurance proceeds, shall be sufficient to restore and
rebuild the said Premises; (d) that in the event Mortgagor shall fail within
a reasonable time, subject to delays beyond its control, to
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restore or rebuild the said improvements, then Mortgagee, at its option, may
restore or rebuild the said improvements for or on behalf of the Mortgagor
and for such purpose may do all necessary acts; (e) that the excess of said
insurance proceeds above the amount necessary to complete such restoration
shall be applied as hereinbefore provided as a credit upon any portion as
selected by Mortgagee, of the indebtedness secured hereby; and (f) the holder
of the prior mortgage on the Premises, if the same remains unsatisfied at
such time, has consented to making such proceeds available for restoration.
In the event any of the said conditions are not or cannot be satisfied, then
the alternate disposition of such insurance proceeds as provided above in
this Section 3 shall again become applicable.
Under no circumstances shall Mortgagee become personally obligated to
take any action to restore or rebuild the said improvements. In the event of
foreclosure of this Mortgage, or other transfer of title to the Premises in
extinguishment of the indebtedness secured hereby, subject to the rights of
the prior mortgage holder, all right, title and interest of the Mortgagor, in
and to any insurance policies then in force, and to the proceeds of any such
policies, shall pass to the purchaser or grantee.
4. The Premises are subject to prior Real Estate Mortgages and an
Assignment of Rents in favor of Bank One, Kenosha, NA more fully described in
Exhibit B hereto. Mortgagor agrees that it will timely pay and perform all
things required to be paid and performed pursuant to said Real Estate
Mortgages and the note or notes secured thereby. In the event that Mortgagor
shall fail to pay or perform anything so required pursuant to said Real
Estate Mortgages and note or notes, Mortgagee shall have the right, but shall
have no obligation, to pay or perform the same and the amount so paid or the
cost of any such performance together with interest thereon at the rate
provided in the Debentures, shall be repayable by the Mortgagor without
demand and shall be an additional lien upon the Premises prior to any right,
title, interest or claim attaching or accruing subsequent to the lien of this
Mortgage and shall be secured by and collectible as a part of this Mortgage.
5. To carry and maintain such liability and indemnity insurance
(including, but without limitation, water damage and the so-called assumed
and contractual liability coverage) as may reasonably be required from time
to time by Mortgagee in forms, amounts and with companies satisfactory to
Mortgagee. Such insurance policies shall name Mortgagee as an additional
insured. Certificates of such insurance, premiums prepaid, shall be deposited
with Mortgagee and shall contain provision for thirty (30) days' notice to
Mortgagee prior to any cancellation thereof.
6. That none of the Improvements shall be altered, removed or demolished
nor shall any fixtures, appliances or articles of personal property on, in or
about the Improvements be severed, removed, sold or mortgaged, without the
consent of Mortgagee which may be withheld in Mortgagee's sole discretion except
that such consent of Mortgagee shall not be required in the case of: (i) the
severance, removal or sale of any fixtures, chattels or articles of personal
property, provided that they are promptly replaced by similar fixtures, chattels
and articles of personal property, at least equal in quality and condition as
those replaced, free from any security interest in or encumbrance thereon or
reservation of title thereto; and (ii) alterations, removals or
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demolitions done for the purpose of making improvements done in the ordinary
course of operating the Premises as income producing property provided that
any such alteration, removal or demolition costs less than $25,000; to
permit, commit or suffer no waste, impairment or deterioration of the
Premises or any part thereof; to keep and maintain the Premises and every
part thereof in thorough repair and condition; to effect such repairs as
Mortgagee may reasonably require and from time to time to make all needful
and proper replacements so that the Premises will, at all times, be in good
condition, fit and proper for the respective purposes for which they were
originally erected or installed; to comply with all statutes, orders,
requirements or decrees relating to the Premises by any federal, state or
municipal authority; to observe and comply with all conditions and
requirements necessary to preserve and extend any and all rights, licenses,
permits (including but not limited to zoning variances, special exceptions
and non-conforming uses), privileges, franchises and concessions which are
applicable to the Premises or which have been granted to or contracted for by
Mortgagor in connection with any existing or presently contemplated use of
the Premises; and to permit Mortgagee or its agents, at all reasonable times,
to enter upon and inspect the Premises.
7. To save Mortgagee harmless from all costs and expenses, including
reasonable attorneys' fees, and costs of a title search, continuation of
abstract and preparation of survey, incurred by reason of any action, suit,
proceeding, hearing, motion or application before any court or administrative
body (excepting an action to foreclose or to collect the debt secured hereby)
in and to which Mortgagee may be or become a party by reason hereof,
including but not limited to condemnation, bankruptcy and administrative
proceedings, as well as any other of the foregoing wherein proof of claim is
by law required to be filed or in which it becomes necessary to defend or
uphold the terms of and the lien created by this Mortgage, and all money paid
or expended by Mortgagee in that regard, together with interest thereon from
date of such payment at the rate set forth in the Debentures shall be so much
additional indebtedness secured hereby and shall be immediately and without
notice due and payable by Mortgagor.
8. That Mortgagor will give Mortgagee immediate written notice of the
actual or threatened commencement of any proceedings under eminent domain
affecting all or any part of the Premises or any easement therein or
appurtenance thereof, including severance and consequential damage and change
in grade of streets, and will deliver to Mortgagee copies of any and all
papers served in connection with any such proceedings. Mortgagor further
covenants and agrees, subject to the rights of the prior mortgage holder, to
make, execute and deliver to Mortgagee, at any time or times upon request,
free, clear and discharged of any encumbrances of any kind whatsoever except
the rights of the holder of the prior mortgage, any and all further
assignments and/or other instruments deemed necessary by Mortgagee for the
purpose of validly and sufficiently assigning all awards and other
compensation heretofore and hereafter to be made to Mortgagor (including the
assignment of any award from the United States Government at any time after
the allowance of the claim therefor, the ascertainment of the amount thereof
and the issuance of the warrant for payment thereof) for any taking, either
permanent or temporary, under any such proceedings.
Mortgagor further agrees that should the Premises or any part thereof,
including any easement or appurtenance thereof, be taken or damaged, permanently
or temporarily, by reason
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of any public improvement or condemnation proceedings, including severance
and consequential damage and change in grade of streets, or damage by
earthquake or in any other manner, subject to the rights of the prior
mortgage holder, Mortgagee shall be entitled to any compensation, award,
payment or relief therefor and Mortgagor does hereby appoint Mortgagee its
Attorney-in-Fact, coupled with an interest, and authorizes, directs and
empowers such Attorney, at the option of the Attorney on behalf of the
Mortgagor, its successors or assigns, to commence, appear in and prosecute,
in its own name, any action or proceedings, to adjust or compromise any claim
therefor and to collect and receive proceeds thereof, and to give proper
receipts and acquittances therefor and after deducting expenses of
collection, to apply the net proceeds as a credit on any portion, as selected
by Mortgagee, of the indebtedness secured hereby notwithstanding the fact
that the amount owing thereon may not then be due and payable hereunder or
that the indebtedness is otherwise adequately secured, provided, however,
that no prepayment premium shall be due in connection with any net proceeds
applied to the indebtedness.
9. That Mortgagor within five (5) days upon request by mail, will
furnish a written statement duly acknowledged confirming the amount of the
principal balance of the Debentures and all interest accrued thereon and all
other amounts due upon this Mortgage and whether any offsets or defenses
exist against the mortgage debt.
10. That upon default by Mortgagor in the performance or observance of
any of the terms, covenants, conditions or warranties herein or in the
Debentures contained, after any notice required by the terms of the
Debentures and the expiration of any applicable cure or grace period,
Mortgagee may, at its option, and whether electing to declare the whole
indebtedness due and payable or not, perform the same without waiver of any
other remedy, and any amount paid or advanced by Mortgagee in connection
therewith or any other costs, charges or expenses incurred in the protection
of the Premises and the maintenance of this lien including reasonable
attorneys' fees, with interest thereon, at the rate set forth in the
Debentures shall be repayable by the Mortgagor without demand and shall be an
additional lien upon the Premises prior to any right, title, interest or
claim attaching or accruing subsequent to the lien of this Mortgage and shall
be secured by and collectible as a part of this Mortgage.
11. That upon any default by Mortgagor in the payment of the principal
sum secured hereby or of any installment thereof, or of interest thereon, as
they severally become due, or any default, in the performance or observance
of any other term, covenant or condition in this Mortgage or in the
Debentures or in any instrument now or hereafter evidencing or securing said
debt, and the continuance of any such default after the giving of any
required notice and the expiration of any applicable grace period provided in
Paragraph 33 of this Mortgage, then in any or either of said events, the
whole indebtedness secured hereby together with accrued interest and all
other sums due hereunder or under the Debentures, shall, at the option of
Mortgagee, become immediately due and payable together with interest at the
rate set forth in the Debentures and together with reasonable attorneys' fees
and without relief from valuation or appraisement laws, and thereupon, or at
any time during the existence of any such default, Mortgagee may exercise
with respect to all personal property and fixtures which are a part of the
Premises, all the rights and remedies accorded upon default to a secured
party under the Uniform Commercial Code as in effect in the State of
Wisconsin, and may proceed to foreclose this Mortgage by judicial
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proceedings, anything hereinbefore or in said Debentures contained to the
contrary notwithstanding, and any failure to exercise said option shall not
constitute a waiver of the right to exercise the same at any other time.
Mortgagee may become the purchaser at any such foreclosure sale, and for the
purpose of making settlement or payment of the purchase price, shall be
entitled to use the Debentures and any claims for interest accrued and unpaid
thereon, together with all other sums, with interest, advanced and unpaid
hereunder, and all statutory charges for such foreclosure, including maximum
attorney's fees allowed by law in order that there may be credited as paid on
the purchase price the sums then due under the Debentures including principal
and interest thereon and all other sums, with interest, advanced and unpaid
hereunder, and all charges and expenses of such foreclosure including
attorneys' fees allowed by law.
12. That upon default by Mortgagor as aforesaid and the election of
acceleration by Mortgagee as aforesaid, Mortgagor does hereby authorize and
empower Mortgagee forthwith to foreclose this Mortgage by sale of the
Premises at public auction according to the statute in such case provided,
and to apply the proceeds of the sale to pay all amounts then due on this
Mortgage, including principal, interest and the amount of any taxes,
assessments and insurance premiums and any other sum which may then be due to
Mortgagee, and also to pay all costs and expenses of such foreclosure sale,
including but not limited to attorneys' fees, cost of continuation of
abstract, examination of title and title insurance, all of which costs,
expenses and fees the Mortgagor agrees to pay.
13. That in case of foreclosure of this Mortgage in any court of law or
equity, whether or not any order or decree shall have been entered therein,
and to the extent permitted by law, a reasonable sum as aforesaid shall be
allowed for attorneys' fees of the plaintiff in such proceeding, for
stenographers' fees and for all moneys expended for documentary evidence and
the cost of a complete abstract of title and title report for the purpose of
such foreclosure, such sums to be secured by the lien hereunder; and, to the
extent permitted by law, there shall be included in any judgment or decree
foreclosing this Mortgage and be paid out of said rents, issues and profits
from the Premises or the proceeds of any sale made in pursuance of any such
judgment or decree: (1) all costs and expenses of such suit or suits,
advertising, sale and conveyance, including reasonable attorneys',
solicitors' and stenographers' fees, outlays for documentary evidence and the
cost of said abstract, examination of title and title report; (2) all moneys
advanced by Mortgagee, if any, for any purpose authorized in this Mortgage,
with interest as herein provided; (3) all the accrued interest and Default
Interest remaining unpaid on the indebtedness hereby secured; (4) any
Acceleration Premium then arising; and (5) all the said principal money
remaining unpaid. The overplus of the proceeds, if any, shall be paid to the
said Mortgagor on reasonable request, or as the court may direct.
14. That in case of any foreclosure sale of the Premises, the same may
be sold in one or more parcels. Mortgagor, for Mortgagor and all who may
claim through or under Mortgagor, waives any and all right to have the
Premises marshaled upon foreclosure of the lien hereof and agrees that any
court having jurisdiction to foreclose such lien may order the Premises sold
as an entirety. Mortgagor agrees that to the extent permitted by law, this
Mortgage may be foreclosed by Mortgagee at Mortgagee's option, pursuant to
the provisions of Section 846.101, 846.102 and/or 846.103 of the Wisconsin
statutes or any successor thereof.
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15. That the failure of Mortgagee to exercise the option for
acceleration of maturity and/or foreclosure following any default as
aforesaid or to exercise any other option granted to Mortgagee hereunder in
any one or more instances, or the acceptance by Mortgagee of partial payments
hereunder shall not constitute a waiver of any such default, but such option
shall remain continuously in force. Acceleration of maturity, once claimed
hereunder by Mortgagee, may, at the option of Mortgagee, be rescinded by
written acknowledgment to that effect by Mortgagee, but the tender and
acceptance of partial payments alone shall not in any way affect or rescind
such acceleration of maturity.
16. That in the event of foreclosure of this Mortgage, Mortgagor does
hereby authorize and empower Mortgagee, its successors and assigns: (a) to
pay all taxes, special assessments, assessments, water rates, sewer rentals
and other governmental charges of every kind and nature that may then have
been or that thereafter during the period of redemption from sale under such
foreclosure may be levied or assessed upon the Premises or any part thereof;
(b) to keep the Improvements insured and to pay the premiums therefor as
required hereunder during the period of redemption from the sale under such
foreclosure; and (c) to keep the Premises in thorough repair as required
hereunder during the period of redemption of the sale from such foreclosure,
and any amount so paid or advanced by Mortgagee under the authority of this
paragraph, together with interest thereon at the rate set forth in the
Debentures, shall be an additional lien upon the Premises prior to any right,
title, interest or claim thereon attaching or accruing subsequent to the lien
of this Mortgage and shall be secured by and collectible as part of the
within Mortgage.
