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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 10, 1996
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COUNTRY STAR RESTAURANTS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 33-67526-A 62-1536550
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
formation)
11150 Santa Monica Boulevard, Suite 650, Los Angeles, CA 90025
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 268-2200
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(Former name or former address, if changes since last report)
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Item 1. Changes in Control of Registrant.
Not applicable.
Item 2. Acquisition or Disposition of Assets.
Not applicable.
Item 3. Bankruptcy or Receivership.
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not applicable.
Item 5. Other Events.
On October, 10, 1996, the Company closed with
respect to the sale of 4,000 shares of a newly issued 7%
convertible preferred stock, par value $.001 per share (the
"Preferred Stock"). The sale was made to a foreign, single,
institutional investor for an aggregate purchase price of
$4,000,000, or $1,000 per share. The sale of Preferred Stock
was effected in a transaction exempt from the registration
requirements of the Securities Act of 1933, as amended (the
"Act"), pursuant to Rules 501-508 promulgated thereunder.
Each share of Preferred Stock may be converted at
the option of the holder in the time frames set forth in the
following paragraph into such number of shares of the
Company's common stock, par value $.001 per share (the
"Common Stock"), as determined by dividing the original
issuance price of $1,000 per share (the "Original Issuance
Price"), by the lesser of (i) $3.25, or (ii) 80% of the
average closing bid price of the Common Stock as reported on
the Nasdaq Stock Market for the five (5) consecutive trading
days immediately prior to the date of conversion; provided,
however, that during the one hundred twenty (120) day period
after the original date of issuance if the five (5)
consecutive trading day average closing bid price of the
Common Stock is less than $1.50 per share, then under no
circumstances can any shares of Preferred Stock be converted
into Common Stock until the five (5) consecutive trading day
average closing bid price of the Common Stock exceeds $1.50
per share. Further, in no event can the aggregate of all the
Preferred Stock be converted, at any time, into more than
three million (3,000,000) shares of the Company's Common
Stock (the "Maximum Number of Shares"). In the event that
any
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conversions of Preferred Stock would result in the issuance
of shares of Common Stock in excess of the Maximum Number of
Shares (the "Excess Conversions"), any shares of Preferred
Stock whose conversions would result in Excess Conversions
will, instead of being converted, be redeemed by the Company
at a rate equal to the Original Issuance Price (plus any
accrued and unpaid dividends thereon) within ninety (90)
days after the Company receives a written redemption notice
from the holder.
Subject to the provisions of the foregoing
paragraph, the Preferred Stock shall be convertible as
follows: (i) up to 1,000 shares of Preferred Stock at any
time from and after the sixtieth (60th) day from the date on
which the shares of Preferred Stock were first issued on
October 10, 1996 (the "Original Issuance Date"); (ii) up to
2,000 shares of Preferred Stock at any time from and after
the ninetieth (90th) day following the Original Issuance
Date; (iii) up to 3,000 shares of Preferred Stock at any
time from and after the one hundred twentieth (120th) day
following the Original Issuance Date; and (iv) all of the
shares of Preferred Stock originally issued to such holder
at any time from and after the one hundred fiftieth (150th)
day following the Original Issuance Date. Notwithstanding
the foregoing, in no event shall the holder of the Preferred
Stock be entitled to convert the Preferred Stock in the
event that such conversion would result in such holder's
beneficially owning more than 5% of the outstanding shares
of the Company's Common Stock. For purposes of computing 5%
ownership, beneficial ownership shall calculated in
accordance with Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended.
The Preferred Stock shall pay cumulative dividends
at the rate of 7% per annum which shall accrue and be
payable in arrears on the outstanding shares of Preferred
Stock on each anniversary of the Original Issuance Date. The
dividend may be paid, at the election of the Company, in
cash or in shares of the Company's Common Stock.
