SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported) February 12, 1997
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COUNTRY STAR RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
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Delaware 33-67526-A 62-1536550
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
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11150 Santa Monica Boulevard, Suite 650, Los Angeles, CA 90025
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 310/268-2200
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Item 1. Changes in Control of Registrant
On February 12, 1997, Country Star Restaurants, Inc., (the "Company") a
Delaware corporation, entered into a secured financing arrangement with Dan
Rubin ("Rubin") and an institutional investor (the "Institutional Investor").
The secured financing arrangement is evidenced by a Loan and Security Agreement
and other agreements described herein (collectively referred to as the "Loan
Agreement").
The Loan Agreement provides that the Institutional Investor has the fully
assignable right to name three (3) members of the Board of Directors of the
Company and that the Board of Directors shall not consist of more than five (5)
members. The Institutional Investor has assigned this right to Rubin as its
agent. Immediately after the closing of the secured financing arrangement,
Rubin's nominees, Darren Rice, William Wei and Robert Nardone were elected to
the Board of Directors of the Company. The Board then elected Rubin to fill the
last seat on the Board of Directors. The Board of Directors now consists of the
four new directors and Robert Schuster.
In connection with the secured financing transaction, Robert Schuster
("Schuster"), Chairman of the Board and Chief Executive Officer of the Company,
resigned as Chief Executive Officer and agreed to release the Company from all
obligations under his Employment Agreement, including severance obligations.
Schuster will continue to serve as Chairman of the Board. Immediately upon
notice from the Company, Schuster has agreed that he will become a consultant to
the Company for a nine (9) month period with compensation at the rate of
$250,000 per annum, plus the continuation of fringe benefits consisting of his
automobile allowance and payment of health insurance.
In connection with the secured financing transaction, Mr. Peter Feinstein
resigned as Director, President and Chief Financial Officer of the Company and
released the Company from all obligations under his Employment Agreement,
including severance obligations. Mr. Feinstein has agreed to become a consultant
to the Company for a nine (9) month period with compensation at the rate of
$240,000 per annum plus the continuation of fringe benefits consisting of his
automobile allowance and payment of health insurance.
The Board then elected Dan Rubin as Chief Executive Officer and President,
and Robert L. Davidson as Secretary of the Company. Mr. Rubin will assume
control of day-to-day operations of the Company. Mr. Rubin will be compensated
at the rate of $20,000 per month, payable in cash or common stock of the
Company, valued at market value at the time of issuance. Mr. Rubin's employment
is terminable at will.
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Rubin now owns warrants to acquire and convertible debt which if converted
would allow him to acquire an aggregate of 846,176 shares of the Company's
common stock. Upon exercise of such warrants and conversion of the convertible
debt, Rubin would own 5.3% of the common stock of the Company then outstanding.
None of the other newly elected directors own any shares or warrants or other
rights to acquire any shares of the Company's common stock.
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Item 5. Other Events
Further information concerning the secured financing arrangement entered
into by the Company on February 12, 1997 follows:
Rubin has made a $3,500,000 line of credit loan available to the Company,
of which an initial advance of $500,000 was committed at closing. Rubin, in his
sole discretion, may make additional advances to the Company under this line of
credit, but is not required to make any such additional advances. All advances
under the line of credit loan bear interest at the rate of prime plus four
percent (4%), payable semi-annually commencing December 31, 1997. The principal
balance of all line of credit advances are due and payable on October 9, 1999.
In consideration for the initial line of credit advance of $500,000, the Company
issued a warrant to acquire 166,667 shares of its common stock at an exercise
price of $.625 per share.
All additional line of credit advances shall have the same terms and
conditions as the initial line of credit advance. For each such additional
advance, Rubin shall receive one (1) common stock purchase warrant for every $3
advanced. The exercise price for these warrants shall be $.625 per share. All of
the warrants issued or to be issued to Rubin shall be subject to adjustment in
the event of stock splits, stock dividends, mergers, consolidations, or similar
corporate events.
The Institutional Investor exchanged its 4,000 shares of Series B
Convertible Preferred Stock of the Company, with an aggregate liquidation
preference of $4,000,000, for a convertible term note in the principal amount of
$4,000,000. The convertible term note bears interest at the rate of seven
percent (7%) per annum, payable semi-annually commencing December 31, 1997. The
principal balance is due and payable on October 9, 1999. Any portion or all of
the principal amount of the note outstanding may be converted into common stock
of the Company commencing ninety (90) days after the date of closing of the
financing. Upon conversion, the Company shall issue that number of shares of its
common stock obtained by dividing the principal amount of the loan converted by
the lesser of (i) $1.33, or (ii) 80% of the average closing bid price of the
common stock for the five (5) consecutive trading days preceding the date of
conversion. The maximum number of shares into which the convertible note may be
converted shall not exceed 3,000,000. The conversion formula is subject to
adjustment in the event of stock splits, stock dividends, mergers,
consolidations, or similar transactions.
In connection with the commitment to make the line of credit loan, Rubin
and other investors in the Company have agreed to settle certain claims against
the Company for the amount of $1,950,000, plus $50,000 in fees and expenses. The
Company has
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issued its convertible term notes in the aggregate amount of $1,950,000 and
agreed to pay $50,000 to Rubin and these investors, in settlement of their
claims. These convertible term notes contain the same terms and conditions as
the convertible term note issued to the Institutional Investor, except that the
holders of these convertible term notes may exercise their conversion feature at
any time following the closing.
The line of credit advances by Rubin, the Institutional Investor's
convertible term note and the convertible term notes issued in settlement of
claims are all secured by a lien on substantially all of the tangible and
intangible assets of the Company. In the event of default, the secured parties
shall participate in the proceeds of the collateral in proportion to their
outstanding debt.
Any statements that are not historical facts contained in this Report are
forward looking statements that involve risks and uncertainties, including but
not limited to those relating to demand for the Company's services, pricing,
market acceptance, competition, the effect of economic conditions, the results
of financing efforts, the Company's ability to complete proposed transactions
and other risks.
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<PAGE>
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 hereunto duly authorized.
Country Star Restaurants, Inc.
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(Registrant)
Date: February 27, 1997 /s/ Dan J. Rubin
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(Signature)
Dan J. Rubin, Chief Executive
Officer and President
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<PAGE>
EXHIBIT INDEX
(4) Instruments Defining the Rights of Security Holders,
Including Indentures
Loan and Security Agreement Between
Registrant and Cameron Capital Ltd.
("Cameron") as Agent for Lenders, and Lenders
from time to time party hereto
Trademark Security Agreement Between
Registrant and Cameron
First Open End Leasehold Deed to Secured
Debt, Security Agreement, Financing Statement
and Assignment of Rent (covering Registrant's
Atlanta facilities)
First Open End Leasehold Deed to Secured
Debt, Security Agreement, Financing Statement
and Assignment of Rent (covering Registrant's
Las Vegas facilities)
First Open End Leasehold Deed to Secured
Debt, Security Agreement, Financing Statement
and Assignment of Rent (covering Registrant's
Los Angeles facilities)
Purchase and Assignment Agreement Between
Cameron and Dan Rubin ("Rubin")
Notice of Assignment and Appointment of
Successor Agent
Agency and Inter-Creditor Agreement Between
Rubin and Cameron
Registration Rights Agreement Between
Registrant, Cameron and Other Investors
Convertible Note in the Amount of $4,000,000
Issued to Cameron
Convertible Note in the Amount of $317,850
Issued to Rubin
Convertible Note in the Amount of $257,302
Issued to Robert Lyszczarz
Convertible Note in the Amount of $1,374,847
Issued to Roy B. Rubin, M.D., P.C., M.P.P.P.
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Warrant to Purchase 83,333 Shares of Common
Stock of the Company issued to Rubin
(99) Additional Exhibits
Consulting Agreement of Robert Schuster to be
Entered Into Upon Notice by the Company
Consulting Agreement of Peter Feinstein
Schuster, formerly President of the Company
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LOAN AND SECURITY AGREEMENT
Dated as of February 12, 1997
between
COUNTRY STAR RESTAURANTS, INC.,
CAMERON CAPITAL LTD.,
as Agent for Lenders,
and
Lenders from time to time party hereto.
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TABLE OF CONTENTS
ARTICLE 1 - INTERPRETATION OF THIS AGREEMENT.................................1
1.1 Definitions......................................................1
1.2 Accounting Terms.................................................9
1.3 Other Terms......................................................9
1.4 Computation of Time Periods.....................................10
ARTICLE 2 - LOANS...........................................................10
2.1 Total Facility..................................................10
2.2 Line of Credit Loans............................................10
2.3 Exchange; Convertible Term Loan.................................10
2.4 Warrants........................................................11
ARTICLE 3 - INTEREST AND FEES...............................................11
3.1 Interest........................................................11
3.2 Maximum Interest Rate...........................................12
ARTICLE 4 - PAYMENTS AND PREPAYMENTS........................................12
4.1 Line of Credit Loans............................................12
4.2 Convertible Term Loan...........................................12
4.4 Mandatory Prepayments of the Loans..............................13
4.5 Place and Form of Payments; Extension of Time...................13
4.6 Apportionment, Application and Reversal of Payments.............13
4.7 Agent and Lenders' Books and Records; Monthly Statements........14
ARTICLE 5 - COLLATERAL......................................................14
5.1 Grant of Security Interest......................................14
5.2 Perfection and Protection of Security Interest..................15
5.3 Location of Collateral..........................................16
5.4 Title to, Liens on, and Sale and Use of Collateral..............16
5.5 Access and Examination..........................................17
5.6 Collateral Reporting............................................17
5.7 Inventory.......................................................17
5.8 Equipment.......................................................17
5.9 Documents, Instruments, and Chattel Paper.......................18
5.10 Right to Cure...................................................18
5.11 Power of Attorney...............................................18
5.12 Agent's and Lenders' Rights, Duties and Liabilities.............19
ARTICLE 6 - BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES...............19
6.1 Books and Records...............................................19
6.2 Financial Information...........................................19
6.3 Notices to Agent................................................21
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ARTICLE 7 - GENERAL WARRANTIES AND REPRESENTATIONS..........................22
7.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents................................22
7.2 Validity and Priority of Security Interest......................23
7.3 Organization and Qualification..................................23
7.4 Corporate Name; Prior Transactions..............................23
7.5 Subsidiaries and Affiliates.....................................23
7.6 Financial Statements............................................23
7.7 Capitalization..................................................24
7.8 Debt............................................................24
7.9 Distributions...................................................24
7.10 Title to Property...............................................24
7.11 Real Estate; Leases.............................................24
7.12 Proprietary Rights..............................................25
7.13 Trade Names.....................................................25
7.14 Litigation......................................................25
7.15 Restrictive Agreements..........................................25
7.16 Labor Disputes..................................................25
7.17 Environmental Matters...........................................25
7.18 No Violation of Law.............................................27
7.19 No Default......................................................27
7.20 ERISA...........................................................27
7.21 Taxes...........................................................28
7.22 Investment Act..................................................29
7.23 Margin Securities...............................................29
7.24 Disclosure......................................................29
7.25 Bank Accounts...................................................29
7.26 Public Utility Holding Company..................................29
7.27 Broker's Fees...................................................30
7.28 Transactions with Affiliates....................................30
ARTICLE 8 - AFFIRMATIVE AND NEGATIVE COVENANTS..............................30
8.1 Taxes and Other Obligations.....................................30
8.2 Corporate Existence and Good Standing...........................30
8.3 Compliance with Law and Agreements..............................30
8.4 Maintenance of Property.........................................31
8.5 Insurance.......................................................31
8.6 Condemnation....................................................32
8.7 Environmental Laws..............................................32
8.8 ERISA...........................................................32
8.9 Mergers, Consolidations, Acquisitions, or Sales.................33
8.10 Distributions; Capital Change...................................33
8.11 Transactions Affecting Collateral or Obligations................33
8.12 Guaranties......................................................33
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8.13 Debt............................................................33
8.14 Prepayment......................................................34
8.15 Transactions with Affiliates....................................34
8.16 Investment Banking and Finder's Fees............................34
8.17 Business Conducted..............................................34
8.18 Liens...........................................................34
8.19 Sale and Leaseback Transactions.................................34
8.20 New Subsidiaries................................................34
8.21 Restricted Investments..........................................35
8.22 Capital Expenditures............................................35
8.23 Operating Lease Obligations.....................................35
8.24 [Reserved]......................................................35
8.25 General and Administration Expense..............................35
8.26 Use of Proceeds.................................................35
8.27 Termination of Employee Accounts;
Reimbursement of Employee Expenses..............................35
8.28 [Reserved]......................................................35
8.29 [Reserved]......................................................35
8.30 Election of Board Members; Attendance at Board Meetings.........36
8.31 Registration Rights.............................................36
8.32 Fiscal Year.....................................................36
8.33 Further Assurances..............................................36
ARTICLE 9 - CONDITIONS OF LENDING...........................................36
9.1 Conditions Precedent to Making of Loans on the Closing Date.....36
9.2 Conditions Precedent to Each Loan...............................38
ARTICLE 10 - DEFAULT; REMEDIES..............................................38
10.1 Events of Default...............................................38
10.2 Remedies........................................................41
ARTICLE 11 - TERM AND TERMINATION...........................................42
11.1 Term and Termination............................................42
ARTICLE 12 - MISCELLANEOUS..................................................42
12.1 Cumulative Remedies; No Prior Recourse to Collateral............42
12.2 No Implied Waivers..............................................43
12.3 Severability....................................................43
12.4 Governing Law; Choice of Forum; Service of Process; Jury
Trial Waiver....................................................43
12.5 Survival of Representations and Warranties......................44
12.6 Other Security and Guaranties...................................44
12.7 Fees and Expenses...............................................45
12.8 Notices.........................................................45
12.9 Indemnity.......................................................46
12.10 Waiver of Notices...............................................47
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12.11 Binding Effect; Assignment; Disclosure..........................47
12.12 Modification....................................................47
12.13 Counterparts....................................................47
12.14 Captions........................................................47
12.15 Right of Set Off................................................47
12.16 Assignment of a Lender's Interest; Participating Lender's
Security Interests..............................................47
12.17 Appointment of Agent............................................48
12.18 Investment Representations of each Lender.......................48
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This LOAN AND SECURITY AGREEMENT (this "Agreement") is dated as of
February 12, 1997 among CAMERON CAPITAL LTD., a Bermuda corporation, with an
office at 10 Cavendish Road, Hamilton, HM 19, Bermuda ("Cameron"), in its
capacity as a lender hereunder and the other lenders from time to time party
hereto (such lenders and their respective successors and assigns being sometimes
hereinafter referred to collectively as "Lenders" and each of such financial
institutions and its successors and assigns being sometimes hereinafter referred
to individually as a "Lender"), Cameron as agent for Lenders (Cameron in such
capacity or its successor and assigns in such capacity, being "Agent"), and
COUNTRY STAR RESTAURANTS, INC., a Delaware corporation, with an office at 11150
Santa Monica Blvd., Los Angeles, California 60025 ("Borrower"). In consideration
of the mutual conditions and agreements set forth in this Agreement, and for
good and valuable consideration, the receipt of which is hereby acknowledged,
Borrower, Agent, and Lenders hereby agree as follows:
ARTICLE 1 - INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. As used herein:
"Accounts" means all of Borrower's now owned or hereafter acquired
or arising accounts, contract rights, and any other rights to payment for the
sale or lease of goods or rendition of services, whether or not they have been
earned by performance.
"Account Debtor" means each Person obligated in any way on or in
connection with an Account.
"Affiliate" means: (a) any Person which, directly or indirectly,
controls, is controlled by or is under common control with, Borrower; (b) any
Person which beneficially owns or holds, directly or indirectly, five percent
(5.0%) or more of any class of Voting Stock of Borrower; or (c) any Person, five
percent (5.0%) or more of any class of the Voting Stock (or if such Person is
not a corporation, five percent (5.0%) or more of the equity interest) of which
is beneficially owned or held, directly or indirectly, by Borrower. Control
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used herein, means the possession, directly or
indirectly, of the power in any form to direct or cause the direction of the
management and policies of the Person in question.