17. That at the option of Mortgagee, this Mortgage shall become subject
and subordinate, in whole or in part (but not with respect to priority of
entitlement to any insurance proceeds, award in condemnation or any
intervening judgment lien) to any and all Leases of all or any part of the
Premises upon the execution and recording in the offices of the County
Recorder in and for Kenosha County, Wisconsin, by Mortgagee of a unilateral
declaration to that effect.
18. That the rights and remedies herein provided are cumulative and
Mortgagee may recover judgment thereon, issue execution therefor, and resort
to every other right or remedy available at law or in equity, without first
exhausting and without affecting or impairing the security or any right or
remedy afforded by this Mortgage and no enumeration of special rights or
powers by any provisions of this Mortgage shall be construed to limit any
grant of general rights or powers, or to take away or limit any and all
rights granted to or vested in Mortgagee by virtue of the laws of Wisconsin.
19. The Mortgagor hereby waives, to the extent permitted by law, the
benefits of all valuation, appraisement, homestead, exemption, stay and
moratorium laws, now in force or which may hereafter become laws.
20. That Mortgagee, without notice, and without regard to the
consideration, if any, paid therefor, and notwithstanding the existence at
that time of any inferior liens thereon, may
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release any part of the security described herein or any person liable for
any indebtedness secured hereby without in any way affecting the priority of
the lien of this Mortgage, to the full extent of the indebtedness remaining
unpaid hereunder upon any part of the security not expressly released and may
agree with any party obligated on said indebtedness or having any interest in
the security described herein to extend the time for payment of any part or
all of the indebtedness secured hereby. Such agreement shall not, in any way,
release or impair the lien hereof, but shall extend the lien hereof as
against the title of all parties having any interest in said security which
interest is subject to said lien.
21. In the event Mortgagee (a) releases, as aforesaid, any part of the
security described herein or any person liable for any indebtedness secured
hereby, (b) grants an extension of time of any payments of the debt secured
hereby; (c) takes other or additional security for the payment thereof; (d)
waives or fails to exercise any right granted herein or in the Debentures,
said act or omission shall not release the Mortgagor, subsequent purchasers
of the Premises or any part thereof, or makers or sureties of this Mortgage
or of the Debentures, under any covenant of this Mortgage or of the
Debentures, nor preclude Mortgagee from exercising any right, power or
privilege herein granted or intended to be granted in the event of any other
default then made or any subsequent default.
22. That nothing herein contained nor any transaction related thereto
shall be construed or so operate as to require the Mortgagor to make any
payment or to do any act contrary to law; that if any clauses or provisions
herein contained operate or would prospectively operate to invalidate this
Mortgage in whole or in part then such clauses and provisions only shall be
held for naught, as though not herein contained, and the remainder of this
Mortgage shall remain operative and in full force and effect. All notices,
approvals, consents, requests and other communications required to be given
hereunder shall be in writing and mailed postage prepaid by certified or
registered mail, return receipt requested, or by personal delivery, to the
addressees indicated in the opening paragraph of this Mortgage (or at such
other place as either Mortgagor or Mortgagee, as the case may be, may, from
time to time, designate in a written notice given to the other) and shall be
deemed sufficiently served on the date of mailing thereof or on the date of
personal delivery.
23. That the Premises herein mortgaged being located in the State of
Wisconsin, this Mortgage and the rights and indebtedness hereby secured
shall, without regard to the place of contract or payment, be construed and
enforced according to the internal laws of the State of Wisconsin.
24. Mortgagor agrees that upon or any time (i) after the occurrence of a
default hereunder, or (ii) during the period of redemption after foreclosure of
this then in any such event, Mortgagee, shall upon application to the district
court where the Premises or any part thereof is located by an action separate
from the foreclosure or in the foreclosure action (it being understood and
agreed that the existence of a foreclosure is not a prerequisite to any action
for a receiver hereunder), be entitled to the appointment of a receiver for the
Rents, profits and all other income of every kind which shall accrue and be
owing for the use or occupation of the Premises or any part thereof. Mortgagee
shall be entitled to the appointment of a receiver
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without regard to waste, adequacy of the security or solvency of Mortgagor or
without the requirement of posting of any bond or security and without regard
to the then value of the Premises. The Mortgagee hereunder or any holder of
the Debentures may be appointed as the receiver. The receiver, who shall be
an experienced property manager, shall collect (until the indebtedness
secured hereby is paid in full and, in the case of a foreclosure sale,
during the entire redemption period) the Rents, profits and all other income
of every kind, manage the Premises so to prevent waste, execute Leases within
or beyond the period of the receivership if approved by the court and apply
all Rents, profits and other income collected by the receiver to the
following in such order as may be designated by Mortgagee:
A. To the payment of all reasonable fees of the receiver, if any,
approved by the court;
B. To the repayment of tenant security deposits, with interest
thereon, if required by applicable statutes;
C. To the payment when due of, delinquent or current, real estate
taxes or special assessments with respect to the Premises, or the periodic
escrow for the payment of the same;
D. To the payment when due of premiums for insurance of the type
required hereby, or the periodic escrow for payment of the same, if any;
E. To the payment of expenses for normal maintenance of the
Premises; and
F. If received prior to any foreclosure sale of the said Premises,
to Mortgagee for payment of the indebtedness secured by this Mortgage, but
no such payment made after acceleration of the indebtedness shall affect
such acceleration;
G. If received during or with respect to the period of redemption
after a foreclosure sale of the said Premises:
(1) If the purchaser at the foreclosure sale is not Mortgagee,
first to Mortgagee to the extent of any deficiency of the sale
proceeds to repay the indebtedness secured by this Mortgage, second to
the purchaser as a credit to the redemption price, but if the said
Premises are not redeemed, then to the purchaser of the said Premises;
(2) If the purchaser at the foreclosure sale is Mortgagee, to
Mortgagee, to the extent of any deficiency of the sale proceeds to
repay the indebtedness secured by this Mortgage and the balance to be
retained by Mortgagee as a credit to the redemption price, but if the
said Premises are not redeemed, then to Mortgagee, whether or not any
such deficiency exists.
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As provided in applicable statutes, Mortgagee shall have the right at any
time and without limitation to advance money to the receiver to pay any part
of or all of the items which the receiver should otherwise pay if cash were
available from the Premises and sums so advanced with interest at the rate
provided in the Debentures, shall be secured hereby, or if advanced during
the period of redemption, shall be a part of the sum required to be paid to
redeem from the sale.
Mortgagor for itself and any subsequent owner of the Premises hereby
waives any and all defenses to the application for a receiver and hereby
specifically consents to such appointment without notice but nothing herein
contained is to be construed to deprive the holder of this Mortgage of any
other right, remedy or privilege it may have under the law to have a receiver
appointed. The provision for the appointment of a receiver and the
assignment of such rents, issues and profits is an express condition upon
which the loan hereby secured is made. The rights and remedies herein
provided for shall be deemed to be cumulative and in addition to, and not in
limitation of, those provided by law, and if there be no receiver so
appointed, Mortgagee may proceed to collect the rents, issues and profits
from the Premises.
25. That in the event of the sale or transfer by operation of law, or
otherwise, of all or any part of the Premises, Mortgagee is hereby authorized
and empowered to deal with such vendee or transferee with reference to the
Premises, or the debt secured hereby, or with reference to any of the terms
or conditions hereof, as fully and to the same extent as it might with
Mortgagor, without in any way releasing or discharging Mortgagor from its
liability or undertaking hereunder.
26. Mortgagor shall maintain and keep in full force and effect its legal
existence, its right to carry on its business, and all franchises, rights and
privileges heretofore or hereafter granted to or for Mortgagor, and shall
file within the prescribed time any and all franchise tax reports and any
other tax reports or returns, and pay all such taxes when due and payable all
in compliance with the provisions of any present or future law.
27. Mortgagor represents and warrants that on the date on which this
Mortgage is executed and delivered, neither it, this Mortgage, nor the
Premises, nor the contemplated use of the Improvements on the Premises are in
violation of any easements, covenants and whether restrictions of record or
not, affecting or binding on the Premises. Mortgagor further covenants that
Mortgagor shall at all times faithfully and timely perform or cause to be
performed all of the terms, covenants and conditions, on Mortgagor's part to
be performed, contained in any agreements, easements, permits or other
instruments affecting the Premises. Mortgagor covenants and agrees that it
will not waive or modify any of the terms of any of such agreements,
easements, permits or other instruments or the rights or easements created
thereby or cancel or surrender same or release or discharge any party
thereunder or person bound thereby of or from any of the terms, covenants or
conditions thereof or permit the release or discharge of any party thereunder
in a manner that adversely affects mortgagee's security, without, in each
instance, the prior written consent of Mortgagee. Mortgagor shall take all
necessary action to effect the performance of all of the obligations of the
other parties to and the persons bound by the said agreements, easements,
permits and other instruments.
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Mortgagor will promptly give to Mortgagee copies of all notices, advices,
demands, requests, consents, statements, approvals, disapprovals,
authorizations, determinations, satisfactions, waivers, designations,
refusals, confirmations or denials which it shall give or receive under any
of the aforesaid agreements, easements, permits and other instruments to the
extent any of the foregoing adversely affect Mortgagee's security.
28. Mortgagor hereby represents and warrants that:
(a) the Premises and the operations presently conducted thereon
are not in violation of any zoning ordinances, building codes or
Environmental laws;
(b) neither Mortgagor nor to the knowledge of Mortgagor, after
due inquiry, any other person or entity has ever caused or permitted
any hazardous substance to be placed, held, located, generated,
treated or disposed of, on, under or at the Premises except in
conformance with applicable law;
(c) Mortgagor has not received any notice from any governmental
agency that the Premises and the operations presently conducted
thereon are the subject of any pending or threatened investigation,
inquiry or proceeding under any Environmental laws;
(d) neither Mortgagor, nor to the knowledge of Mortgagor, after
due inquiry, any other person, has ever caused or permitted any
asbestos to be located on the Premises;
(e) to Mortgagor's knowledge, after due inquiry, no hazardous
substance has ever migrated in, on, about or under the Premises;
(f) Mortgagor has no knowledge of any use of the Premises by any
prior owner which violated any applicable Environmental laws; and
(g) Mortgagor has duly obtained or secured all necessary
permits, licenses, and other governmental authorizations either
necessary or appropriate under Environmental Laws.
29. Mortgagor hereby covenants and agrees that:
(a) its own use of the Premises and the operations and
activities conducted thereon will at all times be in compliance with
all Environmental laws and that it will exercise its best efforts to
secure compliance by other users of the Premises with all
Environmental Laws;
(b) Mortgagor will not cause or permit any hazardous substance
ever to be generated, handled, used, stored treated or placed on,
under or at, or to
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escape, leak, seep, spill or be discharged, emitted or released from, the
Premises or any part thereof, except in compliance with Environmental laws,
PROVIDED, HOWEVER, that Mortgagor may store reasonable quantities of
chemicals, cleansers and other materials reasonably required for maintenance
and operation of the Premises provided the same are properly stored, are
used in the ordinary course of business, and in compliance with all
applicable laws;
(c) the use of the Premises by Mortgagor of the Premises will
not result in the unlawful release or presence of any hazardous
substance or solid waste in, on or under the Premises and Mortgagor
will exercise its best efforts to assure that the use of the Premises
by any tenant, licensee or other occupant will not result in the
unlawful release or presence of any hazardous substance or solid waste
in, on or under the Premises;
(d) Mortgagor shall immediately notify Mortgagee of the
occurrence of any violation or receipt of any notice or complaint of
any violation or alleged violation of any Environmental Laws and shall
give immediate notice to the Mortgagee of any violation, or receipt of
any notice or complaint of any violation or alleged violation, of any
Environmental Laws. Mortgagor will, at the Mortgagor's expense,
furnish Mortgagee with any and all environmental reports, tests,
analyses, and studies reasonably requested by Mortgagee to determine
whether the Premises has been or is being used for the handling,
generation, disposal, storage, or transportation of any hazardous
substances, and whether the Premises and all activities conducted
thereon are in compliance with all Environmental Laws.
(e) Mortgagee, its agents and representatives, may from time to
time make periodic inspections of the Premises and in connection
therewith may make such tests of the air, soil, groundwater, and
building materials, as Mortgagee, its agents and representatives,
shall deem necessary;
(f) Mortgagor shall use its best efforts to cause any and all
tenants, licensees and other occupants of the Premises to conduct
their respective businesses and uses of the Premises so as to comply
in all respects with Environmental Laws; and
(g) In the event reasonable evidence exists of the occurrence or
existence of the violation of any Environmental Law on the Premises,
Mortgagee (by its officers, employees and agents) at any time and from
time to time may contract for the services of persons (the "Site
Reviewers") to perform such environmental site assessments ("Site
Assessments") on the Premises as are reasonably necessary for the
purpose of determining whether there exists on the Premises any
environmental condition which could reasonably be expected to result
in any liability, cost or expense to the owner, occupier or operator
of the Premises arising under any of the Environmental Laws. The Site
Reviewers are
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<PAGE>
hereby authorized to enter upon the Premises for purposes of
conducting Site Assessments. The Site Reviewers are further authorized
to perform both above and below the ground testing for environmental
damage or the presence of hazardous materials on the Premises and such
other tests on the Premises as may be reasonably necessary to conduct
the Site Assessments in the reasonable opinion of the Site Reviewers.