The Preferred Stock shall not have any voting
rights except to the extent that under Delaware law the vote
of the holders of the Preferred Stock, voting separately as
a class, is required to authorize a given action of the
Company. To the extent that under Delaware law the holders
of the Preferred Stock are entitled to vote on matters with
holders of Common Stock voting together as one class, each
share of
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Preferred Stock shall be entitled to the number of votes
equal to the number of shares of Common Stock into which it
is then convertible, using the record date for the taking of
such vote of stockholders as the date as of which the
conversion price is determined. To the extent that the
Preferred Stock is entitled under Delaware law to vote
separately as a class to authorize any action of the
Company, the affirmative vote of the holders of at least the
majority of outstanding class of Preferred Stock shall
constitute the approval of such action by the class.
In the event of any liquidation, dissolution or
winding up of the Company, the holders of the Preferred
Stock shall be entitled to receive, immediately after
distributions to the senior securities, including
distributions on issued and outstanding shares of the
Company's 6% cumulative convertible Series A preferred
stock, and prior to any distribution to the holders of
Company's Common Stock, an amount equal to the sum of the
Original Issuance Price plus any accrued but unpaid
dividends.
In connection with the issuance of the Preferred
Stock, the Company also issued a five (5) year common stock
purchase warrant to purchase up to 300,000 shares of the
Company's Common Stock at an exercise price of $4.50 per
share (the "Warrant"). In connection with the exercise of
the Warrant, there is a "cashless exercise" provision that
is applicable in the event that at the time of exercise the
market price of the Company's Common Stock exceeds the $4.50
exercise price.
The Company has covenanted with the purchaser of
the Preferred Stock to file a registration statement with
the Securities and Exchange Commission on or before November
19, 1996, which shall include all of its shares of Common
Stock issuable upon conversion of the Preferred Stock and
upon exercise of the Warrant. Such registration statement
shall also include certain other shares of Common Stock that
the Company is obligated to register in connection with its
raising of $2.7 million from private investors in the third
quarter of 1996. In the event that the Company fails to
effect such registration statement by November 19, 1996, or
alternatively, fails to have such registration statement
declared effective on or before January 31, 1997, the
Company will be obligated to pay to the Purchaser of the
Preferred Stock a premium on a monthly basis equal to 1.5%
of the Original Issuance Amount of all of the Preferred
Stock commencing as of November
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20, 1996 or February 1, 1997, as the case may be, until such
time as either the registration statement has been filed or
the registration statement is effective (or alternatively,
the shares of Preferred Stock are no longer restricted
securities within the meaning of the Securities Act and Rule
144 promulgated thereunder and bear no restrictive legend),
as the case may be. In addition, the Company will also be
obligated for significant penalties in terms of additional
securities and a reduction of warrants in connection with
the ale of $2.3 million of securities issued to private
investors in the third quarter of 1996 in the event that the
Company does not file the aforementioned registration
statement on or before November 19, 1996.
In December of 1995, the Company entered into a
private financing transaction with the Rubin Investment
Group, a New Jersey corporation ("RIG") pursuant to which
RIG acquired the right, until December 1996, to match (the
"Matching Rights") any sale by the Company of equity
securities in a transaction exempt from registration under
the Act upon the Company's written notice to RIG (the
"Matching Rights Notice") of the material terms and
conditions of any such private equity securities
transaction. On October 11, 1996, the Company sent to RIG
the matching Rights Notice with respect to the sale of the
Preferred Stock. RIG has, in accordance with its Matching
Rights, ten (10) days after RIG is deemed to have been given
the Matching Rights Notice to actually effect a closing
identical to the one the Company entered into with the
foregoing investor with respect to the Preferred Stock. To
date, the Company has not closed a matching transaction with
RIG and the Company believes, for a variety of reasons, that
at this time the Company is no longer obligated to do so. The
Company has been advised by RIG and its counsel that RIG
presently disputes the Company's position with respect to
this matter. In the event that RIG actually closes a
transaction with the Company in accordance with the terms and
conditions of its Matching Rights, the Company is obligated to
promptly provide written notice thereof to the purchaser of
the Preferred Stock (the "RIG Notice"). The purchaser of the
Preferred Stock shall then have the right, but not the
obligation, for a period of ten (10) business days after
receiving the RIG Notice to advise the Company in writing
that it wishes to rescind its transaction with the Company.