"Anniversary Date" means each anniversary of the Closing Date.
"Bankruptcy Code" means Title 11 of the United States Code (11
U.S.C.ss. 101 et seq.).
"Benefit Plan" means a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which Borrower or
an ERISA Affiliate is, or within the immediately preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.
"Business Day" means any day that is not a Saturday, Sunday, or day
on which banks in the State of Illinois are required or permitted to close.
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"Capital Expenditures" means, for any fiscal period, the cost of any
fixed asset or improvement, or replacement, substitution, or addition thereto,
acquired during such period and having a useful life of more than one year,
including, without limitation, those costs arising in connection with the direct
or indirect acquisition of such assets by way of increased product or service
charges or offset items or in connection with a Capital Lease.
"Capital Lease" means any lease of property by Borrower or any of
its Subsidiaries on a consolidated basis which, in accordance with GAAP, is or
should be reflected as a liability on the consolidated balance sheet of Borrower
and its Subsidiaries.
"Closing Date" means the date on which the initial Line of Credit
Loans and the Convertible Term Loan are made hereunder.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, any successor statute, and the rules and regulations promulgated
thereunder.
"Collateral" has the meaning specified in Section 5.1.
"Contaminant" means any pollutant, hazardous substance, toxic
substance, hazardous waste, petroleum or petroleum-derived waste, asbestos,
polychlorinated biphenyls ("PCBs"), or any hazardous or toxic constituent of any
such substance or waste.
"Convertible Term Loan" has the meaning specified in Section 2.3.
"Convertible Note" has the meaning specified in Section 2.3.
"Debt" means all liabilities, obligations and indebtedness of
Borrower and its Subsidiaries on a consolidated basis to any Person, of any kind
or nature, now or hereafter owing, arising, due or payable, howsoever evidenced,
created, incurred, acquired or owing, whether primary, secondary, direct,
contingent, fixed or otherwise, and including, without in any way limiting the
generality of the foregoing: (i) Borrower's or any Subsidiary's liabilities and
obligations to trade creditors; (ii) all of the Obligations; (iii) all of
Borrower's obligations for borrowed money; (iv) all obligations and liabilities
of any Person secured by any Lien on Borrower's or any Subsidiary's property,
even though Borrower or such Subsidiary shall not have assumed or become liable
for the payment thereof; provided, however, that all such obligations and
liabilities which are limited in recourse to such property shall be included in
Debt only to the extent of the value of such property as shown on a consolidated
balance sheet of Borrower and its Subsidiaries prepared in accordance with GAAP;
(v) all obligations or liabilities created or arising under any Capital Lease or
conditional sale or other title retention agreement other than a true lease,
with respect to property used or acquired by Borrower or any Subsidiary, even if
the rights and remedies of the lessor, seller or lender thereunder are limited
to repossession of such property; provided, however, that all such obligations
and liabilities which are limited in recourse to such property shall be included
in Debt only to the extent of the value of such property as shown on a
consolidated balance sheet of Borrower and its Subsidiaries prepared in
accordance with GAAP; (vi) all accrued pension fund and other employee
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benefit plan obligations and liabilities; (vii) all obligations and liabilities
under Guaranties; and (viii) deferred taxes.
"Default" means any event or condition which, with notice, the
passage of time, the happening of any other condition or event, or any
combination thereof, would constitute an Event of Default.
"Default Rate" means a fluctuating per annum interest rate at all
times equal to the sum of (a) the otherwise applicable Interest Rate plus (b)
ten percent 10.00%. Each Default Rate shall be adjusted simultaneously with any
change in the applicable Interest Rate.
"Distribution" means, in respect of any corporation: (a) the payment
or making of any dividend or other distribution of property in respect of
capital stock (or any options or warrants for such stock) of such corporation,
other than distributions in capital stock (or any options or warrants for such
stock) of the same class; or (b) the redemption or other acquisition of any
capital stock (or any options or warrants for such stock) of such corporation.
"DOL" means the United States Department of Labor or any successor
department or agency.
"Environmental Laws" means all federal, state and local laws, rules,
regulations, ordinances, permits, guidance, orders and consent decrees of any
Public Authority relating to health, safety, hazardous substances, and
environmental matters. Such laws and regulations include, without limitation,
the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss. 9601 et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.,
the Clean Water Act, 42 U.S.C. ss. 466 et seq., the Clean Air Act, 46 U.S.C. ss.
7401 et seq., state and federal lien and environmental cleanup programs; the
Occupational Safety and Health Act, 29 U.S.C. ss.ss. 651 et seq.; and U.S.
Department of Transportation regulations.
"Environmental Lien" means a Lien in favor of any Public Authority
for (1) any liability under any Environmental Laws, or (2) damages arising from,
or costs incurred by such Public Authority in response to, a Release or
threatened Release of a Contaminant into the environ ment.
"Environmental Property Transfer Act" means any applicable
requirement of law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the closure of any property or the
transfer, sale or lease of any property or deed or title for any property for
environmental reasons, including, but not limited to, any so-called
"Environmental Cleanup Responsibility Acts" or "Responsible Property Transfer
Acts."
"Equipment" means all of Borrower's now owned and hereafter acquired
machinery, equipment, furniture, furnishings, fixtures, and other tangible
personal property (except Inventory), including, without limitation, motor
vehicles, aircraft, dies, tools, jigs, and office equipment, as well as all of
such types of property leased by Borrower and all of Borrower's rights and
interests with
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respect thereto under such leases (including, without limitation, options to
purchase); together with all present and future additions and accessions
thereto, replacements therefor, component and auxiliary parts and supplies used
or to be used in connection therewith, and all substitutes for any of the
foregoing, and all manuals, drawings, instructions, warranties and rights with
respect thereto; wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute.
"ERISA Affiliate" means (i) any corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Code) as Borrower; (ii) a Partnership or other trade or business (whether or
not incorporated) under common control (within the meaning of Section 414(c) of
the Code) with Borrower; or (iii) a member of the same affiliated service group
(within the meaning of Section 414(m) of the Code) as Borrower, any cor poration
described in clause (i) above or any partnership, trade or business described in
clause (ii) above.
"Event of Default" has the meaning specified in Section 10.1.
"GAAP" means at any particular time with respect to Borrower,
generally accepted accounting principles as in effect at such time, consistently
applied.
"General Intangibles" means all of Borrower's now owned or hereafter
acquired general intangibles, choses in action and causes of action and all
other intangible personal property of Borrower of every kind and nature (other
than Accounts), including, without limitation, all Proprietary Rights, corporate
or other business records, inventions, designs, blueprints, plans,
specifications, trade secrets, goodwill, customer lists, registrations,
licenses, franchises, tax refund claims, any funds which may become due to
Borrower in connection with the termination of any Plan or other employee
benefit plan or any rights thereto and any other amounts payable to Borrower
from any Plan or other employee benefit plan, rights and claims against carriers
and shippers, rights to indemnification, business interruption insurance and
proceeds thereof, property, casualty or any similar type of insurance and any
proceeds thereof, proceeds of insurance covering the lives of key employees on
which Borrower is beneficiary, and any letter of credit, guarantee, claim,
security interest or other security held by or granted to Borrower to secure
payment by an account debtor of any of the Accounts.
"Guaranty" means, with respect to any Person, all obligations of
such Person which in any manner directly or indirectly guarantee or assure, or
in effect guarantee or assure, the payment or performance of any indebtedness,
dividend or other similar obligation of any other Person (the "guaranteed
obligations"), or assure or in effect assure the holder of the guaranteed
obligations against loss in respect thereof, including, without limitation, any
such obligations incurred through an agreement, contingent or otherwise: (a) to
purchase the guaranteed obligations or any property constituting security
therefor; (b) to advance or supply funds for the purchase or payment of the
guaranteed obligations or to maintain a working capital or other balance sheet
condition; or (c) to lease property or to purchase any debt or equity Securities
or other property or services.
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"Interest Rate" means each or any of the interest rates, including
the Default Rate, set forth in Section 3.1.
"Inventory" means all of Borrower's now owned and hereafter acquired
inventory, goods, merchandise, and other personal property, wherever located, to
be furnished under any contract of service or held for sale or lease, including,
without limitation, all returned goods, raw materials, work-in-process
inventory, finished goods and other materials and supplies of any kind, nature
or description which are or might be consumed in Borrower's business or used in
connection with the packing, shipping, advertising, selling or finishing of such
goods, merchandise and such other personal property, and all documents of title
or other documents representing them.
"IRS" means the Internal Revenue Service or any successor agency.
"Lien" means: (a) any interest in property securing an obligation
owed to, or a claim by, a Person other than the owner of the property, whether
such interest is based on the common law, statute, or contract, and including
without limitation, a security interest, charge, claim, or lien arising from a
mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, agreement, security agreement, conditional sale or trust receipt or
a lease, consignment or bailment for security purposes; and (b) to the extent
not included under clause (a), any reservation, exception, encroachment,
easement, right-of-way, covenant, condition, restriction, lease or other title
exception or encumbrance affecting property.
"Line of Credit Facility" means that portion of the Total Facility
providing for Line of Credit Loans.
"Line of Credit Loans" has the meaning specified in Section 2.2.
"Loans" means, collectively, all loans and advances provided for in
Article 2.
"Loan Documents" means this Agreement, the Convertible Note, the
Registration Rights Agreement, the Warrants, the Trademark Agreement, the
Mortgages, the Pledge, and all other agreements, instruments, and documents
heretofore, now or hereafter evidencing, securing, guaranteeing or otherwise
relating to the Obligations, the Collateral, or any other aspect of the trans
actions contemplated by this Agreement, together with all amendments,
restatements, supplements, replacements, or other modifications thereof.
"Maturity Date" means, (i) in the case of all Line of Credit Loans
made hereunder, the second Anniversary Date or, if earlier, the date of
termination of this Agreement in accordance with Article 10, and (ii) in the
case of all Convertible Term Loans made hereunder, October 9, 1999 or, if
earlier, the date of termination of this Agreement in accordance with Article
10.
"Mortgages" means all real property mortgages, leasehold mortgages,
assignments of leases, mortgage deeds, deeds of trust, deeds to secure debt,
security agreements, and other similar instruments hereafter entered into which
provide Agent a Lien on or other interest in any portion of the Premises or the
Real Estate or which relate to any such Lien or interest.
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"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which was at any time during the current year or the
immediately preceding six years contributed to by Borrower or any ERISA
Affiliate.
"Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and debts owing by Borrower to
Agent and Lenders, whether or not arising under this Agreement, whether or not
evidenced by any note, or other instrument or document, whether arising from an
extension of credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment from others, and any participation by
any Lender in Borrower's debts owing to others), absolute or contingent, due or
to become due, primary or secondary, as principal or guarantor, and including,
without limitation, all principal, interest, charges, expenses, fees, attorneys'
fees, filing fees and any other sums chargeable to Borrower hereunder, under
another Loan Document, or under any other agreement or instrument with Agent or
any Lender.
"Pledge" means that certain Pledge Agreement dated as of the date
hereof executed by Borrower in favor of Agent pledging all of its interest in
Country Star Las Vegas LLC now owned or hereafter acquired by Borrower as
security for the payment and performance of the Obligations.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the functions thereof.
"Permitted Liens" means:
(a) Liens for taxes not yet payable or statutory Liens for taxes in
an amount not to exceed $100,000 provided that the payment of such taxes which
are due and payable is being con tested in good faith and by proper proceedings
diligently pursued, and that reserves or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor and that a stay of
enforcement of any such Lien is in effect;
(b) Liens in favor of Agent;
(c) Liens upon Equipment granted in connection with the acquisition
of such Equipment by Borrower after the date hereof (including, without
limitation, pursuant to Capital Leases), provided that (i) the cost of each such
acquisition constitutes a Capital Expenditure permitted by Section 8.22, (ii)
the Debt incurred to finance each such acquisition is permitted by Section 8.13,
and (iii) each such Lien attaches only to the Equipment acquired with the Debt
secured thereby;
(d) deposits under workmen's compensation, unemployment insurance,
social security and other similar laws, or to secure the performance of bids,
tenders or contracts (other than for the repayment of borrowed money) or to
secure indemnity, performance or other similar bonds for the performance of
bids, tenders or contracts (other than for the repayment of borrowed money) or
to secure statutory obligations (other than liens arising under ERISA or
Environmental Liens) or
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surety or appeal bonds, or to secure indemnity, performance or other similar
bonds in the ordinary course of business;
(e) liens which arise by operation of law under Article 2 of the
Uniform Commercial Code in favor of unpaid sellers of goods or prepaying buyers
of goods, or liens in items of any accompanying documents or proceeds of either
arising by operation of law under Article 4 of the Uniform Commercial Code in
favor of a collecting bank;
(f) liens securing the claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons, provided that the
payment thereof is not at the time required by Section 8.1;
(g) reservations, exceptions, encroachments, easements, rights of
way, covenants running with the land, and other similar title exceptions or
encumbrances affecting any Real Estate; provided that they do not in the
aggregate materially detract from the value of the Real Estate or materially
interfere with its use in the ordinary conduct of Borrower's or any Subsidiary's
business; and
(h) liens in existence on the Closing Date and reflected on Schedule
7.2.
"Permitted Rentals" has the meaning specified in Section 8.23.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
Public Authority, or any other entity.
"Plan" means any employee benefit plan as defined in Section 3(3) of
ERISA under which Borrower or any ERISA Affiliate is, or within the immediately
preceding six (6) years was, an "employer" as defined in Section 3(5) of ERISA.
"Premises" means the land identified by addresses on Schedule 7.11,
together with all buildings, improvements, and fixtures thereon and all
tenements, hereditament, and appurtenances belonging or in any way appertaining
thereto, and which constitutes all of the real property in which Borrower has
any interests on the Closing Date.
"Prime Rate" means, for any calendar month or portion thereof, the
highest "prime rate" of interest quoted on the twenty-fifth day of the preceding
calendar month in the Eastern Edition of The Wall Street Journal as the "base
rate on corporate loans at large U.S. money center commercial banks" on such day
or, if the Eastern Edition of The Wall Street Journal is not published on such
day, the first preceding day on which such edition is published; provided,
however, that in the event that The Wall Street Journal ceases quoting a "prime
rate" of the type described, "Prime Rate" means, for any calendar month or
portion thereof, the highest per annum rate of interest then most recently
quoted as the "Bank Prime Loan" rate for "This week" in Statistical Release H.15
(519) of the United States Federal Reserve Board.
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"Proprietary Rights" means all of Borrower's now owned and hereafter
arising or acquired: licenses, franchises, permits, patents, patent rights,
copyrights, works which are the subject matter of copyrights, computer software,
trademarks, service marks, trade names, trade styles, patent, trademark and
service mark applications, and all licenses and rights related to any of the
foregoing, including, without limitation, those patents, trademarks, service
marks and copyrights set forth on Schedule 7.12 hereto, and all other rights
under any of the foregoing, all extensions, renewals, reissues, divisions,
continuations, and continuations-in-part of any of the foregoing, and all rights
to sue for past, present and future infringement of any of the foregoing.
"Public Authority" means the government of any country or sovereign
state, or of any state, province, municipality, or other political subdivision
thereof, or any department, agency, public corporation or other instrumentality
of any of the foregoing.
"Real Estate" means all of the present and future interests of
Borrower, as owner, lessee, or otherwise, in the Premises, including, without
limitation, any option to purchase or lease.
"Registration Rights Agreement" means that certain Registration
Rights Agreement of even date herewith in the form of Exhibit B hereto executed
and delivered by Borrower in favor of Agent.
"Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any Real
Estate or other property, including the movement of Con taminants through or in
the air, soil, surface water, groundwater or Real Estate or other property.