Mortgagor agrees to supply to the Site Reviewers such historical and
operational information regarding the Premises as may be reasonably
requested by the Site Reviewers to facilitate the Site Assessments and
will make available for meetings with the Site Reviewers appropriate
personnel having knowledge of such matters. The results of Site
Assessments shall be furnished to Mortgagor upon request. The
reasonable cost of performing such Site Assessments shall be paid by
Mortgagor.
For purposes of this section, the term "Environmental Laws" shall mean
and include any and all laws, statutes, ordinances, rules, regulations,
orders, or determinations of any governmental authority pertaining to health
or to the environment, and relating to the Premises, including without
limitation, the Clean Air Act, as amended, the Comprehensive Environmental
Response, Compensation and Liability act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), and as may be further
amended (collectively "CERCLA"), the Federal Water Pollution Control Act
Amendments, the Occupational Safety Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the
Hazardous Materials Transportation Act of 1975, as amended, the Safe Drinking
Water Act, as amended, and the Toxic Substances Control Act, as amended.
Likewise, the terms "hazardous substance" and "Release" shall have the
meanings specified in CERCLA and the terms "solid Waste" and "disposal" (or
"disposed") shall have the meanings specified in RCRA; PROVIDED, HOWEVER, in
the event either CERCLA or RCRA is amended so as to broaden the meaning of
any term defined therein, such broader meaning shall apply subsequent to the
effective date of such amendment, AND PROVIDED FURTHER that, to the extent
the laws of the state in which the mortgaged premises is located establish a
meaning for "hazardous substance," "release," "solid waste" or "disposal"
which is broader than that specified in either CERCLA or RCRA, such broader
meaning shall apply with regard to the Premises.
30. Mortgagor covenants and warrants that the Premises are and will be
the subject of validly issued and outstanding permits and that the Premises
are (and Mortgagor covenants that they will remain) permitted by and are
consistent with any and all zoning, ecological, environmental and use
restrictions and all other governmental laws, rules and regulations
applicable to the Premises and Mortgagor agrees that these covenants and
warranties shall be fully accurate and in force continually hereafter for so
long as the indebtedness secured hereby is unpaid.
31. Mortgagor covenants not to initiate, join in, or consent to any change
in any zoning ordinance, private restrictive covenants or other public or
private restriction changing, limiting or restricting the uses which may be made
of the Premises or any part thereof, without the prior written consent of
Mortgagee in each instance. Without limiting the generality of the foregoing,
(a) Mortgagor shall not by act or omission permit all or any part of the
Premises to be
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availed of to qualify for fulfillment of any municipal or governmental
requirements for the construction or maintenance of any building or other
improvements on premises not part of the Premises, and (b) Mortgagor shall
not by act or omission impair the integrity of the Premises as zoning lots
separate and apart from all other premises not subject to this Mortgage. Any
attempt by Mortgagor to take any action which would violate any of the
foregoing provisions of this paragraph 31 shall be void.
32. Notwithstanding anything herein or in the Debentures secured hereby
to the contrary, it is hereby agreed that in no event shall the amount paid,
or agreed to be paid, to Mortgagee as interest pursuant to the terms of the
Debentures exceed the highest lawful rate permissible under applicable usury
laws if any. If Mortgagee would, but for the operation of this paragraph,
ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the unpaid principal balance due hereunder and not to the
payment of interest.
Mortgagor covenants and agrees that the indebtedness secured by this
Mortgage and the proceeds of such indebtedness are for business purposes only.
Mortgagor hereby represents and warrants that no portion of the Premises
is homestead property of Mortgagor.
33. Upon the occurrence of: (a) default in the payment of any interest
upon any Debenture when the same becomes due and payable, and continuance of
such default for a period of ten (10) days; (b) default in the payment of the
principal of any Debenture when the same becomes due and payable; (c) default
in the performance, or breach, of any covenant or warranty of the Mortgagor
in this Mortgage (other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in this Section specifically dealt
with), and continuance of such default or breach for a period of thirty (30)
days after there has been given, by registered or certified mail, to the
Mortgagor by the Holders of at least Ten Percent (10%) in principal amount of
the outstanding Debentures, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; (d) a court having jurisdiction in the
premises shall enter a decree or order for relief in respect of the Mortgagor
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the
Mortgagor or for any substantial part of its property, or ordering the
winding-up or liquidation of its affairs and such decree or order shall
remain unstayed and in effect for a period of thirty (30) consecutive days;
(e) the Mortgagor shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the ;Mortgagor or for any
substantial part of its property, or shall make any general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action in furtherance of any of the
foregoing. (f) the failure of the Mortgagor to pay any indebtedness due any
other person or entity and such failure shall continue beyond any
17
<PAGE>
applicable grace period and result in the acceleration of maturity of such
indebtedness; (g) the Mortgagor shall suffer to exist beyond any applicable
grace period any other event of default under any material agreement binding
the Mortgagor, provided such event of default has not been waived in writing
by the appropriate party or parties to such agreement; or (g) the Mortgagor
shall admit its inability to pay its debts as they mature or shall make an
assignment for the benefit of its creditors: then at such time, or upon the
happening of any such event, or at any time thereafter unless cured to
Mortgagee's satisfaction, as the case may be, the entire principal sum
secured hereby, together with accrued interest or any portion thereof as
selected by Mortgagee and all other sums due hereunder, under the Debentures
and any other document, instrument or agreement now or hereafter evidencing
or securing the indebtedness, shall, at the option of Mortgagee, become
immediately due and payable and shall thereupon be collectible by exercise of
any remedy available under this Mortgage or any other document given as
additional security for the indebtedness secured hereby as fully and
completely as if all of the said sums of money were originally stipulated to
be paid on such day, anything in said Debentures or in this Mortgage to the
contrary notwithstanding, with reasonable attorneys' fees and other costs and
charges and without relief from valuation or appraisement laws. In addition,
such principal sum and all such other sums shall bear interest from the date
of such default until paid at the rate provided in the Debentures, such
interest to be paid on demand. The remedies provided under this paragraph
shall be in addition to and not a limitation on any other rights or remedies
contained in this Mortgage or available as a result of any default by
Mortgagor hereunder. Thereupon, or at any time during the existence of any
such default, Mortgagee may proceed to foreclose this Mortgage, anything
herein or in said Debentures contained to the contrary notwithstanding,
including a partial foreclosure. Any failure of Mortgagee to exercise any
option which Mortgagee may have hereunder, under the documents and
instruments evidencing and securing the debt, or at law or in equity, shall
not constitute a waiver of the right to exercise the same at any other time.
34. That all covenants hereof shall run with the land solely for the
benefit of Mortgagor and its successors and assigns.
35. That this Mortgage and the rights and indebtedness hereby secured,
without regard to the place of contract or payments, be construed and
enforced according to the laws of the State of Wisconsin.
36. That Mortgagor will do, execute, acknowledge and deliver such
further reasonable acts, deeds, conveyances, transfers and assurances
necessary or proper, in the reasonable judgment of Mortgagee, for the better
assuring, conveying, mortgaging, assigning and confirming unto the Mortgagee
all property mortgaged hereby or property intended so to be; whether now
owned by Mortgagor or hereafter acquired.
37. Each right, power and remedy herein conferred upon Mortgagee is
cumulative and in addition to every other right, power or remedy, existing or
implied, given now or hereafter existing at law or in equity, except as
specifically restricted herein and each and every right, power and remedy herein
set forth or otherwise so existing may be exercised from time to time as often
and in such order as may be deemed expedient by Mortgagee, and the exercise or
the
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<PAGE>
beginning of the exercise of one right, power or remedy shall not be a waiver
of the right to exercise at the same time or thereafter any other right,
power or remedy; and no delay or omission of Mortgagee in the exercise of any
right, power or remedy accruing hereunder or arising otherwise shall impair
any such right, power or remedy, or be construed to be a waiver of any
default or acquiescence therein.
38. Nothing in this Mortgage shall be construed as constituting the
Mortgagee a mortgagee in possession.
39. The unenforceability or invalidity of any provision or provisions
hereof shall not render any other provision or provisions herein contained
unenforceable or invalid.
40. The individuals identified as Mortgagee hereunder shall hold their
right, title and interest in and under this Mortgage and the Premises as
tenants in common, with Charles H. Leavell having an undivided 50% interest
and Dorsar Partners, L.P. and Charles S. Leavell each having an undivided 25%
interest. All money and other proceeds from the exercise of the rights and
remedies of Mortgagee granted pursuant to this Mortgage shall belong 50% to
each of said individuals.
IT IS SPECIFICALLY AGREED that time is of the essence of this contract
and that the waiver of the options, or obligations secured hereby, shall not,
at any time thereafter, be held to be abandonment of such rights. Notice of
the exercise of any option granted to Mortgagee herein, or in the Debentures
secured hereby, is not required to be given.
ALL OF THE COVENANTS herein contained shall bind, and the benefits and
advantages thereof shall also inure to the respective heirs, executors,
administrators, successors and assigns of the parties hereto. Whenever used,
the singular number shall include the plural, the plural the singular and the
use of any gender shall include all genders.
IN WITNESS WHEREOF, the Mortgagor has signed and delivered this writing
the day and year first above written.
Renaissance Entertainment Corporation
By
-----------------------------------
James R. McDonald
Its Chief Financial Officer
STATE OF COLORADO )
) ss.
COUNTY OF _________ )
On this ____ day of May, 1997, before me, a Notary Public within and for
said County, personally appeared James R. McDonald, to me personally known,
who, being by me duly sworn did say that he is the Chief Financial Officer of
Renaissance Entertainment Corporation, the
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corporation named as Mortgagor in the foregoing instrument, and that he
signed said instrument on behalf of said corporation and as the free act and
deed of said corporation.
_________________________________________
Print Name_______________________________
Notary Public, ________ County, Colorado
My Commission [Expires]__________________
This instrument was drafted by and after recording should be returned to:
GRAY, PLANT, MOOTY, MOOTY & BENNETT, P.A.
3400 City Center
33 South Sixth Street
Minneapolis, Minnesota 55402
JWT
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EXHIBIT A
LEGAL DESCRIPTION
PARCEL I:
Part of the Southeast Quarter and part of the Northeast Quarter of Section
36, Town 1 North, Range 21 East of the Fourth Principal Meridian, lying and
being in the Town of Bristol, Kenosha County, Wisconsin, and being more
particularly described as: Beginning on the South line of the Southeast
Quarter of said Section at a point 600.7 feet South 89 degrees 24 minutes 50
seconds West from the Southeast corner of said Quarter Section; thence South
89 degrees 24 minutes 50 seconds West along the South line of said Quarter
Section 729.8 feet and to the West line of the East half of said Quarter
Section; thence North 1 degree 53 minutes 10 seconds West along the West line
of the East Half of said Quarter Section 2675.0 feet and to the North line of
said Quarter Section; thence North 1 degree 46 minutes 40 seconds West along
the West line of the Southeast Quarter of the Northeast Quarter of said
Section 1325.36 feet and to the North line of said Quarter Quarter Section;
thence North 89 degrees 02 minutes East along the North line of said Quarter
Quarter Section 1051.34 feet and to the Westerly right-of-way line of
Interstate Highway 94; thence South 2 degrees 03 minutes East along said
right-of-way line 131.93 feet; thence South 21 degrees 06 minutes West along
said right-of-way line 788.49 feet; thence South 2 degrees 03 minutes East
along said right-of-way line 700 feet; thence South 17 degrees 45 minutes 50
seconds East along said right-of-way line 1167.69 feet; thence South 10
degrees 58 minutes 40 seconds East along said right-of-way line 482.66 feet;
thence South 89 degrees 24 minutes 50 seconds West parallel to the South line
of the Southeast Quarter of said Section 395.04 feet; thence South 0 degree
35 minutes 10 seconds East at right angles to the South line of said Quarter
Section 851.72 feet to the point of beginning.
PARCEL II:
The East Half of the West Half of the Southeast Quarter and the Southwest
Quarter of the Northeast Quarter of Section Thirty-six (36), in Town One (1)
North, Range Twenty-one (21) East of the Fourth Principal Meridian; in the
Town of Bristol, County of Kenosha and State of Wisconsin.
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EXHIBIT B
PERMITTED ENCUMBRANCES
1. Real Estate Mortgage from Ellora Corporation to Bank One, Kenosha, NA dated
April 7, 1995 and recorded in the Kenosha County Register of Deeds office
on April 12, 1995 as Document No. 988507, securing $1,000,000.00.
2. Possible special charges by reason of any disallowance of any lottery tax
credit claimed for taxes levied or to be levied.
3. General and special taxes and assessments not yet due.
4. Public or private rights, if any, in such portions of the insured premises
as may be used, laid out, taken or dedicated in any manner whatsoever for
highway or road purposes.
5. Right of Way Authorization from Theodore Dooper to General Telephone
Company of Wisconsin, dated September 21, 1965 and recorded in the office
of the Register of Deeds for Kenosha County, Wisconsin on October 12, 1965
in Volume 713 of Records at page 504, as Document No. 479482 (as to Parcel
I).
6. Easement from Theodore E. Dooper to Wisconsin Electric Power Company, dated
July 23, 1963 and recorded in said Register's office on August 14, 1963 in
Volume 645 of Records at page 235-36, as Document No. 453071 (as to Parcel
I).