In the event that it so advises the Company, within three
(3) business days thereafter, the Company shall be obligated
to return to the purchaser the entire purchase price for the
Preferred Stock whereupon the purchaser will return to the
Company the Preferred Stock and the Warrants. The Company is
not permitted to engage in any other equity financing (other
than an equity financing pursuant to RIG's Matching Rights)
for 120 days after the Original Issuance Date. Thereafter,
until January 7, 1998, the purchaser shall have a right of
first refusal with
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respect to any private equity financing in which the
Company wishes to engage in.
Item 6. Resignation of Registrant's Directors.
Not applicable.
Item 7. Financial Statements and Exhibits.
Press Release dated October 11, 1996.
Item 8. Change in Fiscal Year.
Not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly authorized and caused the undersigned to sign
this Report on the Registrant's behalf.
COUNTRY STAR RESTAURANTS, INC.
By: /s/ Robert J. Schuster
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Robert J. Schuster, Chief
Executive Officer
Dated: November 4, 1996
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ITEM 7. EXHIBIT
CONTACT: PETER R. FEINSTEIN FOR IMMEDIATE RELEASE
President
Country Star Restaurants, Inc.
(310) 268-2200
COUNTRY STAR RESTAURANTS, INC.
COMPLETES FINANCING
LOS ANGELES, CALIFORNIA, October 11, 1996 --- Country Star
Restaurants, Inc. (NASDAQ National Market: CAFE, CAFEP) announced that it has
completed a $4 million private placement of a new issue of non-voting
convertible preferred stock to a single institutional investor pursuant to
Regulation D promulgated under the Securities Act of 1933, as amended. The
preferred stock is convertible into shares of the Company's common stock from
time to time based on the current market price of the Company's common stock
at the time of conversion, provided that in no event can the preferred stock
be converted into an aggregate of more than 3,000,000 shares of the Company's
common stock. Any conversions which would require issuance of Common Stock in
excess of 3,000,000 shares will instead result in redemptions of the preferred
stock, at par, plus accrued dividends. The preferred stock bears a dividend of
7% per annum which is payable, at the Company's option, in cash or shares of
the Company's common stock.
Peter R. Feinstein, President and Chief Financial Officer of the
Company, stated that "These funds, along with the additional private financing
that the Company secured during the third quarter, enables the Company to
continue its expansion plans regarding the building of Country Star Orlando,
which will open next year. The Company presently anticipates, however, that it
will continue to require additional capital in order to continue to expand and
operate the Country Star Restaurants." During the third quarter, the Company
raised an aggregate of $2.7 million from the sale of equity securities to
private investors. The Company recently announced the signing of a lease to
open Country Star Orlando at the Point Orlando Entertainment Center which is
expected to be completed in the summer of 1997, and will be located across the
street from the Convention Center in Orlando, Florida.
Country Star Restaurants, Inc. owns and operates three Country Star
American Music Grills: in Hollywood, at the entrance to Universal Studios; in
Las Vegas on the famous "Strip" at Harmon Avenue; and in Atlanta, Georgia in
the upscale "Buckhead" neighborhood, the grand opening of which is scheduled
for October 13th.
The foregoing press release contains forward looking statements,
including statements regarding, among other items, the timing and direction of
the Company's growth and additional capital requirements. These forward
looking statements are based largely
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on the Company's expectations and subject to a number of risks and
uncertainties, certain of which are beyond the Company's control. Actual
results could differ materially from these forwarding looking statements as a
result of a variety of factors including, among others, completion (and
timeliness of the completion) of the Point Orlando Entertainment Center,
performance of the Company's existing Country Star American Music Grill
Restaurants in Los Angeles, Las Vegas and Atlanta, expansion opportunities for
future Country Star American Music Grill Restaurants, and prevailing economic
conditions as they effect the themed entertainment restaurant industry in
general. In light of these risks and uncertainties there can be no assurance
that the forward looking statements contained in this press release will in
fact transpire or prove to be accurate.
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