"Rentals" has the meaning specified in Section 8.23.
"Reportable Event" means any of the events described in Section 4043
of ERISA.
"Restricted Investment" means any acquisition of property by
Borrower or any of its Subsidiaries in exchange for cash or other property,
whether in the form of an acquisition of stock, debt Security, or other
indebtedness or obligation, or the purchase or acquisition of any other
property, or a loan, advance, capital contribution, or subscription, except
acquisitions of the following: (a) fixed assets to be used in the business of
Borrower or a Subsidiary, so long as the acquisition costs thereof constitute
Capital Expenditures permitted hereunder; (b) goods held for sale or lease or to
be used in the provision of services by Borrower or a Subsidiary in the ordinary
course of business; (c) current assets arising from the sale or lease of goods
or the rendition of services in the ordinary course of business of Borrower or a
Subsidiary; (d) direct obligations of the United States of America, or any
agency thereof, or obligations guaranteed by the United States of America,
provided that such obligations mature within one year from the date of
acquisition thereof; (e) certificates of deposit maturing within one year from
the date of acquisition, bankers' acceptances, Eurodollar bank deposits, or
overnight bank deposits, in each case issued by, created by, or with a bank or
trust company organized under the laws of the United States or any state thereof
having capital and surplus aggregating at least $100,000,000; and (f) commercial
paper given the highest
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rating by a national credit rating agency and maturing not more than 270 days
from the date of creation thereof.
"Subsidiary" means any entity of which more than fifty percent
(50.0%) of the outstanding securities of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions),
is at the time, directly or indirectly through one or more intermediaries, owned
by Borrower and/or one or more of its Subsidiaries.
"Termination Event" means: (1) a Reportable Event under any Benefit
Plan; (2) the withdrawal of Borrower or any ERISA Affiliate from a Benefit Plan
during a plan year in which Borrower or such ERISA Affiliate was a "substantial
employer" under Section 4001(a)(2) of ERISA; (3) an obligation of Borrower or
any ERISA Affiliate arises under Section 4041 of ERISA to provide affected
parties written notice of intent to terminate a Benefit Plan in a distress
termination under Section 4041(c) of ERISA; (4) the PBGC institutes proceedings
to terminate a Benefit Plan; (5) any event or condition constitutes grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Benefit Plan; (5) any withdrawal of Borrower or any
ERISA Affiliate from a Multiemployer Plan; or (6) the cessation of operations
which results in the termination of employment of twenty percent (20.0%) of
Benefit Plan participants who are employees of Borrower and its ERISA
Affiliates.
"Total Facility" has the meaning specified in Section 2.1.
"Trademark Agreement" means the Trademark Security Agreement dated
as of the date hereof, executed and delivered by Borrower to Agent pursuant to
Section 5.2.
"UCC" means the Uniform Commercial Code (or any successor statute)
of the State of Illinois or of any other state the laws of which are required by
Section 9-103 thereof to be applied in connection with the issue of perfection
of security interests.
"Voting Stock" means Securities of any class or classes of a
corporation, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
"Warrants" means that certain Warrant of even date herewith in the
form of Exhibit C issued by Borrower to Cameron under Article 2 and any other
Warrant issued by Borrower to any Lender thereunder, together with each
substitute Warrant thereof.
1.2 Accounting Terms. Any accounting term used in this Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial Statements.
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1.3 Other Terms. All other undefined terms contained in this
Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein. Any
references herein to exhibits, schedules, sections or articles are references to
exhibits, schedules, sections or articles of this Agreement, unless otherwise
specified. Wherever appropriate in the context, terms used herein in the
singular also include the plural, and vice versa, and each masculine, feminine,
or neuter pronoun shall also include the other genders.
1.4 Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" shall mean "from and including" and the words "to" and "until"
shall each mean "to but excluding." Periods of days referred to in this
Agreement shall be counted in calendar days unless Business Days are expressly
prescribed and references in this Agreement to months and years shall be to
calendar months and calendar years unless otherwise specified.
ARTICLE 2 - LOANS
2.1 Total Facility. Subject to all of the terms and conditions of
this Agreement, this Agreement evidences a total credit facility (the "Total
Facility") comprised of: (a) the Line of Credit Loans, under and as described in
Sections 2.2, and (b) the Convertible Term Loan, under and as described in
Section 2.3.
2.2 Line of Credit Loans. Subject to the satisfaction of all of the
conditions precedent set forth in Article 9, Lenders shall, upon Borrower's
request, make a term loan (the "Line of Credit Loan") to Borrower in the
aggregate principal amount of $500,000 ("Initial Line of Credit Amount"). The
Initial Line of Credit Amount shall be represented by two advances of $250,000,
the first advance to be made upon the Closing Date and the second to be made
within ten (10) Business Days of the Closing Date. Lenders, however, in their
sole and absolute discretion, may elect to make additional discretionary term
loan advances to Borrower as Line of Credit Loans in excess of the Initial Line
of Credit Amount on one or more occasions up to an aggregate amount of
$3,000,000, but if they do so, Lenders shall not be deemed thereby to have
changed the limits of the Initial Line of Credit Amount or to be obligated to
exceed the limits of the Initial Line of Credit Amount on any occasion. Each
Lender will charge all Line of Credit Loans and other Obligations to a loan
account of Borrower maintained with such Lender. Borrower may request Line of
Credit Loans either orally or in writing. All requests by Borrower for Line of
Credit Loans shall be made to Agent on behalf of Lenders. Each oral request for
a Line of Credit Loan shall be conclusively presumed to be made by a person
authorized by Borrower to do so and the crediting of a Line of Credit Loan to
Borrower's deposit account, or transmittal to such Person as Borrower shall
direct, shall conclusively establish the obligation of Borrower to repay such
Line of Credit Loan as provided herein. Notwithstanding terms, if any, to the
contrary in this Agreement or the other Loan Documents, Lenders shall have
neither any obligation nor commitment to make any Line of Credit Loans in excess
of the Initial Line of Credit Amount and the making of Line of Credit Loans in
excess of the Initial Line of Credit Amount shall be in the sole and absolute
discretion of Lenders.
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2.3 Exchange; Convertible Term Loan. Subject to the satisfaction of
all of the conditions precedent set forth in Article 9, on the Closing Date
Cameron shall exchange 4,000 shares of its Series B 7% Convertible Preferred
Stock of Borrower ("Series B Preferred Stock"), together with all of Cameron's
claims for accrued dividends, interest, and penalties under such Series B
Preferred Stock, for (a) a term loan ("Convertible Term Loan") owing from
Borrower in the principal amount of $4,000,000, which shall be evidenced by and
repayable in accordance with and subject to the terms of Article 4 and the
conversion and other terms set forth in the Convertible Note (the "Convertible
Note"), authorized, issued and delivered by Borrower to Cameron, in the form
attached as Exhibit A and made a part hereof and (b) 365,522 shares of duly
authorized, fully paid, and non assessable Common Stock of Borrower ("Common
Stock") issued in the name of Cameron (the "Cameron Shares"). Upon execution and
delivery of the Convertible Note by Borrower to Cameron, delivery of the Cameron
Shares to Cameron, and satisfaction of all of the other conditions precedent set
forth in Article 9, (a) Cameron will deliver to Borrower all stock certificates,
duly endorsed, evidencing Cameron's Series B Preferred Stock and (b) Cameron
will execute and deliver, and cause the execution and delivery by Cameron
Capital Management Ltd. ("Cameron Management"), to Borrower of a termination
agreement terminating all of the rights of Cameron and Cameron Management under
that certain Subscription Agreement dated October 9, 1996 among Cameron, Cameron
Management, and Borrower.
2.4 Warrants. In addition to the other conditions precedent to
making Line of Credit Loans as set forth in Article 9, each advance by a Lender
of a Line of Credit Loan shall be accompanied by a Warrant issued by Borrower to
such Lender which shall provide for, among the other terms and conditions set
forth in each Warrant, such Lender's right to purchase for $.625 per share the
number of shares of common stock of Borrower equal to number derived by dividing
the dollar amount of such Line of Credit Loan by three (3). Each Warrant shall
expire on the fifth anniversary of its date of issuance.
ARTICLE 3 - INTEREST AND FEES
3.1 Interest. (a) Borrower shall pay Lenders interest on the unpaid
principal balance of the Line of Credit Loans (including, to the extent
permitted by law, on interest on such Loans not paid when due), and on any other
Obligations incurred hereunder or pursuant to the Loan Documents (other than the
Convertible Term Loan), at a fluctuating per annum rate equal to four percent
(4.00%) plus the Prime Rate. Each change in the Prime Rate shall be reflected in
the fore going interest rates as of the effective date of such change.
(b) Borrower shall pay Lenders interest on the unpaid principal
balance of the Convertible Term Loan (including, to the extent permitted by law,
on interest on such Loans not paid when due) at per annum rate equal to seven
percent (7.00%).
(c) If any of the Obligations owed hereunder are not paid when due
(whether by acceleration or otherwise), then such unpaid amounts shall bear
interest at the Default Rate applicable thereto until so paid.
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(d) If any Default or Event of Default occurs and Agent in its
discretion so elects, then, while any such Default or Event of Default is
outstanding, all of the Obligations shall bear interest at the Default Rate
applicable thereto.
(e) Interest charges under this Agreement shall be computed on the
basis of a year of 360 days and actual days elapsed and will be payable to
Lenders as set forth in Article 4.
3.2 Maximum Interest Rate. In no event shall any interest rate
hereunder exceed the maximum rate permissible for corporate borrowers under
applicable law (the "Maximum Rate"). If, in any month, any interest rate, absent
such limitation, would have exceeded the Maximum Rate, then the interest rate
for that month shall be the Maximum Rate, and, if in future months, that
interest rate would otherwise be less than the Maximum Rate, then that interest
rate shall remain at the Maximum Rate until such time as the amount of interest
paid hereunder equals the amount of interest which would have been paid if the
same had not been limited by the Maximum Rate. In the event that, upon payment
in full of the Obligations under this Agreement, the total amount of interest
paid or accrued under the terms of this Agreement is less than the total amount
of interest which would, but for this Section 3.2, have been paid or accrued if
the interest rates otherwise set forth in this Agreement had at all times been
in effect, then Borrower shall, to the extent permitted by applicable law, pay
Lenders an amount equal to the difference between (a) the lesser of (i) the
amount of interest which would have been charged if the Maximum Rate had, at all
times, been in effect or (ii) the amount of interest which would have accrued
had the interest rates otherwise set forth in this Agreement, at all times, been
in effect and (b) the amount of interest actually paid or accrued under this
Agreement. In the event that a court determines that any Lender has received
interest and other charges hereunder in excess of the Maximum Rate, such excess
shall be deemed received on account of, and shall automatically be applied to
reduce, the Obligations other than interest, in the inverse order of maturity,
and if there are no Obligations outstanding, such Lender shall refund to
Borrower such excess.
ARTICLE 4 - PAYMENTS AND PREPAYMENTS
4.1 Line of Credit Loans. Borrower shall repay the outstanding
principal balance of the Line of Credit Loans, plus all accrued but unpaid
interest thereon, upon the Maturity Date applicable to Line of Credit Loans or,
if earlier, upon acceleration in accordance with Article 10. Borrower may prepay
Line of Credit Loans at any time. Borrower shall not reborrow any Line of Credit
Loans. Scheduled payments of interest accruing hereunder on the principal
balance of the Line of Credit Loans shall be made by Borrower on June 30 and
December 31 of each calendar year; provided, however, that such interest
payments shall not commence until December 31, 1997.
4.2 Convertible Term Loan. Borrower shall repay the outstanding
principal balance of the Convertible Term Loan, plus accrued but unpaid interest
thereon and premium owing thereon in accordance with the Convertible Note, upon
the Maturity Date applicable to the Convertible Term Loan or, if earlier, upon
acceleration in accordance with Article 10. Borrower shall not reborrow any the
Convertible Term Loan. Scheduled payments of interest accruing hereunder on the
principal balance of the Convertible Term Loan shall be made by Borrower on June
30 and December 31 of each calendar year; provided, however, that such interest
payments shall not
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commence until December 31, 1997. The repayment of the principal and interest of
the Convertible Term Loan shall be further subject to the terms and conditions
set forth in the Convertible Note.
4.3 Voluntary Prepayments of the Loans. Borrower may prepay the
principal balance of the Line of Credit Loans at any time and from time to time
without premium. Each prepayment of principal shall be accompanied by payment of
all accrued but unpaid interest on the principal balance of the Line of Credit
Loans to the date of prepayment. Borrower may prepay the principal balance of
the Convertible Term Loan solely in accordance with the terms and conditions set
forth in the Convertible Note.
4.4 Mandatory Prepayments of the Loans. Borrower shall pay the
entire unpaid principal balance of the Line of Credit Loans and the Convertible
Term Loan, and all accrued but unpaid interest thereon, upon the Maturity Date
applicable to such Loan or, if earlier, upon acceleration in accordance with
Article 10. Notwithstanding provisions contained in this Agreement or the other
Loan Documents prohibiting the sale or other transfer of Collateral, in the
event that any of Borrower's Collateral, the sale or transfer of which requires
Lenders' or Agent's consent under this Agreement or any other Loan Document, is
sold or otherwise transferred, whether in violation of the terms of this
Agreement or other Loan Document or pursuant to a consent granted by Lenders or
Agent, Borrower shall immediately upon receipt of the proceeds of such sale or
transfer, make a prepayment of the Convertible Term Loan in the amount of the
net proceeds from such sale or transfer. Any mandatory prepayment of the
Convertible Term Loan shall be further subject to the premium and other
prepayment provisions of the Convertible Note.
4.5 Place and Form of Payments; Extension of Time. All payments of
principal, interest, premium, and other sums due to Lenders shall be made to The
Bank of Bermuda International, New York, New York for credit to The Bank of
Bermuda Limited, Hamilton Bermuda (or to such other accounts as Holder may
direct Borrower). All such payments shall be made in immediately available funds
in United States currency by noon Atlantic standard time (AST) on the date
payment is to be made; provided, however, that Agent may elect, in its sole
discretion, to receive payment for part or all of any accrued interest hereunder
in kind in shares of Common Stock of Borrower, in lieu of immediately available
funds, in such number of shares to be determined based upon the average closing
bid price (as reported by the Nasdaq Stock Market) of the Common Stock of
Borrower for the five (5) consecutive trading days immediately prior to the date
that such interest is payable. If Agent elects to receive payment in kind in
shares of Common Stock in accordance with this Section, the due date for such
payment received in kind shall be extended three (3) Business Days and, on such
extended due date, Borrower shall deliver to Agent stock certificates, together
with any necessary stock powers and/or endorsements, evidencing the number of
shares of Common Stock of Borrower required for such payment under this Section.
If any payment of principal, interest, premium, or other sum to be made
hereunder becomes due and payable on a day other than a Business Day, the due
date of such payment shall be extended to the next succeeding Business Day and
interest thereon shall be payable at the applicable Interest Rate during such
extension.
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4.6 Apportionment, Application and Reversal of Payments. (a) Unless
an Event of Default shall have occurred, all payments received by Agent and
Lenders from Borrower hereunder shall be applied to the Obligations as follows:
first, to fees and expenses due and payable under this Agreement; second, to
accrued interest then due and payable on the Line of Credit Loans; third, to
accrued interest then due and payable on the Convertible Term Loan; fourth, to
installments, if any, then owing of principal which have been scheduled as due
and payable on the Line of Credit Loans before the final maturity or
acceleration of such Loans; fifth, to installments, if any, then owing of
principal which have been scheduled as due and payable on the Convertible Term
Loan before the final maturity or acceleration of such Loan; sixth, to accrued
interest not yet due and payable on the Line of Credit Loans; seventh, to the
principal the Line of Credit Loans, and, if payable in installments, to the
installments thereof in the inverse order of maturity, whether or not then due,
together with any premium due thereon; eighth, to accrued interest not yet due
and payable on the Convertible Term Loan; ninth, to the principal of the
Convertible Term Loan, and, if payable in installments, to the installments
thereof in the inverse order of maturity, whether or not then due, together with
any premium due thereon; and last, to any other Obligations owing to Agent and
Lenders.