7. Distribution Easement granted Wisconsin Electric Power Company and
Wisconsin Bell, Inc. dated November 9, 1993 and recorded in the Kenosha
County Register of Deeds office on November 17, 1993 in Volume 1637 of
Records, Page 434-35, as Document No. 945420 (as to Parcel I).
8. Holding Tank Agreement recorded in the Kenosha County Register of Deeds
office on March 30, 1982 in Volume 1109 of Records, page 865, as Document
No. 688487; and on June 30, 1988 in Volume 1316 of Records, Page 607, as
Document No. 803280 (as to Parcel II).
9. Easement granted by Victoria Slavik to Wisconsin Gas and Electric Company
by instrument dated December 7, 1936 and recorded in said Register's office
July 10, 1937 in Volume 198 of Deeds, Page 528 (as to Parcel II).
10. Terms and conditions contained in Holding Tank Agreement dated 3/28/95 and
recorded in said Register's office on April 6, 1995 as Document No. 988072.
11. Real Estate Mortgage from Renaissance Entertainment Corporation to BankOne,
Colorado, NA dated March 31, 1997 and recorded in the Kenosha County
Register of
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Deeds Office on April 11, 1997 as Document No. 1054187, securing a loan in
the original principal amount of $690,188.55.
12. Real Estate Mortgage from Ellora Corporation to BankOne, Kenosha, NA dated
May 1, 1995 and recorded in the Kenosha County Register of Deeds Office on
June 19, 1995 as Document No. 993640, securing $250,000; together with
Assignment of Leases, Rents and Profits dated May 1, 1995 and recorded in
said Register's Office on June 19, 1995 as Document No. 993641.
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<PAGE>
DEED OF TRUST, ASSIGNMENT OF LEASES
AND SECURITY AGREEMENT
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND SECURITY AGREEMENT (this
"Deed of Trust"), dated as of the 14th day of May, 1997, by and between
RENAISSANCE ENTERTAINMENT CORPORATION, a Colorado Corporation (the
"Grantor"); Lawyers Title Realty Services, Inc., a Virginia corporation
located in Henrico County Virginia, as trustee hereunder (the "Trustee"); and
Dorsar Partners, L.P., a Texas limited partnership, having an address at c/o
Steven L. Feinberg, General Partner, 1855 North Mesa, Suite 120, El Paso,
Texas 79912-5939, Charles H. Leavell having an address at c/o The Leavell
Company, 4487 North Mesa, Suite 204, El Paso, Texas 79902 and Charles S.
Leavell having an address at c/o Renaissance Entertainment Corporation, 4440
Arapahoe Avenue, Suite 200, Boulder, Colorado 80303 (collectively, together
with any subsequent holder or holders of the "Debentures" (defined below) are
hereinafter referred to as the "Beneficiary").
1. Grantor is indebted to Beneficiary on account of loans
(collectively the "Loan") in the principal sum of ONE MILLION and 00/100THS
($1,000,000.00) DOLLARS, as evidenced by: (i) that certain 9% Convertible
Secured Debenture Due 2002 dated May 14, 1997 and issued by Grantor to Dorsar
Partners, L.P.; (ii) that certain 9% Convertible Secured Debenture Due 2002
dated May 14, 1997 and issued by Grantor to Charles S. Leavell and (iii) that
certain 9% Convertible Secured Debenture Due 2002 dated May 14, 1997 and
issued by Grantor to Charles H. Leavell (collectively the "Debentures") with
interest on such principal sum from the date of the Debentures at the rate
specified in the Debentures. The Debentures are being issued, respectively,
pursuant to: (i) that certain Subscription and Purchase Agreement dated as of
May 8, 1997 and executed between Grantor and Dorsar Partners, L.P.; (ii) that
certain Subscription and Purchase Agreement dated May 8, 1997 and executed
between Grantor and Charles S. Leavell and (iii) that certain Subscription
and Purchase Agreement dated as of May 8, 1997 and executed between Grantor
and Charles H. Leavell (collectively the "Subscription Agreements"). The
Debentures mature not later than April 1, 2002. The provisions of the
Debentures are incorporated herein by reference.
2. As a condition to making the Loan, the Beneficiary has required, in
order to secure the repayment of the Debentures, that the Grantor, among
other things, convey the "Property" (defined below) to the Trustee and assign
its interest in leases of the Property pursuant to this Deed of Trust. The
Debentures, this Deed of Trust and every other document further evidencing,
securing the repayment of, executed in connection with or otherwise related
to the Loan are hereinafter referred to as the "Loan Documents".
DEED OF TRUST AND ASSIGNMENT OF LEASES:
SECTION 1. CONVEYANCE IN TRUST AND ASSIGNMENT OF LEASES
1.1 CONVEYANCE OF THE PROPERTY IN TRUST. For and in consideration of the
premises and the making of the Loan, and in order to secure the Indebtedness
(hereinafter defined), the Grantor hereby grants and conveys to the Trustee,
with General Warranty and English covenants
<PAGE>
of title, all of the following described property, whether now owned or held
or hereafter acquired by the Grantor:
ALL that certain land situated in the County of Stafford, Virginia, and
more particularly described on Exhibit "A", and all rights, appurtenances,
easements, privileges, remainders and reversions now or hereafter
appertaining thereto, including, without limitation, all right, title,
interest, property, claim and demand of the Grantor, if any, in and to the
land lying in the bed of any street, road, avenue or alley adjacent thereto,
either at law or in equity, in possession or expectancy, now existing or
hereafter acquired (collectively, the "Land") subject, however, to the
Permitted Exceptions described in Exhibit "B";
TOGETHER WITH all building and improvements now or hereafter erected on
the land (the "Improvements");
TOGETHER WITH all fixtures and tangible personal property owned by the
Grantor and now or hereafter attached to the land or the Improvements, and
replacements thereof, including, but not limited to, all plumbing and
electrical apparatus and equipment, cleaning and maintenance equipment, all
boilers, tanks, engines, motors, incineration and power equipment, laundry
equipment, conduits, switchboards, lifting, cleaning, fire-prevention,
fire-extinguishing, refrigeration, ventilation and communications apparatus,
elevators, escalators, shades, drapes, awnings, signs, screens, storm doors
and windows, stoves, cabinets, partitions, ducts and compressors, piping and
plumbing fixtures, pumps, heating, air conditioning and air cooling systems,
fixtures and equipment and lighting and air cooling systems, fixtures and
equipment and lighting systems, fixtures and all right, title and interest of
Borrower in and to any such personal property and fixtures that may be
subject to any lease, title retention or security agreement or other
instrument (collectively, the "Equipment"). All Equipment is part and parcel
of the Land and appropriated to the use of the Land and, whether affixed or
annexed or not, shall for the purpose of this Deed of Trust be deemed
conclusively to be conveyed hereby.
TOGETHER WITH the Grantor's interest in all leases, subleases, service or
operating agreements and contracts of or relating to the Land, the Improvements
or the Equipment, whether now existing or hereafter entered into; and all rent,
income, revenues, royalties, issues and profits (collectively, the "Rents and
Profits") now or hereafter arising from the Land, the Improvements or the
Equipment; provided that, until the occurrence of an "Event of Default" (as
hereinafter defined), and the election of the Beneficiary to collect the Rents
and Profits after such Event OF Default, the Grantor shall have a license to
collect and dispose of the Rents and Profits subject to the provisions of 1.2
below, and provided further that such assignment shall not impose on the Trustee
or the Beneficiary of the Grantor's obligations under such leases, sublease,
service or operating agreements and contracts.
TOGETHER WITH all proceeds of the conversion, whether voluntary or
involuntary, of any of the foregoing real or personal property into cash or
other liquid claims, including, without limitation, all awards, payments or
proceeds, and any interest thereon, and the right to receive the same, that may
be made as the result of any casualty, any exercise of the right of eminent
domain or deed in lieu thereof, the alteration of the grade of any street and
any injury to or decrease in
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<PAGE>
the value of such property, together with the counsel fees, costs and
disbursements incurred by the Beneficiary in connection with the collection
of such awards, payments and proceeds (collectively, the "Proceeds"). The
Grantor agrees to execute and deliver, from time to time such further
instruments as maybe requested by the Beneficiary to confirm such assignment
to the Beneficiary of the Proceeds.
The Land, the Improvements, the Equipment, the Rents and Profits and the
Proceeds, together with any substitutions therefore, replacements thereof and
additions or attachments thereto, are sometimes hereinafter referred to
collectively as the "Property". Nothing herein shall be deemed to be an
authorization by the Beneficiary to the Grantor to sell, assign or otherwise
dispose of the Property, except in accordance with the provisions of this
Deed of Trust.
1.2 ASSIGNMENT OF RENTS AND LEASES. The Grantor also irrevocably and
absolutely assigns the Rents and Profits to the Beneficiary. Notwithstanding
any contrary provisions hereof, this assignment is intended to effect an
absolute and immediate assignments from the Grantor to the Lender of the
Rents and Profits and not merely the creation of a lien thereon or a security
interest therein. The Grantor shall have a license (the "Grantor's License")
to manage and operate the Project and to collect, receive and apply for its
own account all Rents as they become due; provided, however, that the
Grantor's License shall cease and terminate upon the occurrence of an "Event
of Default' (as defined below). Upon the termination of the Grantor's
License, the Beneficiary, its agents and employees are hereby expressly and
irrevocably authorized before, in conjunction with, or after acceleration of
the Debentures, at the Beneficiary's option, to enter and take possession of
the Property (a) by entry at the business or rental office of the Grantor, if
any, located upon the Property, or (b) by written notice served personally
upon or sent by registered or certified mail to the Grantor in accordance
with the provisions of Section 6.2 of this Deed of Trust, as the Beneficiary
may elect, and no further authorization shall be required. The Grantor
irrevocably appoints the Beneficiary through any of its authorized officers
as the Grantor's attorney-in-fact to do, upon and during any termination of
the Grantor's license, all things which the Grantor might otherwise do with
respect to the Property and the Rents and Profits thereon, including, without
limitation, collecting rents, issues and profits with or without suit and
applying the same, less expenses of collection, to cure a default under the
Indebtedness (defined below) or to cure any "Event of Default" (defined
below), in such manner as the Beneficiary may elect, leasing, in the name of
the Grantor, the whole or any part of the Property which may become vacant,
and employing agents therefore and paying such agents reasonable compensation
for their services. The foregoing appointment of the Beneficiary as the
attorney-in-fact for the Grantor constitutes a power coupled with an interest
and, as such, is irrevocable. The powers and rights granted in this section
shall be other remedies provided in this Deed of Trust upon the occurrence of
an Event of Default and may be exercised independently of or concurrently
with any of such remedies.
1.3 INDEBTEDNESS SECURED. The foregoing conveyance of the Property,
creation of security interest and assignment are made IN TRUST to secure to the
Beneficiary the following (sometimes hereinafter referred to collectively as the
"Indebtedness"): (i) the payment of all sums becoming due and payable by the
Grantor under the Debentures in the aggregate original principal amount of
$1,000,000.00 and evidencing the Loan, (ii) the payment of all sums
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<PAGE>
becoming due and payable by the Grantor under the terms of this Deed of Trust
and of each of the other "Loan Documents" (as hereinafter defined), and (iii)
the performance of each and every covenant, agreement, term and condition of
the Grantor that is set forth in this Deed of Trust and in each of the other
Loan Documents.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR
The Grantor hereby represents and warrants that:
2.1 FORMATION AND AUTHORITY OF THE GRANTOR: VALIDITY OF THE LOAN
DOCUMENTS.
2.1.1 (1) It is a corporation dully formed, validly existing and
in good standing under the laws of the State of Colorado, (2) it has all
requisite power and authority (i) to execute and deliver this Deed of Trust
and all of the other Loan Documents, (ii) to enter into, perform, observe
and otherwise comply fully with the provisions of this Deed of Trust and
all of the other Loan Documents and (iii) to own and operate the Property
and (3) all necessary actions have been taken by Grantor to confer upon the
persons executing this Deed of Trust and all of the other Loan Documents on
the Grantor's behalf the power and authority to do so.
2.1.2 Neither the execution and delivery on behalf of the Grantor
of, or the performance by the Grantor of its obligations under, this Deed
of Trust or any of the other Loan Documents will conflict with or violate,
or constitute a default or require any consent or waiver under, any
provisions of any mortgage, deed of trust, indenture, evidence of
indebtedness, agreement, or governmental or quasi-governmental order,
decree, ruling or directive to which the Grantor is a party or by which the
Grantor or the Property is bound.
2.2 NO DEFAULTS OR LITIGATION.
2.2.1 There are no material actions, suits or proceedings pending
or overtly threatened against the Grantor, any Co-maker or the Property.
2.2.2 Neither the Grantor nor Co-maker is in default with respect
to any material judgment, order, writ, injunction, decree or demand of any
court, arbitrator, administrative agency or any governmental or
quasi-governmental authority.
2.3 USE OF THE PROPERTY. The use of the Property as an entertainment
faire complies with all applicable zoning ordinances, subdivision ordinances,
land use regulations and restrictive covenants affecting the Property, and
all statutes, laws, ordinances, rules, orders and regulations of all
governmental or quasi-governmental authorities with respect to such use have
been satisfied.
2.4 UTILITIES. That all utility services and facilities necessary for
the operation of the Property as an entertainment Faire, including, without
limitation, public water, storm and sanitary sewer facilities, and electric,
telephone and other utility facilities necessary for the
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operation of the Property, are available at the boundaries of the Land, may
be extended to and connected with the Property upon payment of standard
tap-on or connection fees and are adequate to serve the Property.