(b) If an Event of Default shall have occurred, all payments received by
Agent from Borrower hereunder shall be applied to the Obligations the order and
manner which the Agent in its sole discretion shall determine.
(c) Borrower hereby irrevocably waives the right to direct the application
of any payment or proceeds in respect of the Obligations. Agent and Lenders
shall have the continuing and exclusive right to apply and reverse and reapply
any and all such proceeds and payments to any portion of the Obligations.
4.7 Agent and Lenders' Books and Records; Monthly Statements.
Borrower agrees that Agent's and Lenders' books and records showing the
Obligations and the transactions pursuant to this Agreement and the other Loan
Documents shall be admissible in any action or proceeding arising therefrom, and
shall constitute prima facie proof thereof, irrespective of whether any
Obligation is also evidenced by a promissory note or other instrument.
ARTICLE 5 - COLLATERAL
5.1 Grant of Security Interest. (a) As security for all Obligations,
Borrower hereby grants to Agent, for its benefit and the benefit of the Lenders,
a continuing security interest in, lien on, assignment of, and right of set-off
against all of the following property of Borrower, whether now owned or existing
or hereafter acquired or arising and regardless of where located:
(i) all Accounts, contract rights, letters of credit, chattel paper,
instru ments, notes, documents, and documents of title;
(ii) General Intangibles;
(iii) Inventory;
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(iv) Equipment;
(v) all moneys, securities, and other property of any kind of
Borrower in the possession or under the control of Agent or any Lender,
any assignee of or participant in the Obligations or a bailee of any such
party or such party's affiliates;
(vi) all of Borrower's deposit accounts, credits, and balances with
and other claims against Agent, any Lender or any of their affiliates or
any other financial institution with which Borrower maintains deposits;
(vii) all books, records and other property relating to or referring
to any of the foregoing, including, without limitation, all books,
records, ledger cards, data processing records, computer software and
other property and general intangibles at any time evidencing or relating
to any of the foregoing; and
(viii) all accessions to, substitutions for and replacements,
products and proceeds of any of the foregoing, including, but not limited
to, proceeds of any insurance policies, claims against third parties, and
condemnation or requisition payments with respect to all or any of the
foregoing.
All of the foregoing, together with the Real Estate and all other property of
Borrower or any Subsidiary in which Agent may at any time be granted a Lien, is
herein collectively referred to as the "Collateral."
(b) As additional security for the Obligations, Borrower shall
simultaneously herewith execute and deliver to Agent (or, if applicable, cause
its Subsidiary to execute and deliver) the Mortgages and such other agreements
to grant to Agent, for its benefit and the benefit of Lenders, a continuing and
perfected mortgage liens on the Real Estate.
(c) All of the Obligations shall be secured by all of the
Collateral. Agent may, in its sole discretion, (i) exchange, waive, or release
any of the Collateral, (ii) apply Collateral and direct the order or manner of
sale thereof as Agent may determine, and (iii) settle, compromise, collect, or
otherwise liquidate any Collateral in any manner, all without affecting the
Obligations or Agent's or Lenders' right to take any other action with respect
to any other Collateral.
5.2 Perfection and Protection of Security Interest. Borrower shall,
and shall cause its Subsidiaries to, at its expense, perform all steps requested
by Agent at any time to perfect, maintain, protect, and enforce its Liens in the
Collateral including, without limitation: (a) executing and recording of the
Mortgages, and the Trademark Agreement and executing and filing financing or
continuation statements, and amendments thereof, in form and substance
satisfactory to Agent; (b) delivering to Agent the original certificates of
title for motor vehicles with Agent's security interest properly endorsed
thereon; (c) delivering to Agent the originals of all instruments, documents,
and chattel paper, and all other Collateral of which Agent determines it should
have physical possession in order to perfect and protect Agent's security
interest therein, duly endorsed or assigned to Agent without restriction; (d)
delivering to Agent warehouse receipts covering any
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portion of the Collateral located in warehouses and for which warehouse receipts
are issued; (e) transferring Inventory to warehouses designated by Agent; (f)
placing notations on Borrower's books of account to disclose Agent's security
interest; (g) delivering to Agent all letters of credit on which Borrower is
named beneficiary; and (h) taking such other steps as are deemed necessary or
desirable by Agent to maintain and protect its Liens. To the extent permitted by
applicable law, Agent may file, without Borrower's signature, one or more
financing statements disclosing its Liens. Borrower agrees that a carbon,
photographic, photostatic, or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement.
If any Collateral is at any time in the possession or control of any
warehouseman, bailee or any of Borrower's agents or processors, then Borrower
shall notify Agent thereof and shall notify such Person of Agent's security
interest in such Collateral and, upon Agent's request, instruct such Person to
hold all such Collateral for Agent's account subject to Agent's instructions. If
at any time any Collateral is located on any premises that are not owned by
Borrower, then Borrower shall obtain written waivers, in form and substance
satisfactory to Agent, of all present and future Liens to which the owner or
lessor or any mortgagee of such premises may be entitled to assert against the
Collateral.
From time to time, Borrower shall, upon Agent's request, execute and
deliver confirmatory written instruments pledging to Agent the Collateral, but
Borrower's failure to do so shall not affect or limit Agent's security interest
or Agent's or Lenders' other rights in and to the Collateral. So long as this
Agreement is in effect and until all Obligations have been fully satisfied,
Agent's Liens shall continue in full force and effect in all Collateral.
5.3 Location of Collateral. Borrower represents and warrants to
Agent and Lenders that: (a) Schedule 5.3 is a correct and complete list of
Borrower's chief executive office, the location of its books and records, the
locations of the Collateral, and the locations of all of its other places of
business; and (b) Schedule 5.3 correctly identifies any of such facilities and
locations that are not owned by Borrower and sets forth the names of the owners
and lessors or sublessors of, and, to the best of Borrower's knowledge, the
holders of any mortgages on, such facilities and locations. Borrower covenants
and agrees that it will not (i) maintain any Collateral at any location other
than those listed on Schedule 5.3, (ii) otherwise change or add to any of such
locations, or (iii) change the location of its chief executive office from the
location identified in Schedule 5.3, unless it gives Agent at least thirty (30)
days' prior written notice thereof and executes any and all financing statements
and other documents that Agent requests in connection therewith.
5.4 Title to, Liens on, and Sale and Use of Collateral. Borrower
represents and warrants to Agent and Lenders and agrees with Agent and Lenders
that: (a) all of Borrower's Collateral is and will continue to be owned by
Borrower free and clear of all Liens whatsoever, except for Permitted Liens; (b)
Agent's Liens in the Collateral will not be subject to any prior Lien except for
those Permitted Liens, if any, specifically identified on Schedule 7.2; (c)
Borrower will use, store, and maintain the Collateral with all reasonable care
and will use the Collateral for lawful purposes only; and (d) Borrower will not,
without Agent's prior written approval, sell, or dispose of or permit the sale
or disposition of any Collateral, except for sales of Inventory in the ordinary
course of business and as permitted by Section 5.9. The inclusion of proceeds in
the Collateral shall not be
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deemed to constitute Agent's consent to any sale or other disposition of the
Collateral except as expressly permitted herein.
5.5 Access and Examination. Agent may at all reasonable times (and
at any time when a Default or Event of Default exists) at its own expense
(except when a Default or Event of Default exists, in which case at Borrower's
expense) have access to, examine, audit, make extracts from and inspect
Borrower's records, files, and books of account and the Collateral, and discuss
Borrower's affairs with Borrower's officers and management. Borrower will
deliver to Agent any instrument necessary for Agent to obtain records from any
service bureau maintaining records for Borrower. Agent may at all reasonable
times (and at any time when a Default or Event of Default exists) at its own
expense (except when a Default or Event of Default exists, in which case at
Borrower's expense) make copies of all of Borrower's books and records, or
require Borrower to deliver such copies to Agent. Agent may at its own expense
(except when a Default or Event of Default exists, in which case at Borrower's
expense) use such of Borrower's personnel, supplies, and premises as may be
reasonably necessary for maintaining or enforcing Agent's Liens.
5.6 Collateral Reporting. Borrower will provide Agent with all
information concerning the Collateral as Agent shall reasonably request,
together with a certificate of an officer of Borrower certifying as to the
accuracy and completeness of such information. If any of Borrower's records or
reports of the Collateral are prepared by an accounting service or other agent,
Borrower hereby authorizes such service or agent to deliver such records,
reports, and related documents to Agent.
5.7 Inventory. Borrower represents and warrants to Agent and Lenders
and agrees with Agent and Lenders that all of the Inventory is and will be held
for sale or lease, or to be furnished in connection with the rendition of
services, in the ordinary course of Borrower's business, and is and will be fit
for such purposes. Borrower will keep the Inventory in good and marketable
condition, at its own expense. Borrower will not, without prior written notice
to Agent, acquire or accept any Inventory on consignment or approval. Borrower
agrees that all Inventory will be produced in accordance with the Federal Fair
Labor Standards Act of 1938, as amended, and all rules, regulations, and orders
thereunder. Borrower will maintain a perpetual inventory reporting system at all
times. Borrower will conduct a physical count of the Inventory at least once
each Fiscal Year, and at such other times as Agent reasonably requests, and
shall promptly supply Agent with a copy of such count accompanied by a report of
the value of such inventory (determined on a first-in-first-out basis and valued
at the lower of cost or market value). Borrower will not sell any Inventory on a
bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment,
or other repurchase or return basis.
5.8 Equipment. Borrower represents and warrants to Agent and Lenders
and agrees with Agent and Lenders that all of the Equipment is and will be used
or held for use in Borrower's business, and is and will be fit for such
purposes. Borrower shall keep and maintain the Equipment in good operating
condition and repair (ordinary wear and tear excepted) and shall make all
necessary replacements thereof. Borrower shall promptly inform Agent of any
material additions to or deletions from the Equipment. Borrower shall not permit
any Equipment to become a fixture to real property or an accession to other
personal property, unless Agent has a valid, perfected, and
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first priority Lien in such real or personal property. Borrower will not,
without Agent's prior written consent, alter or remove any identifying symbol or
number on the Equipment. Borrower shall not, without Agent's prior written
consent, sell, lease as a lessor, or otherwise dispose of any of the Equipment;
provided, however, that Borrower may dispose of obsolete or unusable Equipment
having an orderly liquidation value no greater than $500 individually, and
$10,000 in the aggregate in any Fiscal Year, without Agent's consent, subject to
the conditions set forth below. In the event any of the Equipment is sold,
transferred or otherwise disposed of, (a) if such sale, transfer or disposition
is effected without replacement of such Equipment, or such Equipment is replaced
by Equipment leased by Borrower or by Equipment purchased by Borrower subject to
a Lien, then Borrower shall deliver all of the cash proceeds of any such sale,
transfer or disposition to Agent, which proceeds shall be applied to the
repayment of the Obligations and without premium or penalty or (b) if such sale,
transfer or disposition is made in connection with the purchase by Borrower of
replacement Equipment (other than Equipment subject to a Lien), then Borrower
shall use the proceeds of such sale, transfer or disposition to finance the
purchase by Borrower of such replacement Equipment and shall deliver to Agent
written evidence of the use of the proceeds for such purchase. All replacement
Equipment purchased by Borrower shall be free and clear of all Liens, claims and
encumbrances, except for Permitted Liens.
5.9 Documents, Instruments, and Chattel Paper. Borrower represents
and warrants to Agent and Lenders and agrees with Agent and Lenders that (a) all
documents, instruments, and chattel paper describing, evidencing, or
constituting Collateral, and all signatures and endorsements thereon, are and
will be complete, valid, and genuine and (b) all goods evidenced by such
documents, instruments, and chattel paper are and will be owned by Borrower free
and clear of all Liens other than Permitted Liens.
5.10 Right to Cure. Agent and Lenders may, in their discretion and
at any time, for Borrower's account and at Borrower's expense, pay any amount or
do any act required of Borrower hereunder or requested by Agent to preserve,
protect, maintain or enforce the Obligations, the Collateral or Agent's Liens
therein, and which Borrower fails to pay or do, including, without limitation,
payment of any judgment against Borrower, any insurance premium, any warehouse
charge, any finishing or processing charge, any landlord's claim, and any other
Lien upon or with respect to the Collateral. All payments that Agent and/or any
Lender makes under this Section and all out-of-pocket costs and expenses that
Agent or any Lender pays or incurs in connection with any action taken by it
hereunder shall be charged to Borrower's loan account as a Line of Credit Loan.
Any payment made or other action taken by Agent or any Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed thereafter as herein provided.
5.11 Power of Attorney. Borrower hereby appoints Agent and Agent's
designees as Borrower's attorney, with power: (a) to endorse Borrower's name on
any checks, notes, acceptances, money orders, or other forms of payment or
security that come into Agent's or any Lender's possession; (b) to sign
Borrower's name on any invoice, bill of lading, or other document of title
relating to any Collateral, on drafts against customers, on assignments of
Accounts, on notices of assignment, financing statements and other public
records; (c) to notify the post office authorities, when an Event of Default
exists, to change the address for delivery of Borrower's mail to an address
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designated by Agent and to receive, open and dispose of all mail addressed to
Borrower; (d) to send requests for verification of accounts to customers or
account debtors; and (e) to do all things necessary to carry out this Agreement.
Borrower ratifies and approves all acts of such attorney. Neither Agent nor the
attorney will be liable for any good faith acts or omissions or for any error of
judgment or mistake of fact or law. This power, being coupled with an interest,
is irrevocable until this Agreement has been terminated and the Obligations have
been fully satisfied.
5.12 Agent's and Lenders' Rights, Duties and Liabilities. Borrower
assumes all responsibility and liability arising from or relating to the use,
sale or other disposition of the Collateral. Neither Agent, Lenders nor any of
their officers, directors, employees, and agents shall be liable or responsible
in any way for the safekeeping of any of the Collateral, or for any loss or
damage thereto, or for any diminution in the value thereof, or for any act of
default of any warehouseman, carrier, forwarding agency or other Person
whomsoever, all of which shall be at Borrower's sole risk. The Obligations shall
not be affected by any failure of Agent or any Lender to take any steps to
perfect its Liens or to collect or realize upon the Collateral, nor shall loss
of or damage to the Collateral release Borrower from any of the Obligations.
Agent may (but shall not be required to), without notice to or consent from
Borrower, sue upon or otherwise collect, extend the time for payment of, modify
or amend the terms of, compromise or settle for cash, credit, or otherwise upon
any terms, grant other indulgences, extensions, renewals, compositions, or
releases, and take or omit to take any other action with respect to the
Collateral, any security therefor, any agreement relating thereto, any insurance
applicable thereto, or any Person liable directly or indirectly in connection
with any of the foregoing, without discharging or otherwise affecting the
liability of Borrower for the Obligations or under this Agreement or any other
agreement now or hereafter existing between Agent and Lenders and Borrower.
ARTICLE 6 - BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
6.1 Books and Records. Borrower shall maintain, at all times,
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions in accordance with GAAP applied
consistently with the audited Financial Statements required to be delivered
pursuant to Section 6.2. Borrower shall, by means of appropriate entries,
reflect in such accounts and in all Financial Statements proper liabilities and
reserves for all taxes and proper provision for depreciation and amortization of
property and bad debts, all in accordance with GAAP. Borrower shall maintain at
all times books and records pertaining to the Collateral in such detail, form
and scope as Agent shall reasonably require, including, but not limited to,
records of (a) all payments received and all credits and extensions granted with
respect to the Accounts; (b) the return, rejections, repossession, stoppage in
transit, loss, damage, or destruction of any Inventory; and (c) all other
dealings affecting the Collateral.