2.5 TAXES. The Land and the Improvements are assessed for taxation
separately without regard to any other property, and that, for all purposes,
the Land and the Improvements may be mortgaged, conveyed and otherwise dealt
with as a separate lot or parcel.
2.6 ENVIRONMENTAL MATTERS.
2.6.1 The Property and the Grantor are not in violation of,
or subject to, any existing, pending or threatened investigation by
any federal, state or local governmental authority under any law,
statute, ordinance, or regulation pertaining to health, industrial
hygiene or the environment (collectively, "Environmental Laws"),
including without limitation (i) the Comprehensive Environmental
Response, Compensation, and Liability act of 1980, as amended, 42
U.S.C. {9601 ET SEQ. ("CERCLA"), and (ii) the Resource Conservation
and Recovery act of 1976, 41 U.S.C. {6901 ET SEQ. ("RCRA").
2.6.2 The Grantor's use of the Property does not and will not
result in the release or disposal of any Hazardous Substance onto the
Property.
2.6.3 To the Grantor's best knowledge and belief, there is no
occurrence or condition on any other real property that could cause
the Property or any part thereof to be subject to any restrictions on
ownership, occupancy, transferability or use.
2.7 PERMITS. All permits, licenses, registrations, certificates,
authorizations and approvals required to have been obtained as of the date
hereof have been obtained for the execution and delivery of the Loan
Documents by the Grantor, the performance and enforcement of the obligations
of the Grantor thereunder and the construction, ownership, operation and use
of the Property by the Grantor, and the Grantor knows of no reason why any
future required permits or approvals cannot be obtained as needed.
2.8 ACCESS. The Property fronts on, and has unencumbered legal and
physical access to, a publicly dedicated and maintained roadway.
2.9 OTHER INDEBTEDNESS. As of the date hereof the Grantor is not in
default in the payment of the principal of or interest on any of its
indebtedness for borrowed money and is not in default under any instrument
under or subject to which indebtedness has been incurred, and no event has
occurred and is continuing under the provisions of any such agreement that,
with notice or the passage of time or both, would constitute a default
thereunder.
2.10 SURVIVAL OF THE GRANTOR'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties made in this Deed of Trust shall remain true
and correct in all material respects
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and shall survive so long as any of the Indebtedness shall remain unsatisfied
or otherwise outstanding.
SECTION 3. COVENANTS OF THE GRANTOR
The Grantor covenants and agrees as follows:
3.1 PAYMENT OF THE INDEBTEDNESS. The Grantor shall (a) pay the
obligations evidenced by the Debentures as therein provided, (b) pay and
perform when due all payments and obligations required under any lien that
may now or hereafter have priority over the lien of this Deed of Trust, and
(c) pay all sums due under and perform all of its obligations under the
Debentures, this Deed of Trust and the other Loan Documents.
3.2 FURTHER ASSURANCES. The Grantor shall, at its cost and without
expense to the Trustee or the Beneficiary, do every such further act and
execute, acknowledge and deliver every such further deed, conveyance,
document, instrument, mortgage, assignment, notice of assignment, transfer
and assurance as the Trustee or the Beneficiary shall reasonably require, at
any time and from rime to time, in order to more fully convey, assign,
transfer and confirm unto the Trustee or the Beneficiary the property and
rights hereby conveyed or assigned, or which the Grantor may be or may
hereafter become bound to convey or assign to the Trustee or the Beneficiary.
The Grantor shall execute, acknowledge and deliver such financing statements
or comparable security instruments as the Beneficiary may request, at any
time and from time to time, in order to evidence more effectively, to perfect
or to continue the perfection of the security interest created hereunder. If,
in the opinion of the Beneficiary, it becomes necessary or desirable to file
additional Financing or continuation statements in any jurisdiction in order
to preserve, perfect or protect the security interest created under this Deed
of Trust, the Grantor agrees, upon the written request of the Beneficiary, to
execute such statements and cause them to be filed in such jurisdictions.
3.3 RECORDATION OF INSTRUMENTS. The Grantor shall pay all filing and
recordation taxes and fees and any other expenses incident to the execution,
acknowledgment, filing and recordation of this Deed of Trust, any Financing
statements, each of the other Loan Documents and any instruments of further
assurance and any instruments of release, partial release, termination or
partial termination, as applicable.
3.4 SUBSTITUTIONS. Immediately upon the acquisition, construction,
assembly, placement or conversion of any extensions, improvements, renewals,
substitutions or replacements of, or any additions or appurtenance to, the
Land, the improvements or the Equipment, as the case may be, and, in each
such case, without further deed of trust, conveyance, assignment or other act
by the Grantor, such extensions, improvements, renewals, substitutions,
replacements, additions and appurtenances shall become subject to and
encumbered by the liens and assignments contained in this Deed of Trust as
fully and completely, and with the same effect, as though now owned by the
Grantor and specifically described in Section 1, such
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encumbrance to be effective and self-operative without the necessity of any
further action by the parties hereto.
3.5 TAXES, ASSESSMENTS AND LIENS.
3.5.1 The Grantor, from time to time when the same shall
become due, shall pay and discharge all taxes of every kind and nature
including, without limitation, real property taxes and assessments,
general and special (collectively, the "Property Taxes"), all general
and special levies, permits, inspection and license fees, all water
and sewer rents and charges, and all other public charges of every
nature, imposed upon or assessed against the Property. The Grantor,
promptly upon the request of the Beneficiary, shall deliver to the
Beneficiary receipts evidencing the payment of all such taxes,
assessments, levies, fees, rents and other public charges.
3.5.2 The Grantor, from time to time when the same shall
become due, shall pay all lawful claims and demand of mechanics,
materialmen, laborers, and others that, if unpaid, might result in, or
permit the creation of, a mechanic's materialmen, laborers, and others
that, if unpaid, might result in, or permit the creation of, a
mechanic's materialmen's, judgment or other lien on the Property or
any part thereof, or on the rents, and, if any such lien is filed,
docketed or otherwise recorded, the Grantor shall notify the
Beneficiary promptly and, at the sole cost of the Grantor, shall
promptly "bond off' or satisfy and effect the release of such lien or
shall provide affirmative title insurance coverage satisfactory to the
Beneficiary.
3.6 INSURANCE.
3.6.1 The Grantor, at its expense and for the benefit of the
Beneficiary (subject to the rights of the prior deed of trust holder),
shall keep the Improvements and the Equipment insured, to the extent
of full replacement cost, against loss by fire, casualty, and such
other hazards and risks as are customarily insured against in
connection with the ownership, operation and use of projects of like
size and character as the Property. All such insurance shall be
written in forms and amounts satisfactory to the Beneficiary, shall
name Beneficiary as an additional insured under a standard mortgagee
loss payable endorsement and shall be issued by companies having a
rating of A:XII or better in Best's Key Rating Guide, shall be
licensed to do business in the Commonwealth of Virginia and shall be
satisfactory to the Beneficiary. Each such policy shall provide that
it shall not be canceled (including, without limitation, any
cancellation or lapse for nonpayment of premium), and that coverage
thereunder shall not be reduced materially, without at least thirty
(30) days prior written notice to the Beneficiary.
3.6.2 The Grantor shall promptly notify the Beneficiary of
any loss covered by such insurance. The Grantor hereby authorizes
Beneficiary, at its option, but subject to the rights of the prior
deed of trust holder, to collect, adjust
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and compromise any losses under any of the insurance aforesaid and
after deducting costs of collection to apply the proceeds at its option
as follows: (A) As a credit upon any portion as selected by
Beneficiary, of the indebtedness secured hereby, or (B) To restoring the
improvements in which event Beneficiary shall not be obligated to see
the proper application thereof nor shall the amount so released or used
be deemed a payment on any indebtedness secured hereby, or (C) To
deliver same to the owner of the premises.
3.6.3 The Grantor shall not take out separate insurance
concurrent in form or contributing in the event of loss with the
insurance required to be maintained under this Section 3.6, unless the
Beneficiary is included thereon as a named payee under a standard
mortgagee endorsement. The Grantor shall immediately notify the
Beneficiary whenever any such separate insurance is taken out and
shall promptly deliver to the Beneficiary the policy or policies of
such insurance.
3.6.4 All of the Grantor's rights, title and interest in and
to all insurance policies described in this Section 3.6 are hereby
assigned to the Beneficiary. Upon the occurrence of an Event of
Default, the Beneficiary, on behalf of the Grantor, may adjust and
compromise any claims under such insurance policies and collect,
receive and apply the proceeds thereof as the Beneficiary shall see
fit. The Beneficiary is hereby irrevocably appointed as the Grantor's
attorney-in-fact, coupled with an interest, for such purposes, and may
deduct from such proceeds any expenses incurred by the Beneficiary in
connection therewith.
3.6.5 Notwithstanding any provisions herein to the contrary
and in particular the foregoing provisions of this Section 3.6, in the
event of any such loss or damage as therein described to the
improvements upon the Property, it is hereby understood, covenanted
and agreed that, subject to the rights of the prior deed of trust
holder, the Beneficiary shall make the proceeds received under any
such insurance policies as therein described available for the
restoration of the improvements so damaged, subject to the following
conditions: (a) that Grantor is not then in default under any of the
terms, covenants and conditions hereof; (b) that Beneficiary shall
first be given satisfactory proof that such improvements have been
fully restored or that by the expenditure of such money will be fully
restored, free and clear of all liens, except as to the liens of this
Deed of Trust and the deeds of trust which are prior to this Deed of
Trust; (c) that in the event such proceeds shall be insufficient to
restore or rebuild the said improvements, Grantor shall deposit
promptly with Beneficiary funds which, together with the insurance
proceeds, shall be sufficient to restore and rebuild the said
Property; (d) that in the event Grantor shall fail within a reasonable
time, subject to delays beyond its control, to restore or rebuild the
said improvements, then Beneficiary, at its option, may restore or
rebuild the said improvements for or on behalf of the Grantor and for
such purpose may do all necessary acts; (e) that the excess of said
insurance proceeds above the amount necessary to complete such
restoration shall
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be applied as hereinbefore provided as a credit upon any portion as
selected by Beneficiary, of the indebtedness secured hereby; and (f) the
holder of any prior deed of trust on the Property, if the same remains
unsatisfied at such time, has consented to making such proceeds
available for restoration. In the event any of the said conditions are
not or cannot be satisfied, then the alternate disposition of such
insurance proceeds as provided above in this Section 3.6 shall again
become applicable.
3.6.6 Under no circumstances shall Beneficiary become
personally obligated to take any action to restore or rebuild the said
improvements. In the event of foreclosure of this Deed of Trust, or
other transfer of title to the Property in extinguishment of the
indebtedness secured hereby, subject to the rights of the prior deed
of trust holder, all right, title and interest of the Grantor, in and
to any insurance policies then in force, and to the proceeds of any
such policies, shall pass to the purchaser or grantee.
3.7 RIGHT TO CURE. If the Grantor shall fail to perform any of
the covenants contained in this Deed of Trust or in any of the other
Loan Documents, or shall fail to observe or perform any covenant, term
or condition under any other instrument creating a lien or encumbrance
on the Property, or shall fail to observe or perform any provision of
any lease, restrictive covenant or other agreement affecting the
Property, each of the Beneficiary and the Trustee shall have the option,
but not the obligation, to advance funds for and otherwise cause the
observance or performance of the same on the Grantor's behalf, and all
monies so advanced shall be added to the principal balance of the
Debentures, shall be payable by the Grantor to the Beneficiary on
demand, and shall bear interest at the rate provided in the Debentures,
and the payment thereof shall be secured hereby. No action taken by the
Beneficiary or the Trustee pursuant to the provisions of this Section
3.7 shall constitute, nor be deemed to constitute, a waiver or cure of
any Event of Default.
3.8 CONFIRMING; STATEMENT. The Grantor, as often as the
Beneficiary may reasonably request in writing, within ten (10) days
after such request, shall promptly furnish a written statement, duly
authorized and acknowledged, setting forth (1) the amount due, whether
of principal, interest or otherwise, under the Note, this Deed of Trust
and any of the other Loan documents, (2) the date to which payments of
principal and interest have been made, (3) whether the Grantor has any
defenses against or rights of setoff with respect to the payment or
performance thereof, and (4) such other information with respect to the
Loan as the Beneficiary may request
3.9 MAINTENANCE OF THE PROPERTY. The Grantor shall not commit,
permit or suffer any material waste on the Property or make any change
in the operation or use of the Property' that will in anyway create or
materially increase any fire or other hazard. At all times, the Grantor
shall maintain and keep the Property in good operating order and
condition and shall promptly make, from time to time, all necessary
repairs, renewals, replacements, additions and improvements in
connection therewith, including, without limitation, all repairs,
renewals, replacements, additions, improvements and rebuilding that may
be required as a result of damage
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or loss to the Property occasioned by fire or other casualty, by the
exercise of the power of eminent domain or by conveyance thereof. The
Improvements and the Equipment shall not be removed, demolished or
materially altered without the prior written consent of the Beneficiary,
in its discretion.
3.10 REMOVAL OF EQUIPMENT FIXTURE FILING.
3.10.1 The Grantor shall not remove any Equipment from the
Property, nor sell or otherwise dispose of the same, unless the
Grantor replaces such Equipment prior to or promptly after each such
removal, sale or disposal with property of a like kind and having a
fair market value at least equal to the replacement value of the
Equipment so removed. The liens and security interests created herein
shall forthwith attach to all of such replacement property without the
necessity of any further action by the parties hereto; provided.
however, that the Grantor shall execute such additional Financing
statements and security agreements, renewals thereof and amendments
thereto and such other documents and instruments as may be required by
the Beneficiary to perfect or continue the security interests created
hereunder.