6.2 Financial Information. Borrower shall promptly furnish to Agent
or its agents all such financial information as Agent shall reasonably request,
and notify its auditors and accountants that Agent is authorized to obtain such
information directly from them. Without limiting the foregoing, Borrower and its
Subsidiaries will furnish to the Agent, in such detail as the Agent shall
request, the following:
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(a) As soon as available, but in any event not later than one
hundred five (105) days after the close of each Fiscal Year, (1) Borrower's
Annual Report on Form 10-K (or any successor form) and (2) consolidated and
consolidating audited balance sheets, and statements of income and expense,
statements of cash flow, and statements of stockholders' equity for Borrower and
its consolidated Subsidiaries for such Fiscal Year; together with the
accompanying notes thereto, setting forth in each case in comparative form
figures for the previous Fiscal Year, all in reasonable detail, fairly
presenting the financial position and the results of operations of Borrower and
its consolidated Subsidiaries as at the date thereof and for the Fiscal Year
then ended, all prepared in accordance with GAAP. Such statements shall be
examined in accordance with generally accepted auditing standards by and
accompanied by a report thereon unqualified as to scope of Borrower's
independent certified public accountants.
(b) In the case of October, November, and December 1996, not later
than February 28, 1996, in the case of January 1997, not later than March 15,
1997, and the case of February and March 1997, not later than thirty (30) days
after the end of each such calendar month, and, in the case of each calendar
month thereafter, not later than fifteen (15) days after the end of each
calendar month: (1) consolidated and consolidating (by each restaurant location)
unaudited balance sheets of Borrower and its consolidated Subsidiaries as at the
end of such month; (2) consolidated and consolidating (by each restaurant
location) unaudited statements of income and expenses for Borrower and its
consolidated Subsidiaries for such month and for the period from the beginning
of the Fiscal Year to the end of such month; and (3) consolidated and
consolidating (by each restaurant location) unaudited statements of cash flow
for Borrower and its consolidated Subsidiaries for such month and for the period
from the beginning of the Fiscal Year to the end of such month; all of the
foregoing items in reasonable detail, fairly presenting the financial position
and results of operation of Borrower and its consolidated Subsidiaries as at the
date thereof and for such periods, and prepared in accordance with GAAP applied
consistently with the audited Financial Statements. Such statements shall be
certified to be correct by the chief financial or accounting officer of
Borrower, subject to normal year-end adjustments.
(c) With each of the annual audited and monthly unaudited Financial
Statements delivered pursuant to Sections 6.2(a) and 6.2(b), a certificate of
the chief executive or chief financial officer of Borrower (i) setting forth in
reasonable detail the calculations required to establish that Borrower was in
compliance with its covenants set forth Article 8 during the period covered in
such Financial Statements and as at the end thereof, and (ii) stating that,
except as explained in reasonable detail in such certificate, (A) all of the
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents are correct and complete as at the date of such certificate
as if made at such time, (B) Borrower is, at the date of such certificate, in
compliance with all of its covenants and agreements in this Agreement and the
other Loan Documents, and (C) no Default or Event of Default then exists or
existed during the period covered by such Financial Statements.
(d) On or before February 28, 1997, a rolling three (3) calendar
month budget report ("Budget Report") satisfactory to Agent for the period
beginning February 1, 1997, setting forth in complete detail all projected
expenditures of Borrower for such period. Not later than fifteen (15) days after
the end of each calendar month, commencing with the end of February 1997,
subsequent Budget Reports satisfactory to Agent for the rolling three (3)
calendar month period
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commencing in the calendar month succeeding the month in which such Budget
Report is due, setting forth in complete detail all projected expenditures of
Borrower for such period. The first month component of each Budget Report shall
be detailed by daily projected expenditures and the second and third month
component of each Budget report shall be detailed by weekly projected
expenditures.
(e) With each request for a Line of Credit Loan, a detailed report
satisfactory to Agent, listing by amount and payee the uses for the proceeds of
such Line of Credit Loan ("Use of Proceeds Schedule").
(f) Promptly after their preparation, copies of any all (1) proxy
statements, financial statements, and reports which Borrower makes available to
its stockholders and (2) all reports and registration statements and
prospectuses filed by Borrower or any of its Subsidiaries with any securities
exchange or the Securities and Exchange Commission.
(g) Promptly after filing with the PBGC, DOL, or IRS, a copy of each
annual report or other filing or notice filed with respect to each Benefit Plan
of Borrower or any ERISA Affiliate.
(h) Promptly after filing with the IRS, a copy of each tax return
filed by Borrower or by any of its Subsidiaries.
(i) Within ten Business Days after the Closing Date,
6.3 Notices to Agent. Borrower shall notify Agent of any change in
Borrower's name, state of incorporation, or form of organization, trade names or
styles under which Borrower will sell Inventory or create Accounts, or to which
instruments in payment of Accounts may be made payable, at least thirty (30)
days prior thereto. In addition, Borrower shall notify Agent in writing of the
following matters promptly and in any event not later than two (2) Business Days
after becoming aware thereof:
(a) any Default or Event of Default.
(b) the assertion by the holder of any capital stock of Borrower or
of any Debt in an outstanding principal amount exceeding $25,000, that a default
exists with respect thereto or that Borrower is not in compliance with the terms
thereof, or the threat or commencement by such holder of any enforcement action
because of such asserted default or non-compliance.
(c) any material adverse change in Borrower's or any Subsidiary's
property, business, operations, or condition (financial or otherwise).
(d) any pending or threatened action, suit, proceeding, or
counterclaim by any Person, or any pending or threatened investigation by a
Public Authority, which may materially and adversely affect the Collateral, the
repayment of the Obligations, Agent's or any Lender's rights
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under the Loan Documents, or Borrower's or any Subsidiary's property, business,
operations, or condition (financial or otherwise).
(e) any pending or threatened strike, work stoppage, material unfair
labor practice claim, or other material labor dispute affecting Borrower or any
of its Subsidiaries.
(f) any violation of any law, statute, regulation, or ordinance of
Public Authority applicable to Borrower, any Subsidiary, or their respective
properties (including, without limitation, any Environmental Law) which may
materially and adversely affect the Collateral, the repayment of the
Obligations, Agent's or any Lender's rights under the Loan Documents, or
Borrower's property, business, operations, or condition (financial or
otherwise).
(g) when Borrower or any ERISA Affiliate knows or has reason to
know, that a Termination Event or a prohibited transaction (as defined in
Sections 406 of ERISA and 4975 of the Code) has occurred, and, when known, any
action taken or threatened by the IRS, the DOL or the PBGC with respect thereto.
(h) receipt by Borrower or any ERISA Affiliate of copies of the
following: (i) each actuarial report for any Benefit Plan or Multiemployer Plan
and annual report for any Multiemployer Plan; (ii) any notices of the PBGC's
intention to terminate a Benefit Plan or to have a trustee appointed to
administer such Benefit Plan; (iii) any favorable or unfavorable determination
letter from the IRS regarding the qualification of a Plan under Section 401(a)
of the Code; or (iv) any notice from a Multiemployer Plan regarding the
imposition of withdrawal liability.
(i) (1) any increases in the benefits of any existing Plan or the
establishment of any new Plan or the commencement of contributions to any Plan
to which Borrower or any ERISA Affiliate was not previously contributing; or (2)
any failure by Borrower or any ERISA Affiliate to make a required installment or
any other required payment under Section 412 of the Code on or before the due
date for such installment or payment.
(j) after Borrower or any ERISA Affiliate knows or has reason to
know that any of the following events has or will occur: (i) a Multiemployer
Plan has been or will be terminated; (ii) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan; or (iii) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
Each notice given under this Section shall describe the subject matter
thereof in reasonable detail, and shall set forth the action that Borrower any
Subsidiary and any ERISA Affiliate, as applicable, has taken or proposes to take
with respect thereto. For purposes of subsections (g) through (j) above,
Borrower and any ERISA Affiliate shall be deemed to know all facts known by the
Administrator of any Plan of which Borrower or any ERISA Affiliate is the plan
sponsor.
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ARTICLE 7 - GENERAL WARRANTIES AND REPRESENTATIONS
Borrower warrants and represents to Agent and Lenders, that:
7.1 Authorization, Validity, and Enforceability of this Agreement
and the Loan Documents. Borrower has the corporate power and authority to
execute, deliver and perform this Agreement and other Loan Documents, to incur
the Obligations, and to grant to Agent Liens upon and security interests in the
Collateral. Borrower has taken all necessary corporate action to authorize its
execution, delivery, and performance of this Agreement and the other Loan
Documents. No consent, approval, or authorization of, or declaration or filing
with, any Public Authority, and no consent of any other Person, is required in
connection with Borrower's execution, delivery, and performance of this
Agreement and the other Loan Documents, except for those already duly obtained.
Each of this Agreement and the other Loan Documents has been duly executed and
delivered by Borrower, and constitutes the legal, valid and binding obligation
of Borrower, enforce able against it in accordance with its terms. Borrower's
execution, delivery, and performance of this Agreement and the other Loan
Documents do not and will not conflict with, or constitute a violation or breach
of, or constitute a default under, or result in the creation or imposition of
any Lien upon the property of Borrower or any of its Subsidiaries by reason of
the terms of (a) any contract, mortgage, Lien, lease, agreement, indenture, or
instrument to which Borrower or any of its Subsidiaries is a party or which is
binding upon it, (b) any judgment, law, statute, rule or governmental regulation
applicable to Borrower or any of its Subsidiaries, or (c) the Certificate or
Articles of Incorporation or By-laws of Borrower or any of its Subsidiaries.
7.2 Validity and Priority of Security Interest. The provisions of
this Agreement, the Mortgages, and the other Loan Documents create legal and
valid Liens on all the Collateral in Agent's favor for its benefit and the
benefit of Lenders, and such Liens constitute perfected and continuing Liens on
all the Collateral, having priority over all other Liens on the Collateral
except those Permitted Liens specifically identified on Schedule 7.2, securing
all the Obligations, and enforceable against Borrower and all third parties.
7.3 Organization and Qualification. Borrower (a) is duly
incorporated and organized and validly existing in good standing under the laws
of the State of Delaware, (b) is qualified to do business as a foreign
corporation and is in good standing in the States of California, Georgia, and
Nevada, which are the only states in which qualification is necessary in order
for it to own or lease its property and conduct its business, and (c) has all
requisite power and authority to conduct its business and to own its property.
7.4 Corporate Name; Prior Transactions. Borrower has not, during the
past five (5) years, been known by or used any other corporate or fictitious
name (other than the Delaware corporate name "Country Music Restaurants, Inc."
during the period from May 27, 1993 to June 3, 1993), or been a party to any
merger or consolidation, or acquired all or substantially all of the assets of
any Person, or acquired any of its property outside of the ordinary course of
business.
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7.5 Subsidiaries and Affiliates. Schedule 7.5 is a correct and
complete list of the name and relationship to Borrower of each and all of
Borrower's Affiliates. Borrower has no Subsidiaries other than Country Star Las
Vegas LLC.
7.6 Financial Statements. Borrower has delivered to Agent the
unaudited balance sheet and related statements of income, retained earnings,
statement of cash flow, and changes in stockholders equity as of September 30,
1996. All such financial statements have been prepared in accordance with GAAP
and present accurately and fairly the financial position of Borrower as at the
dates thereof and its results of operations for the periods then ended.
7.7 Capitalization.
(a) Prior to the consummation of the transactions contemplated by
this Agreement, Borrower's authorized capital stock consists of: (a)
25,000,000 shares of common stock, par value $0.001 per share, of which
15,153,331 shares are validly issued and outstanding, fully paid and
non-assessable, and are owned beneficially and of record; (b) 2,000,000
shares of preferred stock, par value $0.001 per share, of which (1)
363,806 shares are validly issued and outstanding as Series A Preferred
Stock (each convertible into six shares of common stock), fully paid and
non-assessable, and are owned beneficially and of record; and (2) 4,000
shares are validly issued and outstanding as Series B Convertible
Preferred Stock, fully paid and non-assessable, and are owned beneficially
and of record; (c) 90,000 qualified stock options, each exercisable into
one share of common stock; (d) 1,138,000 nonqualified stock options, each
exercisable into one share of common stock; and (e) 4,911,592 warrants to
purchase common stock, each exercisable into one share of common stock.
After giving effect to the consummation of the transactions contemplated
by this Agreement, Borrower's capitalization shall remain unchanged,
except that Cameron's 4,000 shares of Series B Convertible Preferred Stock
shall be exchanged in accordance with Article 2.
(b) Upon issuance in accordance with the terms hereof the Common
Shares shall be duly authorized, validly issued, fully paid and
non-assessable. The share of common stock issuable upon conversion of the
Convertible Note and upon exercise of the Warrant have been duly reserved
for issuance, and, upon issuance in accordance with the terms of the
Convertible Note or the Warrants, as the case may be, shall be duly
authorized, validly issued, fully paid and non-assessable.
7.8 Debt. After giving effect to the transactions contemplated by
this Agreement, and the making of the Convertible Term Loan and the Line of
Credit Loans to be made on the Closing Date, Borrower has no Debt, except (a)
the Obligations, (b) Debt set forth on the latest Financial Statements delivered
to Agent prior to or on the Closing Date, and (c) trade payables and other
contractual obligations arising in the ordinary course of business.
7.9 Distributions. On and after the Closing Date, no Distribution
has been declared, paid, or made upon or in respect of any capital stock or
other securities of Borrower except as expressly permitted hereby.
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7.10 Title to Property. Borrower has good, indefeasible, and
merchantable title to all of its property (including, without limitation, the
assets reflected on the Financial Statements delivered to Agent, except as
disposed of in the ordinary course of business since the date thereof or as
otherwise expressly permitted hereby), free of all Liens except Permitted Liens.
7.11 Real Estate; Leases. Schedule 7.11 sets forth a correct and
complete list of all Real Estate owned by Borrower, all leases and subleases of
real or personal property by Borrower as lessee or sublessee, and all leases and
subleases of real or personal property by Borrower as lessor, lessee, sublessor
or sublessee. Each of such leases and subleases is valid and enforceable in
accord ance with its terms and is in full force and effect, and no default by
any party to any such lease or sublease exists.
7.12 Proprietary Rights. Schedule 7.12 sets forth a correct and
complete list of all of the Proprietary Rights. None of the Proprietary Rights
is subject to any licensing agreement or similar arrangement except as set forth
on Schedule 7.12. To the best of Borrower's knowledge, none of the Proprietary
Rights infringes on or conflicts with any other Person's property, and no other
Person's property infringes on or conflicts with the Proprietary Rights. The
Proprietary Rights described on Schedule 7.12 constitute all of the property of
such type necessary to the current and anticipated future conduct of Borrower's
business.
7.13 Trade Names. All trade names or styles under which Borrower
will sell Inventory or create Accounts, or to which instruments in payment of
Accounts may be made payable, are listed on Schedule 7.4.
7.14 Litigation. Except as set forth on Schedule 7.14, there is no
pending or (to the best of Borrower's knowledge) threatened, action, suit,
proceeding, or counterclaim by any Person, or investigation by any Public
Authority, or any basis for any of the foregoing, which may materially and
adversely affect the Collateral, the repayment of the Obligations, Agent's or
Lenders' rights under the Loan Documents, or Borrower's or any Subsidiary's
property, business, operations, or condition (financial or otherwise).
7.15 Restrictive Agreements. Borrower is not a party to any contract
or agreement, and is not subject to any charter or other corporate restriction,
which affects its ability to execute, deliver, and perform the Loan Documents
and repay the Obligations or which materially and adversely affects or, insofar
as Borrower can reasonably foresee, could materially and adversely affect,
Borrower's property, business, operations, or condition (financial or
otherwise), or would in any respect materially and adversely affect the
Collateral, the repayment of the Obligations, Agent's or Lenders' rights under
the Loan Documents, or Borrower's or any Subsidiary's property, business,
operations, or condition (financial or otherwise).
7.16 Labor Disputes. Except as set forth on Schedule 7.16, (a) there
is no collective bargaining agreement or other labor contract covering employees
of Borrower or any of its Subsidiaries, (b) no such collective bargaining
agreement or other labor contract is scheduled to expire during the term of this
Agreement and (c) no union or other labor organization is seeking to organize,
or to be recognized as, a collective bargaining unit of employees of Borrower or
any of its
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Subsidiaries or for any similar purpose, and (d) there is no pending or (to the
best of Borrower's knowledge) threatened, strike, work stoppage, material unfair
labor practice claim, or other material labor dispute against or affecting
Borrower, or any of its Subsidiaries or their respective employees.
7.17 Environmental Matters. Except as otherwise disclosed on
Schedule 7.17:
(a) Each of Borrower and its Subsidiaries has complied in all
material respects with all Environmental Laws and health and safety laws
applicable to its property and business, and neither Borrower nor any Subsidiary
nor any of their respective present property or operations, or Seller's past
property or operations, are subject to any order from or agreement with any
Public Authority or private Person respecting (i) compliance with any
Environmental Law or health or safety requirements of law, or (ii) any potential
liabilities and costs or remedial action arising from the Release or threatened
Release of a Contaminant.
(b) Each of Borrower and its Subsidiaries has obtained all
environmental, health and safety permits necessary for its operation, and all
such permits are in good standing and Borrower and such Subsidiaries are in
compliance with all terms and conditions of such permits.
(c) Except as necessary in the ordinary course of business, and in
all cases in compliance with Environmental Laws, neither Borrower nor any of its
Subsidiaries, nor, to the best of Borrower's knowledge, any of Seller or
Seller's predecessors in interest, has generated, handled, used, stored or
disposed of any hazardous or toxic waste or substance, as defined pursuant to 40
CFR Part 261 or any equivalent Environmental Law, on or off its property
(whether or not owned by it), nor has Borrower filed any notice with any Public
Authority indicating such generation, handling, use, storage or disposal.
(d) Borrower has no material contingent liability with respect to
non-compliance with any Environmental Laws or any Release or threatened Release
of a Contaminant or the generation, handling, use, storage, or disposal of
hazardous or toxic wastes or substances.
(e) Neither Borrower nor any of its Subsidiaries, nor to the best of
Borrower's knowledge, any of Seller or Seller's predecessors in interest, has
received any summons, complaint, order or similar notice that it is not in
compliance with, or that any Public Authority is investigating its compliance
with, any Environmental Laws or health and safety laws or that it is or may be
liable to any other Person as a result of a Release or threatened Release of a
Contaminant.
(f) Except as necessary in the ordinary course of business, and in
all cases in compliance with Environmental Laws, there is not now, nor has there
ever been on or in the Premises: (i) any generation, treatment, recycling,
storage or disposal of any hazardous waste, as that term is defined under 40 CFR
Part 261 or any equivalent Environmental Law; (ii) any underground storage tanks
or surface impoundments; (iii) any asbestos containing material, or (iv) any
polychlorinated biphenyls (PCBs) used in hydraulic oils, electrical transformers
or other equipment.
(g) Neither Borrower nor any of its Subsidiaries has filed any
notice under any applicable Environmental Law reporting a Release of a
Contaminant into the environment.
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(h) No Environmental Lien has attached to any property of Borrower
or any Subsidiary.
(i) No Environmental Property Transfer Acts are applicable to the
transactions contemplated by this Agreement and Borrower has provided all
notices and obtained all necessary environmental permit transfers and consents,
if any, required in order to consummate the transactions contemplated by this
Agreement or to perfect Agent's Liens and to operate Borrower's business as
presently or proposed to be operated.
7.18 No Violation of Law. Neither Borrower nor any of its
Subsidiaries is in violation of any law, statute, regulation, ordinance,
judgment, order, or decree applicable to it which violation would in any respect
materially and adversely affect the Collateral, the repayment of the
Obligations, Agent's or Lenders' rights under the Loan Documents, or Borrower's
or any Subsidiary's property, business, operations, or condition (financial or
otherwise).
7.19 No Default. Neither Borrower nor any of its Subsidiaries is in
default with respect to any note, indenture, loan agreement, mortgage, lease,
deed, or other agreement to which Borrower is a party or by which it is bound,
which default would materially and adversely affect the Collateral, the
repayment of the Obligations, Agent's or Lenders' rights under the Loan
Documents, or Borrower's or any Subsidiary's property, business, operations, or
condition (financial or other wise).
7.20 ERISA. (a) Neither Borrower nor any ERISA Affiliate maintains
or contributes to any Plan other than those listed on Schedule 7.21.
(b) No Plan has been terminated or partially terminated or is
insolvent or in reorganization, nor have any proceedings been instituted to
terminate or reorganize any Plan.
(c) Neither Borrower nor any ERISA Affiliate has any withdrawal
liability, including contingent withdrawal liability, to any Benefit Plan
pursuant to Title IV of ERISA.
(d) Neither Borrower nor any ERISA Affiliate has incurred any
liability to the PBGC which remains outstanding other than the payment of
premiums, and there are no premium payments which have become due which are
unpaid.
(e) No Benefit Plan has incurred any accumulated funding deficiency
(as defined in Sections 302(a)(2) of ERISA and 412(a) of the Code), whether or
not waived.
(f) Neither Borrower nor any ERISA Affiliate has breached any of the
respon sibilities, obligations or duties imposed on it by ERISA or regulations
promulgated thereunder with respect to any Plan. Each Plan is in substantial
compliance with ERISA, and neither Borrower nor any ERISA Affiliate has received
any notice asserting that a Plan is not in compliance with ERISA.
(g) Each Plan which is intended to be a qualified Plan has been
determined by the IRS to be qualified under Section 401(a) of the Code as
currently in effect and each trust related to
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such Plan has been determined to be exempt from federal income tax under Section
501(a) of the Code.
(h) Except as provided on Schedule 7.21, neither Borrower nor any
ERISA Affiliate maintains or contributes to any employer welfare benefit plan
within the meaning of Section 3(1) of ERISA which provides benefits to employees
after termination of employment other than as required by Section 601 of ERISA.
(i) Schedule B to the most recent annual report filed with the IRS
with respect to each Benefit Plan and furnished to Agent is complete and
accurate. Since the date of each such Schedule B, there has been no adverse
change in funding status or financial condition of the Benefit Plan relating to
such Schedule B.
(j) Neither Borrower nor any ERISA Affiliate has failed to make a
required installment under subsection (m) of Section 412 of the Code or any
other payment required under Section 412 of the Code on or before the due date
for such installment or other payment.
(k) Neither Borrower nor any ERISA Affiliate is required to provide
security to a Plan under Section 401(a)(29) of the Code due to a Plan amendment
that results in an increase in current liability for the plan year.
(l) Neither Borrower nor any ERISA Affiliate nor any fiduciary of
any Plan which is not a Multiemployer Plan (i) has engaged in a nonexempt
prohibited transaction described in Sections 406 of ERISA or 4975 of the Code or
(ii) has taken or failed to take any action which would constitute or result in
a Termination Event.
(m) Neither Borrower nor any ERISA Affiliate has failed to make a
required contribution or payment to a Multiemployer Plan nor has Borrower or any
ERISA Affiliate made a complete or partial withdrawal under Sections 4203 or
4205 of ERISA from a Multiemployer Plan.
(n) Borrower has given to Agent copies of all of the following: each
Benefit Plan and related trust agreement (including all amendments to such Plan
and trust) in existence or committed to as of the date hereof and the most
recent summary plan description, actuarial report, determination letter issued
by the IRS and Form 5500 filed in respect of each such Benefit Plan in
existence; a listing of all of the Multiemployer Plans with the aggregate amount
of the most recent annual contributions required to be made by Borrower and all
ERISA Affiliates to each such Multiemployer Plan, any information which has been
provided to Borrower or an ERISA Affiliate regarding withdrawal liability under
any Multiemployer Plan and the collective bargaining agreement pursuant to which
such contribution is required to be made; each employee welfare benefit plan
within the meaning of Section 3(1) of ERISA which provides benefits to employees
after termination of employment other than as required by Section 601 of ERISA,
the most recent summary plan description for such plan and the aggregate amount
of the most recent annual payments made to terminated employees under each such
Plan.
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(o) Neither Borrower nor any ERISA Affiliate has, or would
reasonably be expected to have, any liability under Sections 4063, 4064, 4069,
4204 or 4212(c) of ERISA.
7.21 Taxes. Borrower has filed all tax returns and other reports
which it was required by law to file on or prior to the date hereof and has paid
all taxes assessments, fees, and other governmental charges, and penalties and
interest, if any, against it or its property, income, or franchise, that are due
and payable.
7.22 Investment Act. Neither Borrower nor any of its Subsidiaries is
an "invest ment company" nor an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are defined
in the Investment Company Act of 1940, as amended (15 U.S.C. ss. 80(a)(1), et
seq.), nor is Borrower or any Subsidiary subject to any other state or federal
regulation limiting its ability to incur Debt. The making of the Line of Credit
Loans, the Convertible Term Loan, and other financial accommodations hereunder
by Agent and Lenders, the application of the proceeds and repayment thereof by
Borrower and the consummation of the other transactions contemplated by this
Agreement and the Loan Documents do not violate any provisions of such laws or
any rule, regulation or order issued by the Securities and Exchange Commission
or other Public Authority thereunder.
7.23 Margin Securities. Neither Borrower nor any of its Subsidiaries
owns any "margin security," as that term is defined in Regulations G and U of
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), and the proceeds of the Line of Credit Loans, the Convertible Term
Loan, and the other financial accommodations made pursuant to this Agreement
will be used only for the purposes contemplated hereunder. None of the
transactions contemplated by this Agreement will violate Regulations G, T, U or
X of the Federal Reserve Board. None of the Line of Credit Loans, the
Convertible Term Loan, or the other financial accommodations hereunder will be
used, directly or indirectly, for the purpose of purchasing or carrying any
margin security, for the purpose of reducing or retiring any Debt or other
Person's indebtedness which was originally incurred to purchase or carry any
margin security, or for any other purpose which might cause any such loan or
other financial accommodation to be considered a "purpose credit" within the
meaning of Regulation G, U or X of the Federal Reserve Board. Borrower will
neither take nor permit any agent acting on its behalf to take any action which
might cause any transaction, obligation or right created by this Agreement, or
any document or instrument delivered pursuant hereto, to violate any regulation
of the Federal Reserve Board.
7.24 Disclosure. Neither this Agreement nor any document or
statement furnished to Agent or any Lender by or on behalf of Borrower hereunder
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein or therein not
misleading.
7.25 Bank Accounts. Schedule 7.26 contains an accurate list of (a)
all bank accounts maintained by Borrower with any bank or other financial
institution and (b) all corporate credit cards and bank cards of Borrower (which
cards shall be terminated before the Closing Date in accordance with Section
8.27).
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7.26 Public Utility Holding Company. Borrower is not a "holding
company" or a "subsidiary company" of a "holding company" or an Affiliate of a
"holding company" within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
7.27 Broker's Fees. No broker or finder is entitled to receive
compensation for services rendered with respect to the transactions contemplated
by this Agreement, except as disclosed by Borrower to Agent in writing prior to
the Closing Date.
7.28 Transactions with Affiliates. Except as disclosed on Schedule
7.29, Borrower has no agreements with or obligations to any Affiliates,
including without limitation, any agreement to sell, transfer, distribute, or
pay any money or property or to pay any fees or expenses of any nature
(including, but not limited to, any fees or expenses for management services) to
any Affiliate or employee thereof, or lend or advance money or property to any
Affiliate or employee thereof, or invest in (by capital contribution or
otherwise) or purchase or repurchase any stock or indebtedness, or any property,
of any Affiliate or employee thereof, or become liable on any guaranty of the
indebtedness, dividends, or other obligations of any Affiliate or employee
thereof.
ARTICLE 8 - AFFIRMATIVE AND NEGATIVE COVENANTS
Borrower covenants that, so long as any of the Obligations remain
outstanding or this Agreement is in effect:
8.1 Taxes and Other Obligations. Borrower shall, and shall cause
each of its Subsidiaries to, (a) file when due all tax returns and other reports
which it is required to file, (b) pay, or provide for the payment, when due, of
all taxes, fees, assessments and other governmental charges against it or upon
its property, income and franchises, make all required withholding and other tax
deposits, and establish adequate reserves for the payment of all such items, and
provide to Agent, upon request, satisfactory evidence of its timely compliance
with the foregoing and (c) pay when due all claims of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons, and all other
indebtedness owed by it and perform and discharge in a timely manner all other
obligations undertaken by it; provided, however, that Borrower and its
Subsidiaries need not pay any tax, fee, assessment, governmental charge, or
Debt, or discharge any other obligation, that any of them is contesting in good
faith by appropriate proceedings diligently pursued, and for which adequate
reserves are maintained, so long as no Lien, other than a Permitted Lien,
results from such non-payment.
8.2 Corporate Existence and Good Standing. Borrower shall, and shall
cause each of its Subsidiaries to, maintain its corporate existence and its
qualification and good standing in all states necessary to conduct its business
and own its property, and shall obtain and maintain all licenses, permits,
franchises and governmental authorizations necessary to conduct its business and
own its property.
8.3 Compliance with Law and Agreements. Borrower shall, and shall
cause each of its Subsidiaries to, comply with the material terms and provisions
of each judgment, law, statute,
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rule, and governmental regulation applicable to it and each material contract,
mortgage, lien, lease, indenture, order, instrument, agreement, or document to
which it is a party or by which it is bound.
8.4 Maintenance of Property. Borrower shall, and shall cause each of
its Subsidiaries to, maintain all of its property necessary and useful in its
business in good operating condition and repair, ordinary wear and tear
excepted.
8.5 Insurance. Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, with financially sound and reputable insurers,
insurance against loss or damage by fire with extended coverage; theft,
burglary, pilferage and loss in transit; public liability and third party
property damage; larceny, embezzlement or other criminal liability; business
interruption; public liability and third party property damage; and such other
hazards or of such other types as is customary for Persons engaged in the same
or similar business, as Agent shall specify, in amounts, and under policies
acceptable to Agent. Borrower shall also maintain flood insurance, in the event
of a designation of the area in which any Real Estate is located as "flood
prone" or a "flood risk area," as defined by the Flood Disaster Protection Act
of 1973, in an amount to be reasonably determined by Agent, and shall comply
with the additional requirements of the National Flood Insurance Program as set
forth in said Act. Borrower shall also maintain, for the benefit of its officers
and directors, insurance with financially sound and reputable insurers against
loss or damage for the acts or omissions of its officers and directors with
coverage amounts not less than $3,000,000.
Borrower shall cause Agent to be named in each such policy as
secured party or mortgagee and loss payee or additional insured, in a manner
acceptable to Agent. Each policy of insurance shall contain a clause or
endorsement requiring the insurer to give not less than thirty (30) days' prior
written notice to Agent in the event of cancellation of the policy for any
reason whatsoever and a clause or endorsement stating that the interest of Agent
and Lenders shall not be impaired or invalidated by any act or neglect of
Borrower or the owner of any premises for purposes more hazardous than are
permitted by such policy. All premiums for such insurance shall be paid by
Borrower when due, and certificates of insurance and, if requested, photocopies
of the policies shall be delivered to Agent. If Borrower fails to procure such
insurance or to pay the premiums therefor when due, Agent may (but shall not be
required to) do so and charge the costs thereof to Borrower's loan account as a
Line of Credit Loan.