3.10.2 The parties hereto agree that this Deed of Trust shall
constitute a security agreement" and that the recordation of this
Deed of Trust shall constitute a "fixture filing' (as both of such
terms are defined in the Uniform Commercial Code as adopted in the
Commonwealth of Virginia, as amended from time to time (the "UCC")).
3.11 EMINENT DOMAIN. The Grantor shall notify the Beneficiary promptly
upon learning of any action or proceeding relating to any condemnation or
other taking or conveyance in lieu thereof, whether direct or indirect, of
the Property, or any part thereof, and the Grantor shall appear in and
prosecute any such action or proceeding. In the event of any such
condemnation, taking or conveyance, and to the extent practicable, the
Grantor, at its own expense, shall promptly rebuild, restore and repair the
Property to the same condition as existed immediately prior to such
condemnation, taking or conveyance. The Trustee and the Beneficiary may
participate in any such action or proceeding, and the Grantor, from time to
time, shall execute and deliver to the Trustee and the Beneficiary any and
all instruments requested by them in order to permit such participation. In
any such action or proceeding, the Trustee and the Beneficiary may be
represented by counsel selected by them, and the Grantor shall reimburse the
Beneficiary and the Trustee for all fees, costs and expenses incurred by them
in connection with such representation promptly upon demand therefore. Any
award or compensation payable in connection with such action or proceeding is
hereby assigned to and shall be paid to the Beneficiary, subject to the
rights of the prior deed of trust holders. Grantor further covenants and
agrees, subject to the rights of the prior deed of trust holder, to make,
execute and deliver to Beneficiary, at any time or times upon request, free,
clear and discharged of any encumbrances of any kind whatsoever except the
rights of the holder of the prior deed of trust, any and all further
assignments and/or other instruments deemed necessary by Beneficiary for the
purpose of validly and sufficiently assigning all awards and other
compensation heretofore and hereafter to be made
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to Grantor (including the assignment of any award from the United States
Government at any time after the allowance of the claim therefor, the
ascertainment of the amount thereof and the issuance of the warrant for
payment thereof) for any taking, either permanent or temporary, under any
such proceedings. Grantor further agrees that should the Property or any
part thereof, including any easement or appurtenance thereof, be taken or
damaged, permanently or temporarily, by reason of any public improvement or
condemnation proceedings, including severance and consequential damage and
change in grade of streets, or damage by earthquake or in any other manner,
subject to the rights of the prior deed of trust holder, Beneficiary shall be
entitled, subject to the rights of the prior deed of trust holders, to any
compensation, award, payment or relief therefor and Grantor does hereby
appoint Beneficiary its Attorney-in-Fact, coupled with an interest, and
authorizes, directs and empowers such Attorney, at the option of the Attorney
on behalf of the Grantor, its successors or assigns, to commence, appear in
and prosecute, in its own name, any action or proceedings, to adjust or
compromise any claim therefor and to collect and receive proceeds thereof,
and to give proper receipts and acquittances therefor and after deducting
expenses of collection, to apply the net proceeds as a credit on any portion,
as selected by Beneficiary, of the indebtedness secured hereby
notwithstanding the fact that the amount owing thereon may not then be due
and payable hereunder or that the indebtedness is otherwise adequately
secured, provided, however, that no prepayment premium shall be due in
connection with any net proceeds applied to the indebtedness.
3.12 COSTS AND EXPENSES: INDEMNITY. The Grantor shall pay all
reasonable costs, fees and expenses of the Beneficiary in connection with
approval, documentation, closing, disbursement, administration and collection
of the Loan, including, without limitation, all appraisal fees, inspection
fees, recording costs and fees. charges and expenses of legal counsel,
architects, engineers and other consultants retained by the Beneficiary in
connection with the Loan. The Grantor shall indemnify against and hold the
Beneficiary harmless from any liability whatsoever for the costs, fees and
expenses described in this Section 3.12. in the event the Beneficiary or the
Trustee or both is made a party to or appears, either voluntarily or
involuntarily, in any action or proceeding affecting or relating to any of
the Property or any of the Indebtedness, or the validity or priority of any
of the Loan Documents or any lien, right, title or security interest intended
thereby, then the Grantor shall, upon demand, reimburse the Beneficiary or
the Trustee or both, as applicable, for all costs, expenses, and liabilities
incurred by the Beneficiary or the Trustee or both, as applicable, by reason
thereof, including, without limitation, costs of litigation and attorney's
fees, and the same shall be secured by this Deed of Trust.
3.13 OPERATION OF THE PROPERTY. The Grantor shall operate the Property
as an entertainment faire center in strict compliance with all applicable
governmental and quasi-governmental statutes, laws, ordinances, rules and
regulations and orders.
3.14 ENVIRONMENTAL COMPLIANCE.
3.14.1 Neither the Grantor nor any third party will use,
generate. manufacture, produce, store, release. discharge, or dispose
of on, under or about the Property or transport to or from the
Property any Hazardous Substance except
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limited amounts of any Hazardous Substance used by Grantor in the
operation of the Property. For the purposes of this Deed of Trust,
a Hazardous Substance shall be any substance that is regulated by or
defined as being harmful to the environment or public health in any
Environmental Laws.
3.14.2 The Grantor shall give prompt written notice to the
Beneficiary of:
3.14.2.1 any proceeding or inquiry by and governmental
authority with respect to the presence of any Hazardous Substance on
the Property or the migration thereof from or to other real property;
3.14.2.2 all claims made or overtly threatened by any
third party against the Grantor or the Property relating to any loss
or injury resulting from any Hazardous Substance; and
3.14.2.3 the Grantor's discovery of any occurrence or
condition on any real property adjoining or in the vicinity of the
Property that could cause the Property or any part thereof to be
subject to any restrictions on the ownership, occupancy,
transferability or use of the Property under any Environmental Laws.
3.14.3 The Beneficiary shall have the right to join and
participate in, as a party if it so elects, any legal proceedings or
actions initiated in connection with any Environmental Laws.
3.14.4 In the event that any such Hazardous Substances are
hereafter found on, under or about the Property, the Grantor shall
take all necessary and appropriate actions and shall spend all
necessary sums to cause the same to be cleaned up and/or removed in
accordance with any Environmental Laws, and the Beneficiary shall in
no event be liable or responsible for any costs or expenses incurred
in so doing.
3.14.5 The Grantor shall at all times observe and satisfy the
requirements of, and maintain the Property in compliance with, all
Environmental Laws.
3.14.6 Should the Grantor at any time default in or fail to
perform or observe any of its obligations under this Section 3.14, the
Beneficiary shall have the right, but not the duty, without limitation
upon any of the Beneficiary's rights pursuant hereto, to perform the
same, and the Grantor agrees to pay to the Beneficiary, on demand, all
costs and expenses incurred by the Beneficiary in connection
therewith, including, without limitation, reasonable attorney's fees,
together with interest from the date of expenditure at the rate
provided in the Debentures. The Grantor hereby agrees to indemnify
against and hold the
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Beneficiary harmless from any loss,, liability, claim, demand,
damage, suit, action, cost and expense, including, without limitation,
attorneys' fees, incurred by or imposed on the Beneficiary by reason of
the Grantor's failure to perform or observe any of its obligations or
agreements under this Section 3.14.
3.14.7 The obligations and indebtedness of the Grantor under
this Section 3.14, notwithstanding anything contained herein or in any
other document or agreement which may be construed to the contrary,
shall survive the foreclosure of this Deed of Trust, the repayment of
the Loan and the termination of the Debentures and the other Loan
Documents.
SECTION 4. SECURITY AGREEMENT
4.1 CREATION OF A SECURITY INTEREST. The Grantor hereby grants and
conveys to the Beneficiary as security for the Indebtedness a security
interest (a) in the Equipment, including, without limitation, any and all
property of a similar type or kind hereafter located on or at the Property
and owned by the Grantor, and (b) in any and all intangible property of the
Grantor now or hereafter used in, arising out of, or relating to the
ownership, development, management, operation or use of the Property,
including, without limitation, (1) documents, instruments, accounts, chattel
paper, general intangibles and proceeds (as each of such terms is defined in
the UCC), (2) architectural and engineering plans and specifications for the
Property or any portion thereof, (3) escrow accounts, insurance policies and
business records of or with respect to the Property, (4) any and all of the
Grantor's rights, if any to (i) all warranties and guarantees by
manufacturers, suppliers and installers pertaining to any of the Improvements
or the Equipment, for the purpose of securing all of the indebtedness.
4.2 REPRESENTATION. WARRANTIES AND COVENANTS. The Grantor hereby
represents, warrants and covenants that, except for the security interest
granted hereby, the Grantor is and, as to items of the Equipment to be
acquired after the date hereof, shall be the sole owner of the Equipment free
from any adverse liens, security interests, encumbrances or claims thereon or
thereto of any kind whatsoever. The Grantor shall notify the Beneficiary of,
and shall defend the Equipment against, all claims and demands of all persons
at any rime claiming the same or any interest therein.
SECTION 5. EVENTS OF DEFAULT: REMEDIES
5.1 EVENTS OF DEFAULT. That (a) default in the payment of any
interest upon any Debenture when the same becomes due and payable, and
continuance of such default for a period of ten (10) days; (b)default in the
payment of the principal of any Debenture when the same becomes due and
payable; (c) default in the performance, or breach, of any covenant or
warranty of the Grantor in this Deed of Trust (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in this
Section specifically dealt with), and continuance of such default or breach
for a period of thirty (30) days after there has been given, by registered or
certified mail, to the Grantor by the holders of at least Ten Percent (10%)
in principal amount of the outstanding Debentures, a written notice
specifying such default or
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breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; (d) a court having jurisdiction in the
premises shall enter a decree or order for relief in respect of the Grantor
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the
Grantor or for any substantial part of its property, or ordering the
winding-up or liquidation of its affairs and such decree or order shall
remain unstayed and in effect for a period of thirty (30) consecutive days;
(e) the Grantor shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the ;Grantor or for any
substantial part of its property, or shall make any general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action in furtherance of any of the
foregoing. (f) the failure of the Grantor to pay any indebtedness due any
other person or entity and such failure shall continue beyond any applicable
grace period and result in the acceleration of maturity of such indebtedness;
(g) the Grantor shall suffer to exist beyond any applicable grace period any
other event of default under any material agreement binding the Grantor,
provided such event of default has not been waived in writing by the
appropriate party or parties to such agreement; or (g) the Grantor shall
admit its inability to pay its debts as they mature or shall make an
assignment for the benefit of its creditors: the happening of any such event
shall be an Event of Default hereunder.
5.2 REMEDIES UPON AN EVENT OF DEFAULT.
5.2.1 Upon the occurrence of an Event of Default, the
Beneficiary, by written notice given to the Grantor, may, at its
option, declare the entire unpaid principal balance of the Debentures,
all accrued but unpaid interest and all unpaid late charges thereunder
to be due and payable immediately, and, upon any such declaration,
such principal balance, accrued but unpaid interest and unpaid late
charges shall become and be due and payable immediately, and upon any
such declaration, such principal balance, accrued but unpaid interest
and unpaid late charges shall become and be due and payable
immediately, without presentment, demand, protest of notice of
dishonor, all of which are hereby waived by the Grantor, anything
contained in the Debentures or in this Deed of Trust to the contrary
notwithstanding. The Grantor further waives the benefits of the
Homestead Exemption and any other exemptions provided by law.
5.2.2 Upon the occurrence of an Event of Default, the
Beneficiary, at its option, may invoke the power of sale and any other
remedies permitted by applicable law or provided herein. The
Beneficiary shall be entitled to collect all costs and expenses
incurred by it in pursuing such remedies, including, but not limited
to, attorney's fees
This Deed of Trust shall be governed by and construed in
accordance with the applicable provisions of Sections 55-59.1,
55-59.2, 55-59.3, 55-59.4, 55-60
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and, to the extent not inconsistent with the provisions hereof,
Section 55-59 of the Code of Virginia, 1950, as amended and in
effect on the date of this Deed of Trust, with the following
further understanding as in such sections provided:
Advertisement Required: Sale to be for cash on the Property or
any part thereof, or at such other place as the Trustee shall select
after first advertising the time, place and terms of sale once a week for
three (3) weeks in a newspaper having general circulation in the County
of Stafford, VA.
Exemptions Waived.
Subject to All upon Default.
Substitution of Trustee Permitted, With or Without Cause.
Right of Anticipation Reserved as provided in the Debentures.
Renewal, Reinstatement or Extension Permitted.
Any Trustee May Act.
5.2.3 Upon the occurrence of an Event of Default, the
Beneficiary, with or without entry, personally or by its agents or
attorneys, insofar as applicable, may:
5.2.3.1 Exercise any or all of the remedies
available to a secured party under the UCC;
5.2.3.2 Direct the Grantor to assemble the
Equipment and make it available to the Beneficiary at
the place designated by the Beneficiary, and the Grantor
hereby covenants and agrees to do so promptly. The
Beneficiary shall have the right to sell, assign and
deliver all or any part of the Equipment at public or
private sale, without advertisement, and to bid and
become the purchaser thereof at any such public or
private sale. If the provisions of the UCC require that
notice of a public sale of any part of the Equipment be
given to the Grantor, the Beneficiary shall give the
Grantor such notice of sale as may be required under the
UCC. If the provisions of the UCC impose no such notice
requirement, the Beneficiary shall give the Grantor
notice of such public or private sale at least ten (10)
days before the time of such sale or other disposition.