Borrower shall promptly notify Agent of any material loss, damage,
or destruction to the Collateral or arising from its use, whether or not covered
by insurance. Agent is hereby authorized to collect all insurance proceeds
directly. After deducting from such proceeds the expenses, if any, incurred by
Agent and Lenders in the collection or handling thereof, Agent may apply such
proceeds to the reduction of the Obligations in such order as Agent determines,
or at Agent's option, may permit or require Borrower to use such money, or any
part thereof, to replace, repair, restore or rebuild the Collateral in a
diligent and expeditious manner with materials and workmanship of substantially
the same quality as existed before the loss, damage or destruction. Without
limiting the foregoing, in case of any loss, damage or destruction with respect
to any of the Equipment or Real Estate, including any improvements, Agent is
authorized to collect all insurance proceeds payable in connection therewith and
apply them at its option, to the reduction of the Loans (applying such proceeds
to the Obligations as set forth in Article 4) or to any of the other Obligations
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then due hereunder. Agent may, at its option, permit or require Borrower to use
any such insurance proceeds, or any part thereof, to replace, or to repair,
restore or rebuild, the lost, damaged or destroyed property. If the lost,
damaged or destroyed property is to be replaced, repaired, restored or rebuilt,
such replacement, repair, restoration or rebuilding shall be done with materials
and workmanship of substantially as good a quality as existed before such loss,
damage or destruction, and Borrower shall commence the work of replacement,
repair, restoration or rebuilding as soon as practicable and proceed diligently
with it until completion. Plans and specifications for any such repair or
restoration shall be reasonably satisfactory to Agent and shall be submitted to
Agent prior to commencement of the work and shall be subject to the reasonable
approval of Agent.
8.6 Condemnation. Borrower shall, immediately upon learning of the
institution of any proceeding for the condemnation or other taking of any of its
property, notify Agent of the pendency of such proceeding, and agrees that Agent
may participate in any such proceeding, and Borrower from time to time will
deliver to Agent all instruments reasonably requested by Agent to permit such
participation. Agent is authorized to collect the proceeds of any condemnation
claim or award and apply them, at its option, to the reduction of the Loans or
to any of the other Obligations then due. If the condemned property is to be
replaced, repaired, restored or rebuilt, such replacement, repair, restoration
or rebuilding shall be done with materials and workmanship of substantially as
good a quality as existed before such loss, damage or destruction, and Borrower
shall commence the work of replacement, repair, restoration or rebuilding as
soon as practicable and proceed diligently with it until completion. Plans and
specifications for any such repair or restoration shall be reasonably
satisfactory to Agent and shall be submitted to Agent prior to commencement of
the work and shall be subject to the reasonable approval of Agent.
8.7 Environmental Laws. Borrower shall, and shall cause each of its
Subsidiaries to, conduct its business in full compliance with all Environmental
Laws applicable to it, including, without limitation, those relating to the
generation, handling, use, storage, and disposal of hazardous and toxic wastes
and substances. Borrower shall, and shall cause each of its Subsidiaries to,
take prompt and appropriate action to respond to any non-compliance with
Environmental Laws and shall regularly report to Agent on such response.
Whenever Borrower gives notice to Agent pursuant to Section 6.3(f), Borrower
shall, at Agent's request and Borrower's expense (a) cause an independent
environmental engineer acceptable to Agent to conduct such tests of the site
where the non-compli ance or alleged non-compliance with Environmental Laws has
occurred and prepare and deliver to Agent a report setting forth the results of
such tests, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof and (b) provide to Agent
a supplemental report of such engineer whenever the scope of the environmental
problems, or the response thereto or the estimated costs thereof, shall change.
8.8 ERISA. (a) Borrower shall, and shall cause each of its ERISA
Affiliates to, establish, maintain and operate all Plans to comply in all
material respects with the provisions of ERISA, the Code, all regulations and
interpretations promulgated thereunder, and all other applicable laws and
regulations.
(b) Borrower shall not, and shall not permit any ERISA Affiliate, to:
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(i) Engage in any prohibited transaction described in Sections 406
of ERISA or 4975 of the Code for which a statutory or class exemption is
not available or a private exemption has not been previously been obtained
from the DOL;
(ii) Permit to exist any accumulated funding deficiency (as defined
in Section 302 of ERISA and Section 412 of the Code) whether or not
waived;
(iii) Fail to pay timely required contributions or annual
installments due with respect to any waived funding deficiency to any
Benefit Plan;
(iv) Terminate any Benefit Plan which would result in any liability
of Borrower or an ERISA Affiliate under Title IV of ERISA;
(v) Fail to make any contribution or payment to any Multiemployer
Plan which Borrower or any ERISA Affiliate may be required to make under
any agree ment relating to such Multiemployer Plan, or any law pertaining
thereto;
(vi) Fail to pay any required installment under section (m) of
Section 412 of the Code or any other payment required under Section 412 of
the Code on or before the due date for such installment or other payment;
or
(vii) Amend a Plan resulting in an increase in current liability for
the plan year such that Borrower or any ERISA Affiliate is required to
provide security to such Plan under Section 401(a)(29) of the Code.
8.9 Mergers, Consolidations, Acquisitions, or Sales. Neither
Borrower nor any of its Subsidiaries shall enter into any transaction of merger,
reorganization, or consolidation, or transfer, sell, assign, lease, or otherwise
dispose of all or any part of its property, or wind up, liquidate or dissolve,
or agree to do any of the foregoing, except (a) for sales of Inventory in the
ordinary course of its business and (b) as otherwise expressly permitted hereby.
8.10 Distributions; Capital Change. Neither Borrower, nor any of its
Subsidiaries shall (a) directly or indirectly declare or make, or incur any
liability to make, any Distribution, except Distributions to Borrower by a
Subsidiary wholly owned by Borrower or by one or more other Subsidiaries that
are wholly owned by Borrower or (b) make any change in its capital structure
which could adversely affect the repayment of the Obligations.
8.11 Transactions Affecting Collateral or Obligations. Neither
Borrower nor any of its Subsidiaries shall enter into any transaction which
materially and adversely affects the Collateral or Borrower's ability to repay
the Obligations.
8.12 Guaranties. Neither Borrower nor any of its Subsidiaries shall
make, issue, or become liable on any Guaranty, except Guaranties in favor of
Agent and Lenders.
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8.13 Debt. Neither Borrower nor any Subsidiary shall incur or
maintain any Debt, other than: (a) the Obligations; (b) trade payables and
contractual obligations to suppliers and customers incurred in the ordinary
course of business; (c) obligations to fund any of Borrower's pension or
employee benefit plans in the ordinary course of business; (d) liability for
employees' salaries incurred in the ordinary course of business; (e) tax
liability incurred in the ordinary course of business; and (f) other Debt
existing on the Closing Date and reflected in the audited Financial Statements
delivered to Agent.
8.14 Prepayment. Borrower shall not voluntarily prepay any Debt
(other than prepayment of trade payables in the ordinary course of business),
except the Obligations in accordance with their terms.
8.15 Transactions with Affiliates. Neither Borrower nor any of its
Subsidiaries shall, sell, transfer, distribute, or pay any money or property,
including, but not limited to, any fees or expenses of any nature (including,
but not limited to, any fees or expenses for management services) to any
Affiliate or employee thereof, or lend or advance money or property to any
Affiliate or employee thereof, or invest in (by capital contribution or
otherwise) or purchase or repurchase any stock or indebtedness, or any property,
of any Affiliate or employee thereof, or become liable on any Guaranty of the
indebtedness, dividends, or other obligations of any Affiliate or employee
thereof, except for actual and reasonable expenses incurred and approved in
advance in writing by the Crisis Manager and other expenses permitted to be
incurred in accordance with Section 8.27.
8.16 Investment Banking and Finder's Fees. Neither Borrower nor any
of its Subsidiaries shall pay or agree to pay, or reimburse any other party with
respect to, any investment banking or similar or related fee, underwriter's fee,
finder's fee, or broker's fee to any Person in connection with this Agreement.
Borrower shall defend and indemnify each of Agent and Lenders against and hold
it harmless from all claims of any Person for any such fees, and all costs and
expenses (including without limitation, attorneys' fees) incurred by Agent or
Lenders in connection therewith.
8.17 Business Conducted. Borrower and its Subsidiaries shall not
engage, directly or indirectly, in any line of business other than the
businesses in which Borrower and its Subsidiaries are engaged on the Closing
Date.
8.18 Liens. Neither Borrower nor any of its Subsidiaries shall
create, incur, assume, or permit to exist any Lien on any property now owned or
hereafter acquired by any of them, except Permitted Liens.
8.19 Sale and Leaseback Transactions. Neither Borrower nor any of
its Subsidiaries shall, directly or indirectly, enter into any arrangement with
any Person providing for Borrower or a Subsidiary to lease or rent property that
Borrower or a Subsidiary has or will sell or otherwise transfer to such Person.
8.20 New Subsidiaries. Borrower shall not, directly or indirectly,
organize or acquire any Subsidiary.
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8.21 Restricted Investments. Neither Borrower nor any of its
Subsidiaries shall make any Restricted Investment.
8.22 Capital Expenditures. Neither Borrower nor any of its
Subsidiaries shall make or incur any Capital Expenditure if, after giving effect
thereto, the aggregate amount of all Capital Expenditures by Borrower and its
Subsidiaries on a consolidated basis would exceed (i) $240,000 from and after
the Closing Date through the end of Fiscal Year 1997 and (ii) in any Fiscal Year
thereafter, an amount equal to depreciation expense for tangible personal
property for the immediately preceding Fiscal Year, as determined in accordance
with GAAP applied consistently with the Financial Statements.
8.23 Operating Lease Obligations. Neither Borrower nor any of its
Subsidiaries shall enter into any lease of real or personal property as lessee
or sublessee (other than a Capital Lease), if, after giving effect thereto, the
aggregate amount of Rentals (as hereinafter defined) payable by Borrower and its
Subsidiaries on a consolidated basis in any Fiscal Year in respect of such lease
and all such leases would exceed $150,000 (such amount being referred to herein
as "Permitted Rentals"). The term "Rentals" means all payments due from the
lessee or sublessee under a lease, including, without limitation, basic rent,
percentage rent, property taxes, utility or maintenance costs, and insurance
premiums.
8.24 [Reserved]
8.25 General and Administration Expense. Borrower covenants that
within sixty (60) days after the Closing date its consolidated selling, general,
and administrative expenses (exclusive of compensation to the Crisis Manager),
as reflected on Borrower's books and records and determined in accordance with
GAAP, shall not exceed $100,000 for any calendar month.
8.26 Use of Proceeds. Borrower shall not use the proceeds any Line
of Credit Loans for any payment not expressly set forth on the Use of Proceeds
Schedule applicable to such Line of Credit Loan.
8.27 Termination of Employee Accounts; Reimbursement of Employee
Expenses. Commencing upon the making of the initial advance under the Line of
Credit Loan, there shall be no corporate credit cards or bank cards, upon which
Borrower could be obligated, issued or outstanding to Borrower's employees,
officers, or directors. Borrower agrees that no employee, officer, or director
of Borrower shall be reimbursed for any out of pocket expense unless such
expense is incurred in accordance with Borrower's established company expense
policy and the party seeking reimbursement provides Borrower with reasonable and
customary evidence of incurring such expense prior to reimbursement; provided
however that, in addition to the foregoing restrictions, no expense in excess of
$250 per transaction shall be reimbursed by Borrower unless previously approved
by the Company's Chief Executive Officer.
8.28 [Reserved]
8.29 [Reserved]
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8.30 Election of Board Members; Attendance at Board Meetings.
Borrower shall cause the election to the board of directors of Borrower of up to
three (3) directors which have been designated by Agent in its sole discretion,
including the individuals initially appointed to the board of directors pursuant
to Section 9.1(g), and any successors thereto designated by Agent from time to
time. Neither the number of directors of Borrower nor the size of the board of
directors of Borrower shall ever exceed five (5) without Agent's prior written
consent. Whether or not Agent shall have appointed any director pursuant to the
preceding sentence, Borrower shall give Agent written notice of each meeting of
Borrower's board or directors and each committee thereof at the same time and in
the same manner as notice is given to the directors, and Borrower shall permit
representatives chosen by Agent to attend as an observer of all meetings of its
board of directors and all committees thereof, including telephonic meetings.
Unless such observer is a director, such observer(s) shall have no right to vote
at any such meetings. Such representative will receive all written materials and
other information given to directors in connection with such meetings at the
same time such materials and information are given to Borrower's directors,
including, without limitation, copies of all minutes and resolutions of
directors meetings. If Borrower proposes to take any action by written consent
in lieu of a meeting of its board of directors or of any committee thereof,
Borrower will give written notice thereof to Agent prior to the effectiveness of
such consent describing in reasonable detail the nature and substance of such
action. Borrower will pay the reasonable out-of-pocket expenses of the
representative(s) incurred in connection with attending such board and committee
meetings.
8.31 Registration Rights. In accordance with the terms of the
Registration Rights Agreement, Borrower shall cause a registration statement to
be filed on or before May 1, 1997 and such registration statement shall be
effective on or before June 30, 1997.
8.32 Fiscal Year. Borrower will not change its Fiscal Year from a
Fiscal Year ending on the last day of December.
8.33 Further Assurances. Borrower shall execute and deliver, or
cause to be executed and delivered, to Agent such documents and agreements, and
shall take or cause to be taken such actions, as Agent may, from time to time,
request to carry out the terms and conditions of this Agreement and the other
Loan Documents.
ARTICLE 9 - CONDITIONS OF LENDING
9.1 Conditions Precedent to Making of Loans on the Closing Date. The
obligation of Lenders to make the initial Line of Credit Loan on the Closing
Date and to make the Convertible Term Loan is subject to the following
conditions precedent having been satisfied in a manner satisfactory to Agent:
(a) Borrower shall have performed and complied with all covenants,
agreements and conditions contained herein which are required to be
performed or complied with by Borrower before or on such Closing Date.
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(b) Agent shall have received a certificate dated such Closing Date
and signed by the chief executive officer and the chief financial officer
of Borrower certifying that the conditions specified in Subsection 9.1(a)
above have been fulfilled.
(c) Borrower shall have executed and delivered to Agent and Agent
shall have received all Loan Documents and all items on the List of
Closing Documents attached hereto as Exhibit D which are not elsewhere
identified in this Article 9, such items to be in form and substance
satisfactory to Agent, and to be executed by all parties thereto when the
nature of such items so requires.
(d) Borrower shall have paid to Agent all fees, costs, and expenses
(including, without limitation, the attorneys' and paralegals' fees and
disbursements of Freeborn & Peters in an amount not to exceed $50,000)
incurred by Agent and Lenders as of the Closing Date in connection with
the negotiation, preparation, and consummation of this Agreement, the
other Loan Agreements and the transactions contemplated thereby.
(e) Each of Robert J. Schuster and Peter R. Feinstein shall have
executed and delivered (i) resignation letters in form and substance
satisfactory to Agent and (ii) Consulting Agreements in form and substance
satisfactory to Agent, it being understood and agreed that it is a further
condition to the making of the Line of Credit Loan that Mr. Feinstein's
resignation and his Consulting Agreement shall have taken effect.
(f) Borrower shall have delivered to Agent the written waiver, in
form and substance satisfactory to Agent, of Josephthal Lyon & Ross to any
rights it may have to any fees in connection with the transactions
contemplated by this Agreement.
(g) Borrower shall have caused to be elected to the board of
directors of Borrower up to three individuals designated by Agent and
shall have caused the resignation (as evidenced by an executed original
letter of resignation) of any and all board members other than Messrs.
Feinstein and Schuster.
(h) All proceedings taken in connection with the execution of this
Agreement, the Convertible Note, all other Loan Documents and all
documents and papers relating thereto shall be satisfactory to Agent.
Agent shall have received copies of such documents and papers as Agent may
reasonably request in connection therewith, all in form and substance
satisfactory to Agent.