The proceeds of any such sale shall be applied First to
the costs of such sale, including, without limitation,
advertising costs, if any, and attorneys' fees, and
second to all or any portion of the Indebtedness as the
Beneficiary shall determine; and
-15-
<PAGE>
5.2.3.3 Take such steps to protect and enforce
its rights, whether by action, suit or proceeding in
equity or at law, for the specific performance of any
covenant, term, condition or agreement set forth in the
Debentures, in this Deed of Trust or in any other Loan
Document, or in furtherance of the execution of any
power herein or therein granted, or for any foreclosure
hereunder, or for the enforcement of any other
appropriate legal or equitable remedies or otherwise, as
the Beneficiary shall elect
In no event shall the Beneficiary, in the
exercise of the remedies provided in this Deed of Trust,
be deemed to be a "mortgagee in possession", and neither
the Beneficiary nor the Trustee shall in any way be
liable for any act, either of commission or omission, in
connection with the exercise of such remedies.
5.2.4 After the exercise by the Trustee of their power of
sale pursuant to this Deed of Trust and pending the exercise by the
Trustee or the Beneficiary or their agents or attorneys of their right
to exclude the Grantor from all or any part of the Property, the
Grantor agrees to pay the fair and reasonable rental value for the use
and occupancy of the Property or any portion thereof that is in its
possession for such period and, upon default in making any such
payment, will vacate and surrender possession of the Property to the
Trustee or the Beneficiary, as the case may be, or to a receiver, if
any, and in default thereof may be evicted by any summary action or
proceeding for recovery or repossession of premises for nonpayment of
rent, however designated.
5.2.5 Upon the occurrence of an Event of Default and upon
written demand from the Beneficiary, the Grantor shall pay to the
Beneficiary the whole amount which then shall have become due and
payable under the Debentures, for principal, interest and late
charges, as the case may be, and all sums required to be paid by the
Grantor pursuant to any provision of this Deed of Trust and of any
other Loan Document and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection,
including, without limitation, reasonable compensation to the Trustee
and the Beneficiary, and to their respective agents and counsel, and
any expenses incurred by the Trustee and the Beneficiary hereunder. In
the event that the Grantor shall fail forthwith to pay such amounts
upon demand, the Beneficiary shall be entitled and empowered to
institute such actions or proceedings at law or in equity as may be
advised by its legal counsel for the collection of the sums due and
unpaid, and may prosecute any such action or proceedings to judgment
or final decree, and may enforce any such judgment or final decree
against the Grantor and collect, out of the property of the Grantor,
wherever situated, as well as out of the Property, in any manner
provided by law, monies so adjudged or decreed to be due and payable.
-16-
<PAGE>
The Beneficiary shall be entitled to recover judgment as
aforesaid either before, after or during the pendency of any
proceedings for the enforcement of the provisions of this Deed of
Trust, and the right of the Beneficiary to recover such judgment shall
not be affected by any entry or sale hereunder, or by the exercise of
any other right, power or remedy for the enforcement of the provisions
of this Deed of Trust, or of any other Loan document, or the
foreclosure of the lien hereof; and, in the event of a sale of the
Property, or any part thereof, and of the application of the proceeds
of such sale to the payment of the indebtedness, the Beneficiary shall
be entitled to enforce payment of and to receive all amounts then
remaining due and unpaid upon, the Debentures, and to enforce payment
of all other charges, payments and costs due under this Deed of Trust
and under any other Loan Documents, and shall be entitled to recover
judgment for any portion of the indebtedness remaining unpaid, with
interest. In case of proceedings against the Grantor in insolvency or
bankruptcy or involving the liquidation of any of its assets, then the
Beneficiary shall be entitled to prove the whole amount of principal,
interest and late charges due under the Debentures in the full amount
thereof, and all other payments, charges and costs due under this Deed
of Trust and under any other Loan Documents in the full amount
thereof, and all other payments, charges and costs due under this Deed
of Trust and under any other Loan Documents, without deducting
therefrom any proceeds obtained from the sale of the whole or any part
of the Property; provided, however, that in no event shall the
Beneficiary receive a greater amount than such principal, interest and
late charges and such other payments, charges and costs from the
aggregate amount of the proceeds of the sale of the Property and the
distributions from the insolvent or bankrupt estate of the Grantor.
No recovery of any judgment by the Beneficiary and no levy of
execution under any judgment upon the Property or upon any other
property of the Grantor shall affect, in any manner or to any extent,
the lien of this Deed of Trust upon the Property or any part thereof,
or any liens, rights, powers or remedies of the Trustee or the
Beneficiary hereunder, but such liens, rights, powers and remedies of
the Trustee and the Beneficiary shall continue unimpaired as before.
5.2.6. Immediately upon the commencement of any action, suit
or other legal proceeding by the Beneficiary to obtain judgment for
all or any portion of the Indebtedness, or for the enforcement of the
provisions of the Debentures, of this Deed of Trust or of any other
Loan Document and following the occurrence of an Event of Default and
the failure of the Grantor to cure such Event of Default within any
applicable cure period, the Grantor shall, if required by the
Beneficiary, consent to the appointment of a receiver or receivers for
the Property and of all of the Rents. Upon the occurrence of an Event
of Default and the failure of the Grantor to cure such Event of
Default within any applicable cure period provided herein, and upon
the commencement of any proceedings to foreclose this Deed of Trust,
or to enforce any of the provisions hereof, of the Debentures or of
any other Loan Document, or upon the commencement of any other
judicial
-17-
<PAGE>
proceedings to enforce any right of the Trustee or the
Beneficiary hereunder, under the Debentures or under any other Loan
Documents, the Trustee, the Beneficiary or both of them shall be
entitled, as a matter of right, if it or they shall so elect, without
giving notice to any other party and without regard to the adequacy or
inadequacy of the security of the Property, forthwith, either before
or after declaring the unpaid balance of the Debentures to be due and
payable, to effect the appointment of a receiver or receivers.
Notwithstanding the appointment of any receiver, liquidator or trustee
of the Grantor or of any of its property, or of the Property or any
part thereof, the Trustee and the Beneficiary shall be entitled to
retain possession and control of all property now or hereafter held
under this Deed of Trust.
5.3 SALE OF THE PROPERTY.
5.3.1 Upon completion of any sale or sales made by the
Trustee under or by virtue of this Deed of Trust, the Trustee, or an
officer of any court empowered to do so, shall execute and deliver to
the accepted purchaser or purchasers a good and sufficient instrument,
or good and sufficient instruments, conveying, assigning and
transferring all estate, right, title and interest in and to the
property and rights sold. The Trustee are hereby irrevocably appointed
the true and lawful attorney-in-fact of the Grantor, in its name and
stead, to make all necessary conveyances, assignments, transfers and
deliveries of the Property and rights so sold, and for that purpose
the Trustee may execute all necessary instruments of conveyance,
assignment and transfer, and may substitute one or more persons with
like power, the Grantor hereby ratifying and confirming all that such
attorney-in-fact or such substitute or substitutes shall lawfully do
by virtue hereof. Nevertheless, the Grantor shall ratify and confirm
any such sale or sales by executing and delivering to the Trustee or
to such purchaser or purchasers all such instruments as may be
advisable, in the judgment of the Trustee of the Beneficiary, if so
requested by the Trustee or the Beneficiary, for the purpose, and may
be designated in such request. Any such sale or sale made under or by
virtue of this Section 5, whether made under the power of sale herein
granted or under or by virtue of judicial proceedings or a judgment or
decree of foreclosure and sale, shall operate to divest all of the
estate, right, title, interest, claim and demand whatsoever, whether
at law or in equity, of the Grantor in and to the properties and
rights so sold, and shall be a perpetual bar, both at law and in
equity, against the Grantor and against any and all persons claiming
or who may claim the same or any part hereof from, through or under
the Grantor.
5.3.2 Upon any sale made under or by virtue of this Section
5, whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of
foreclosure and sale, the Beneficiary may bid for and acquire the
Property or any part thereof and, in lieu of paying cash therefore,
may make settlement for the purchase price by crediting against the
Indebtedness the net sales price after deducting therefrom the
expenses of the
-18-
<PAGE>
sale and the costs of the action and any other sums that the Trustee
or the Beneficiary are authorized to deduct under this Deed of Trust.
5.4 Waiver of Rights. The Grantor shall not at any time insist upon,
or plead in any manner whatsoever, claim or take any benefit or advantage of
any moratorium law or any exemption from execution or sale of the Property or
any part thereof, wherever enacted, now or at any time hereafter enforced,
that may affect the covenants and terms of performance of this Deed of Trust
or of any other Loan document, nor claim, take or insist upon any benefit or
advantage of any law now or hereafter enacted providing for the valuation or
appraisal of the Property, or any part thereof, prior to any sale or sales
thereof that may be made pursuant to any provision contained herein, or
pursuant to any decree, judgment or order of any court of competent
jurisdiction; nor, after any such sale or sale, claim or exercise any right
under any statute heretofore or hereafter enacted to redeem the property so
sold or any part thereof, and the Grantor hereby expressly waives all benefit
or advantage of any such law or laws. The Grantor, for itself and all who
claim under it, hereby waives, to the extent that it lawfully may, all right
to have the Property marshalled upon any sale or foreclosure hereunder.
5.5 TRUSTEE.
5.5.1 The Trustee shall be under no duty (i) to take any
action hereunder except as expressly set forth herein, (ii) to perform
any act that would involve them in expense of liability or to
institute or defend any suit or action in respect hereof, unless
properly indemnified to their satisfaction, or (iii) to account for
the use or application of any payments under this Deed of Trust, under
the Debentures or under any of the other Loan Documents, except as may
otherwise be expressly provided by applicable law. The Trustee shall
not be required to take notice, nor shall they be deemed to have
knowledge, of any Event of Default or any event that, with notice or
the passage of time or both, would constitute an Event of Default, and
the Trustee may assume conclusively that there has been no such Event
of Default or event that might constitute an Event of Default unless
and until they shall have been notified thereof in writing by the
Beneficiary.
5.5.2 The Grantor shall pay the Trustee just compensation for
any and all services performed and all their expenses, charges,
counsel fees and other disbursements incurred on and about the
administration and execution of the trust hereby created, and the
performance of their duties and powers hereunder, which compensation,
expenses, fees and disbursements shall constitute a part of the
Indebtedness. The Grantor agrees to indemnify against and hold the
Trustee harmless from any loss, claim, demand, suit, action,
liability, damage, cost and expense, including, without limitation,
attorneys' fees, incurred in the exercise and performance of their
powers and duties hereunder.
5.6 EXERCISE OF RIGHTS. Any rights that may be exercised by the Trustee
or the Beneficiary or both pursuant to the provisions of this Section 5 upon the
occurrence of an Event
-19-
<PAGE>
of Default, any be exercised by the Trustee, the Beneficiary or both, as the
case may be, for so long as such Event of Default shall continue thereafter.
5.7 REMEDIES CUMULATIVE: NO WAIVERS. No remedy conferred upon or
reserved to the Trustee, the Beneficiary or both of them herein or in any of
the other Loan Documents is intended to exclusive of any other remedy or
remedies, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or under any of the other Loan
Documents or now or hereafter existing at law, in equity or by statute. Every
power and remedy given to the Trustee, the Beneficiary or both of them
pursuant to the provisions of this Deed of Trust may be exercised from time
to time and as often as may be deemed expedient by the Trustee of the
Beneficiary. No delay by or omission of the Trustee or the Beneficiary in the
exercise of any right or power accruing upon any Event of Default or upon any
event that, with notice or the passage of time or both would constitute and
Event of Default, shall impair any such right or power nor be construed to be
a waiver of any such Event of Default or any acquiescence therein. A waiver
of the breach of any covenant, term or condition contained herein or in any
of the other Loan documents shall not be construed as a waiver any subsequent
breach of the same covenant, term or condition. The acceptance by the
Beneficiary of any sum in an amount less than the sum then due shall be
deemed an acceptance on account only and upon the condition that it shall not
constitute a waiver of the obligation of the Grantor to pay the entire sum
then due. The Grantor's failure to pay the entire sum then due shall be and
continue to be an Event of Default notwithstanding such acceptance of such
amount on account, and, at all times thereafter and until the entire sum ten
due shall have been paid, and notwithstanding the acceptance by the
Beneficiary thereafter of further sums on account or otherwise, the
Beneficiary and the Trustee shall be entitled to exercise all rights
conferred upon them, or either of them, in this Deed of Trust and in every
other Loan Document upon the occurrence of an Event of Default, or upon the
occurrence of an event that, with notice or the passage of time or both,
would constitute an Event of Default, and the right to whether any of such
amounts are received prior or subsequent to notice of such sale. Consent by
the Beneficiary to any transaction or action for which consent or approval of
the Beneficiary is required hereunder or under any of the other Loan
Documents shall not be deemed a waiver of the right to require such consent
or approval with respect to future or successive transactions or actions.
SECTION 6. MISCELLANEOUS PROVISIONS
6.1 SAVINGS CLAUSE. Nothing contained herein, nor any transaction
related hereto, shall be construed or shall so operate either presently or
prospectively (a) to require the Grantor to make any payment or to take any
action contrary to law, or (b) to permit the Trustee to take any action
contrary to law. Should any one or more of the terms, provision, covenants or
conditions of this Deed of Trust or any of the other Loan Documents be held
to be void, invalid, illegal or unenforceable in any respect, the same shall,
at the option of the Beneficiary, not affect any other term, provision,
covenant or condition of this Deed of Trust, but the remainder hereof shall
be effective as though such term, provisions, covenant or condition had never
been contained herein.
-2-
<PAGE>
6.2 NOTICES. All notices, requests, demands and other communications
with respect to this Deed of Trust shall be in writing and shall be delivered
by hand, sent prepaid by UPS Next Day Air (or a comparable overnight delivery
service) or sent by United States mail, certified, postage prepaid, return
receipt requested, to the following addresses:
(a) If to the Grantor:
Renaissance Entertainment Corporation
4440 Arapaho Road, Suite 200
Boulder, Colorado 30303
Attn: James R. McDonald, C.F.O.
(b) If to the Beneficiary:
Dorsar Partners, L.P.
c/o Steven L. Feinberg, General Partner
1855 North Mesa, Suite 120
El Paso, Texas 79902-5939
Charles H. Leavell
c/o The Leavell Company
4487 North Mesa, Suite 204
El Paso, Texas 79902
Charles S. Leavell
c/o Renaissance Entertainment Corporation
4440 Arapahoe Avenue, Suite 200
Boulder, Colorado 80303
Any notice, request, demand or other communication delivered or sent in the
manner aforesaid shall be deemed given or made (as the case may be) (i) on
the day on which it is actually delivered or delivery refused of (ii) on the
second (2nd) business day after the day on which it is deposited in the
United States mail, or an overnight delivery service, whichever first occurs.
Any party to this Deed of Trust may change its address by notifying the other
party hereto of the new address in manner permitted by this Section 6.2.
6.3 CHOICE OF LAW. This Deed of Trust shall be executed, construed,
performed and enforced in accordance with the laws of the Commonwealth of
Virginia.
6.4 SUCCESSORS AND ASSIGNS. To the extent not prohibited hereunder,
all of the grants, covenants, terms provisions and conditions herein
contained shall run with the Land shall apply to, bind and inure to the
benefit of the successors and assigns of the Grantor, the successor in trust
of the Trustee, and the endorsees, transferees, successors and assigns of the
Beneficiary.
6.5 AMENDMENTS. Neither this Deed of Trust nor any provision hereof
may be amended, waived, discharged or terminated orally, but only by an
instrument in writing and signed by the parties hereto.
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<PAGE>
6.6 RULES OF CONSTRUCTION. The following rules of construction shall
apply to this Deed of Trust unless the context otherwise requires:
6.6.1 Singular words shall connote the plural as well as the
singular, and vice versa, and the neuter gender shall connote the
masculine and the feminine genders, and vice versa, as the context may
require.
6.6.2 All references herein to particular articles, sections
or exhibits are references to the respective articles, sections or
exhibits of or attached to this Deed of Trust.
6.6.3 The article and section headings set forth herein are
solely for convenience of reference and shall not constitute a part of
this Deed of Trust nor shall they affect its meaning, construction or
effect.
6.6.4 Each party hereto and its counsel have reviewed and
revised (or requested revision of) this Deed of Trust and the Loan
Documents, and the normal rule of construction that any ambiguities
are to be resolved against the drafting party shall not be applicable
in the construction and interpretation of this Deed of Trust or the
Loan Documents or any amendments or exhibits hereto.
6.7 RIGHT TO RELEASE PERSONS LIABLE. Without affecting the liability
of the Grantor or any other person (except any person released in writing)
for payment or performance of any of the Indebtedness, and without affecting
the rights of the Beneficiary or the Trustee with respect to any security not
expressly released in writing, the Beneficiary, at any time and from time to
time, either before or after the maturity of the Debentures, and without
notice or consent may:
6.7.1 Release any person or persons liable for payment or
performance of any of the Indebtedness:
6.7.2 Make any agreement extending the time or otherwise
altering the terms of payment or performance of all or any part of the
Indebtedness, or modifying or waiving any of the Indebtedness, or
subordinating, modifying or otherwise dealing with the lien hereof or
of any of the other Loan Documents;
6.7.3 Exercise or refrain from exercising or waive any right
that the Beneficiary may have;
6.7.4 Accept additional security of any kind; and
6.7.5 Release or otherwise deal with any property, real or
personal, securing the Indebtedness, including, without limitation,
all or any part of the Property.
6.8 NO JOINT VENTURE. Nothing contained in this Deed of Trust or in
any of the other Loan Documents shall create a partnership or joint venture
or principal-agent relationship
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<PAGE>
between the Grantor and the Beneficiary or between the Beneficiary and any
other party, or cause the Beneficiary to be liable in any way for the debts
or obligations of the Grantor or any other party.
6.9 WAIVER. The Grantor and Beneficiary hereby irrevocably waive the
right to trial by jury in any suit' action or other proceeding, now pending
or hereafter instituted, concerning or arising out of this Deed of Trust, any
of the other Loan Documents or the loan transaction contemplated hereunder
and thereunder, or the actions of Beneficiary in the enforcement hereof or
thereof.
WITNESS the following signatures:
RENAISSANCE ENTERTAINMENT
CORPORATION, a Colorado corporation
By
-------------------------------------
James R. McDonald
Its Chief Financial Officer
STATE OF COLORADO )
) ss.
COUNTY OF _____________ )
The foregoing instrument was acknowledged before me this day of May,
1997, by James R. McDonald, the Chief Financial Officer of Renaissance
Entertainment Corporation, a Colorado corporation in the County of
_____________, State of Colorado.
-------------------------------------
Notary Public
My commission expires:
-23-
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
All those certain lots, pieces or parcels of land lying and
being in the George Washington District, Stafford County, Virginia,
described as "Parcel A 162.0986 Acres" and "Parcel B 87.9014
Acres", as shown on that certain plat of survey made by Greenhorne
and O'Mara, entitled "Boundary Survey of the Property of Sherwood
Forest Associates," dated March 29, 1995, a copy of which is
recorded in the Clerk's Office of the Circuit Court of Stafford
County, Virginia, in Plat Book 27, page 278 and 279, and pursuant
to which plat such parcels are more particularly described as
follows:
PARCEL A
Beginning at an iron pipe found on the northern right-of-way
line of Kings Highway, Route 3 (such point also being the
Northwestern corner of property now or formerly owned by Montrief)
and proceeding along the northern right-of-way line of Route 3
N. 81 DEG. 42' 56" W. 130.42 feet to a VDH monument; thence
N. 87 DEG. 25' 34" W. 100.50 feet to an iron pipe set; thence
N. 81 DEG. 42' 56" W. 175.21 feet to an iron pipe set; thence
along a curve with a radius of 2806.70 feet and chord length of
588.41 feet and are length of 589.49 feet; thence N. 69 DEG. 40' 54" W.
349.29 feet to an iron pipe set; thence S. 20 DEG. 19' 06" W. 24
feet to an iron pipe set; thence n. 69 DEG. 44' 20" W. 943.08 feet
to an iron pipe set at the southeastern corner of property now or
formerly owned by Moushtaha Investment & Trading Company; thence
leaving the northern right-of-way of Kings Highway Route 3 and
proceeding N. 35 DEG. 49' 54" E. 2302.79 feet to an iron pipe set
on the southern right-of-way of property now or formerly owned by
CSX Railroad; thence along said railroad property S. 74 DEG. 42' 31" N.
3155.02 feet to a monument found; thence S. 40 DEG. 52' 46" E. 741.72
feet to a fence post; thence S. 67 DEG. 02' 49" W. 1689.39 feet to an
iron pipe found; thence S. 69 DEG. 10' 22" W. 337.70 feet to an
iron pipe found; thence S. 69 DEG. 34' 50" W. 545.81 feet to an
iron pipe set; thence S. 67 DEG. 33' 48" W. 325 feet to the point
and place of beginning.
PARCEL B
Beginning at a point at the intersection of the northern right-of-way line
of property now or formerly owned by CSX Railroad with the eastern boundary
of land now or formerly owned by Moushtaha Investment and Trading Company
which point of 2409.58 feet from the intersection of the northern
right-of-way of Route 3 and the southwestern corner of Parcel A described
above and proceeding from said point of beginning N. 35 DEG. 49' 54" E.
2892.64 feet to an iron pipe set; thence S. 45 DEG. 44' 27" E. 273.31 feet to
an iron rod found; thence S. 69 DEG. 36' 39" W. 341.74 feet to a point;
thence S. 55 DEG. 04' 26" E. 180.16 feet to a point; thence S. 36 DEG. 13'
56" W. 196.27 feet to a point; thence S. 29 DEG. 31' 45" E. 42.69 feet to a
point; thence S. 21 DEG. 36' 56" S. 248.46 feet to a point; thence S. 08 DEG.
58' 38" E. 114.64 feet to a point; thence S. 21 DEG. 53' 33" E. 173.36 feet
to a point; thence S. 00 DEG. 19' 23" E. 116.23 feet to a point; thence S. 12
DEG. 55' 31" E. 154.13 feet to a point; thence S. 23 DEG. 29' 00" E. 312.79
feet to a point; thence S. 37 DEG. 21' 54" E. 138.98 feet to a point; thence
S. 74 DEG. 04' 59" E. 100.09 feet to a point; thence S. 40 DEG. 37' 15" E.
427.66 feet to a point; thence N. 32 DEG. 54' 19" E. 88.87 feet to a point;
thence S. 59 DEG. 48' 05" E. 499.67 feet to a point; thence S. 38 DEG. 02'
02" E. 195.28 feet to a point; thence S. 11 DEG. 26' 35" E. 183.27 feet to a
point; thence, S. 02 DEG 28' 34" E. 193.55 feet to a point; thence S. 58 DEG.
03' 22" E. 183.94 feet to a point; thence S. 57 DEG. 59' 28" W. 385.64 feet
to a monument found; thence along the northern line of CSX Railroad property
N. 74 DEG. 42' 31" W. 2994.51 feet to the point and place of beginning.
-24-
<PAGE>
Being the same property conveyed to Renaissance Entertainment Corporation,
by deed of H. Jason Gold, Trustee in Bankruptcy for the Estate of Sherwood
Forest Associates, a Virginia general partnership, dated July 26, 1995,
recorded in the Clerk's Office of the Circuit Court of Stafford County,
Virginia, in Deed Book 1124, at page 682, and by corrected and re-recorded
deed recorded in Deed Book 1146, page 558.
Less and except 0.5178 acres dedicated to public use by plat recorded in
Plat Book 28, page 108 in the Clerk's Office of the Circuit Court, Stafford
County, Virginia.
-25-
<PAGE>
EXHIBIT B
PERMITTED EXCEPTIONS
1. Deed of Trust, Assignment of Leases, and Security Agreement from
Renaissance Entertainment Corporation to Beale and Sasser, Trustee, dated
November 7, 1995, recorded in Deed Book 1153, page 495.
2. Deed of Trust from Renaissance Entertainment Corporation to Sasser and
Beale, Trustee, dated January 22, 1996, recorded as LR960001577.
3. Disclosure Statement regarding Mechanics' Lien filed by Wise Guys
Contracting, Inc., recorded as LR960009403.
4. Memorandum for Mechanics' Lien filed by Wise Guys Contracting, Inc.,
recorded as LR960009404.
5. Memorandum for Mechanics' Lien filed by Wise Guys Contracting, Inc.,
recorded as LR960009405.
6. Matters shown or noted on plat entitled "Boundary Survey of the Property of
Sherwood Forest Associates," made by Greenhorne & O'Mara, dated 29 March
1995, and recorded in Plat Book 27, pages 278-279 and Plat Book 28, pages
168-169, including:
a. steams and creeks affecting property;
b. fences do not coincide with boundaries;
c. power pole and ex. overhead powerline (VEPCO DB 79, Pg 48);
d. CSX Railroad bisects property;
e. approximate location of abandoned dirt road.
7. VEPCO easement recorded in Deed Book 79, at Page 48.
8. Maintenance Agreement for Stormwater Detention Systems, dated July 24,
1995, recorded in Deed Book 1130, page 537.
9. Easement granted Bell-Atlantic-VA dated November 1, 1995, and recorded in
Deed Book 1153, page 280.
10. Easement granted Bell Atlantic-VA dated November 1, 1995, and recorded in
Deed Book 1153, page 284.
-26-
<PAGE>
11. Lack of a located and recorded right of access to and from the land
described as Parcel B, which is separated from other land of the insured
and a public right of way by the CSX Railroad property.
12. Rights of others thereto entitled in and to the continued uninterrupted
flow of streams or creeks running along boundaries or through the property
(White Oak Run is designated on survey).
-27-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 310,297
<SECURITIES> 0
<RECEIVABLES> 63,094
<ALLOWANCES> 0
<INVENTORY> 184,494
<CURRENT-ASSETS> 1,275,927
<PP&E> 9,130,691
<DEPRECIATION> 2,180,177
<TOTAL-ASSETS> 9,944,585
<CURRENT-LIABILITIES> 3,418,724
<BONDS> 4,171,587
0
0
<COMMON> 9,294,473
<OTHER-SE> (5,121,555)
<TOTAL-LIABILITY-AND-EQUITY> 9,944,585
<SALES> 14,873
<TOTAL-REVENUES> 14,873
<CGS> 0
<TOTAL-COSTS> 23,319
<OTHER-EXPENSES> 1,745,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 91,432
<INCOME-PRETAX> (1,828,359)
<INCOME-TAX> 0
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