The acceptance by Borrower of any Loans made on the Closing Date shall be deemed
to be a representation and warranty made by Borrower to the effect that all of
the conditions to the making of such Loans set forth in this Section 9.1 have
been satisfied, with the same effect as delivery to Agent of a certificate
signed by the president and chief financial officer of Borrower, dated the
Closing Date, to such effect.
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9.2 Conditions Precedent to Each Loan. Lenders shall not be
obligated to make the Loans and the Loans shall be made by Lenders only in their
sole discretion; further, Agent and Lenders may require that certain conditions
precedent be satisfied before making any Loan, which shall include, without
limitation that on the date of any such extension of credit:
(a) the following statements shall be true, and the acceptance by
Borrower of any extension of credit shall be deemed to be a statement to
the effect set forth in clauses (i) and (ii), with the same effect as the
delivery to Agent of a certificate signed by the president and chief
financial officer of Borrower, dated the date of such extension of credit,
stating that:
(i) The representations and warranties contained in this
Agreement and the other Loan Documents are correct in all material
respects on and as of the date of such extension of credit as though
made on and as of such date, except to the extent Agent has been
notified by Borrower that any representation or warranty is not
correct and Agent has explicitly waived in writing compliance with
such representation or warranty; and
(ii) No event has occurred and is continuing, or would result
from such extension of credit, which constitutes a Default or an
Event of Default; and
(b) Agent shall have received a Use of Proceeds Schedule
satisfactory to it and such other approvals, documents, agreements, or
instruments as it may request, including without limitation, evidence that
all Liens on the Collateral granted and purported to be granted by
Borrower hereunder have attached, are perfected, and are first priority
Liens on the Collateral;
(c) no order, judgment or decree of any Public Authority and no law,
rule or regulation applicable to Agent or Lenders shall purport by its
terms to enjoin, restrain or otherwise prohibit the making of such Loan;
and
(d) since the Closing Date, no material adverse change shall have
occurred with respect to the business, operations, assets or condition
(financial or otherwise) of Borrower and its subsidiaries.
ARTICLE 10 - DEFAULT; REMEDIES
10.1 Events of Default. It shall constitute an event of default
("Event of Default") if any one or more of the following shall occur for any
reason:
(a) any failure to pay the principal of or interest or premium on
any of the Loans or other Obligations when due, whether upon demand or
otherwise;
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(b) any representation or warranty made by Borrower in this
Agreement, any of the other Loan Documents, any Financial Statement, or
any certificate furnished by Borrower or any Subsidiary at any time to
Agent or any Lender shall prove to be untrue in any material respect as of
the date on which made;
(c) any failure by Borrower to comply with any of the covenants set
forth in Article 8 of this Agreement;
(d) any failure by Borrower to comply with any of the other
covenants and agreements contained in this Agreement, the Convertible
Note, the Warrants, the Registration Rights Agreement, the Mortgages, the
other Loan Documents, or any other agreement entered into at any time to
which Borrower or any Subsidiary and Agent or any Lender are party, for
more than (i) ten (10) days after notice of such failure by Agent to
Borrower, (ii) ten (10) days after the date that Borrower discovers, or
reasonably should have discovered, such failure, or (iii) if such failure
shall have existed for more than twenty (20) days, upon the earlier of (A)
written notice thereof from Agent to Borrower or (B) Borrower's discovery
of such failure; provided, however, that no such grace period shall apply,
and an Event of Default shall exist promptly upon such failure to comply,
if such failure to comply may not, in Agent's reasonable determination, be
cured by Borrower during such grace period; or if any such agreement,
instrument or document shall terminate (other than in accordance with its
terms or the terms hereof or with the written consent of Agent) or become
void or unenforceable without the written consent of Agent;
(e) default shall occur with respect to any Debt for borrowed money
or any indebtedness for borrowed money of any Subsidiary (other than the
Obligations) in an outstanding principal amount in excess of $25,000 or
under any agreement or instrument under or pursuant to which any such Debt
or indebtedness may have been issued, created, assumed, or guaranteed by
Borrower or any Subsidiary, and such default shall continue for more than
the period of grace, if any, therein specified, if the effect thereof
(with or without the giving of notice or further lapse of time or both) is
to accelerate, or to permit the holders of any such Debt or indebtedness
to accelerate, the maturity of any such Debt; or any such Debt or
indebtedness shall be declared due and payable or be required to be
prepaid (other than by a regularly scheduled required prepayment) prior to
the stated maturity thereof;
(f) Borrower or any Subsidiary shall (i) file a voluntary petition
in bankruptcy or file a voluntary petition or an answer or otherwise
commence any action or proceeding seeking reorganization, arrangement or
readjustment of its debts or for any other relief under the federal
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency
act or law, state or federal, now or hereafter existing, or consent to,
approve of, or acquiesce in, any such petition, action or proceeding; (ii)
apply for or acquiesce in the appointment of a receiver, assignee,
liquidator, sequestrator, custodian, trustee or similar officer for it or
for all or any part of its
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property; (iii) make an assignment for the benefit of creditors; or (iv)
be unable generally to pay its debts as they become due;
(g) an involuntary petition shall be filed or an action or
proceeding otherwise commenced seeking reorganization, arrangement or
readjustment of Borrower's or any Subsidiary's debts or for any other
relief under the federal Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency act or law, state or federal, now or hereafter
existing;
(h) a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for Borrower or any Subsidiary or for all or
any part of their property shall be appointed; or a warrant of attachment,
execution or similar process shall be issued against any part of the
property of Borrower or any Subsidiary;
(i) Borrower or any Subsidiary shall file a certificate of
dissolution under applicable state law or shall be liquidated, dissolved
or wound-up or shall commence or have commenced against it any action or
proceeding for dissolution, winding-up or liquidation, or shall take any
corporate action in furtherance thereof;
(j) all or any material part of the property of Borrower or any
Subsidiary shall be nationalized, expropriated or condemned, seized or
otherwise appropriated, or custody or control of such property or of
Borrower or any Subsidiary shall be assumed by any Public Authority or any
court of competent jurisdiction at the instance of any Public Authority,
except where contested in good faith by proper proceedings diligently
pursued where a stay of enforcement is in effect;
(k) for any reason other than the failure of Agent to take any
action available to it to maintain perfection of the Liens created in
favor of Agent or any Lender pursuant to the Loan Documents, any Loan
Document ceases to be in full force and effect or any Lien with respect to
any material portion of the Collateral intended to be secured thereby
ceases to be, or is not, valid, perfected and prior to all other Liens
(other than Permitted Liens) or is terminated, revoked or declared void;
(l) one or more final judgments for the payment of money aggregating
in excess of $25,000 (whether or not covered by insurance) shall be
rendered against Borrower which is not discharged in full or stayed within
thirty (30) days from the date of entry thereof;
(m) any loss, theft, damage or destruction of any item or items of
Collateral occurs which (i) materially and adversely affects the operation
of Borrower's business; or (ii) is material in amount and is not
adequately covered by insurance;
(n) there occurs any material adverse change in Borrower's property,
business, operation, or condition (financial or otherwise);
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(o) there is filed against Borrower any civil or criminal action,
suit or proceeding under any federal or state racketeering statute
(including, without limita tion, the Racketeer Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding (1) is not
dismissed within one hundred twenty (120) days, and (2) could result in
the confiscation or forfeiture of any material portion of the Collateral;
or
(p) a default shall occur under the Registration Rights Agreement.
10.2 Remedies. (a) If a Default or an Event of Default exists, Agent
may, without notice to or demand on Borrower restrict the amount of or refuse to
make Line of Credit Loans. If an Event of Default exists, Agent may, without
notice to or demand on Borrower, do one or more of the following, in addition to
the actions described in the preceding sentence, at any time or times and in any
order: (i) terminate this Agreement and (ii) declare any or all Obligations to
be immediately due and payable (provided however that upon the occurrence of any
Event of Default described in Subsections 10.1(f), 10.1(g), 10.1(h), or 10.1(i),
all Obligations shall automatically become immediately due and payable without
notice or demand of any kind); and pursue its other rights and remedies under
the Loan Documents and applicable law.
(b) If an Event of Default exists: (i) Agent shall have, in addition
to all other rights, the rights and remedies of a secured party under the UCC;
(ii) Agent may, at any time, take possession of the Collateral and keep it on
Borrower's premises, at no cost to Agent or any Lender, or remove any part of it
to such other place or places as Agent may desire, or Borrower shall, upon
Agent's demand, at Borrower's cost, assemble the Collateral and make it
available to Agent at a place reasonably convenient to Agent; and (iii) Agent
may sell and deliver any Collateral at public or private sales, for cash, upon
credit or otherwise, at such prices and upon such terms as Agent deems
advisable, in its sole discretion, and may, if Agent deems it reasonable,
postpone or adjourn any sale of the Collateral by an announcement at the time
and place of sale or of such postponed or adjourned sale without giving a new
notice of sale. Without in any way requiring notice to be given in the following
manner, Borrower agrees that any notice by Agent of sale, disposition or other
intended action hereunder or in connection herewith, whether required by the UCC
or otherwise, shall constitute reasonable notice to Borrower if such notice is
mailed by registered or certified mail, return receipt requested, postage
prepaid, or is delivered personally against receipt, at least five (5) days
prior to such action to Borrower's address specified in or pursuant to Section
12.8. If any Collateral is sold on terms other than payment in full at the time
of sale, no credit shall be given against the Obligations until Agent receives
payment, and if the buyer defaults in payment, Agent may resell the Collateral
without further notice to Borrower. In the event Agent seeks to take possession
of all or any portion of the Collateral by judicial process, Borrower
irrevocably waives: (a) the posting of any bond, surety or security with respect
thereto which might otherwise be required; (b) any demand for possession prior
to the commencement of any suit or action to recover the Collateral; and (c) any
requirement that Agent retain possession and not dispose of any Collateral until
after trial or final judgment. Borrower agrees that Agent and Lenders have no
obligation to preserve rights to the Collateral or marshal any Collateral for
the benefit of any Person. Agent is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, name, trade
secrets, trade names, trademarks, and advertising matter, or any similar
property, in
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completing production of, advertising or selling any Collateral, and Borrower's
rights under all licenses and all franchise agreements shall inure to Agent's
benefit. The proceeds of sale shall be applied first to all expenses of sale,
including attorneys' fees, and second, in whatever order Agent elects, to all
Obligations. Agent will return any excess to Borrower or such other Person as
shall be legally entitled thereto and Borrower shall remain liable for any
deficiency.
(c) If an Event of Default occurs, Borrower hereby waives all rights
to notice and hearing prior to the exercise by Agent of Agent's rights to
repossess the Collateral without judicial process or to replevy, attach or levy
upon the Collateral without notice or hearing.
(d) If Agent terminates this Agreement upon an Event of Default,
Borrower shall pay Agent and Lenders, upon the earlier of Agent's request
therefor or the repayment of the Obligations, a premium equal to the prepayment
premiums that would have been payable under Article 4 if the Loans had been
voluntarily prepaid by Borrower on that date.
(e) Agent and Lenders agree not to initiate proceedings against
Borrower under the Bankruptcy Code for a period of ninety (90) days after the
Closing Date. The foregoing (i) shall not prohibit Agent and Lenders from
participating in any such proceeding if not initiated by Agent or any Lender
during such period and (ii) shall not in any way impair or constrain the
exercise by Agent or any Lender of any of their other rights and remedies under
the Loan Documents, including, without limitation, the rights and remedies set
forth in paragraphs (a), (b), (c), and (d) of this Section.
ARTICLE 11 - TERM AND TERMINATION
11.1 Term and Termination. The term of this Agreement shall end on
October 9 1999 unless earlier terminated pursuant to Article 10. Upon the
effective date of termination of this Agreement for any reason whatsoever, all
Obligations (including, without limitation, all unpaid principal of, accrued
interest on and prepayment premiums or penalties, if any, with respect to the
Convertible Term Loan) shall become immediately due and payable. Notwithstanding
the termination of this Agreement, until all Obligations are paid and performed
in full, Agent and Lenders shall retain all their rights and remedies hereunder
(including, without limitation, Agent's security interest in and all rights and
remedies with respect to all then existing and after-arising Collateral).
ARTICLE 12 - MISCELLANEOUS
12.1 Cumulative Remedies; No Prior Recourse to Collateral. The
enumeration herein of Agent's and Lenders' rights and remedies is not intended
to be exclusive, and such rights and remedies are in addition to and not by way
of limitation of any other rights or remedies that Agent and Lenders may have
under the UCC or other applicable law. Agent shall have the right, in its sole
discretion, to determine which rights and remedies are to be exercised and in
which order. The exercise of one right or remedy shall not preclude the exercise
of any others, all of which shall be cumulative. Agent and Lenders may, without
limitation, proceed directly against Borrower to collect the Obligations without
any prior recourse to the Collateral.
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12.2 No Implied Waivers. No act, failure or delay by Agent or any
Lender shall constitute a waiver of any of its rights and remedies. No single or
partial waiver by Agent or any Lender of any provision of this Agreement or any
other Loan Document, or of breach or default hereunder or thereunder, or of any
right or remedy which Agent or any Lender may have, shall operate as a waiver of
any other provision, breach, default, right or remedy or of the same provisions,
breach, default, right or remedy on a future occasion. No waiver by Agent or any
Lender shall affect its rights to require strict performance of this Agreement.
12.3 Severability. If any provision of this Agreement shall be
prohibited or invalid, under applicable law, it shall be is ineffective only to
such extent, without invalidating the remainder of this Agreement.
12.4 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver. (a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICT OF LAWS PROVISIONS, PROVIDED THAT PERFECTION ISSUES WITH
RESPECT TO ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE MAY GIVE EFFECT TO
APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UNIFORM
COMMERCIAL CODE) OF THE STATE OF ILLINOIS.
(b) SUBJECT ONLY TO THE EXCEPTION IN THE NEXT SENTENCE, BORROWER,
AGENT, AND EACH LENDER HEREBY AGREE TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL
COURT OF THE NORTHERN DISTRICT OF ILLINOIS AND THE STATE COURTS OF ILLINOIS
LOCATED IN COOK COUNTY, ILLINOIS AND WAIVE ANY OBJECTION BASED ON VENUE OR FORUM
NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN, AND AGREE THAT ANY
DISPUTE CONCERNING THE RELATIONSHIP BETWEEN OR AMONG ANY LENDER, AGENT, AND
BORROWER OR THE CONDUCT OF EITHER PARTY IN CONNECTION WITH THIS AGREEMENT OR
OTHERWISE SHALL BE HEARD ONLY IN THE COURTS DESCRIBED ABOVE. NOTWITHSTANDING THE
FOREGOING: (1) AGENT AND LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR
PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION AGENT DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE
COLLATERAL, REAL ESTATE, OR OTHER SECURITY FOR THE OBLIGATIONS AND (2) EACH OF
THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN
THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE THOSE JURISDICTIONS.
(c) BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED
MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO BORROWER AT ITS ADDRESS SET FORTH IN
SECTION 12.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS
AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS, OR, AT AGENT'S
OPTION, BY SERVICE UPON
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CT CORPORATION SYSTEM, 600 SECOND STREET, SPRINGFIELD, ILLINOIS WHICH BORROWER
IRREVOCABLY APPOINTS AS BORROWER'S AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF
PROCESS WITHIN THE STATE OF ILLINOIS. IN ADDITION, AGENT AGREES TO PROMPTLY
FORWARD BY REGISTERED MAIL ANY PROCESS SO SERVED UPON SAID AGENT TO BORROWER AT
ITS ADDRESS SET FORTH IN SECTION 12.8. BORROWER HEREBY CONSENTS TO SERVICE OF
PROCESS AS AFORESAID.
(d) BORROWER, AGENT, AND EACH LENDER EACH HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR EITHER OF THEM IN RESPECT TO
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED, IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE. EACH OF BORROWER, AGENT, AND LENDERS HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT EITHER MAY FILE AN ORIGINAL COUNTERPART
OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) NOTHING IN THIS SECTION 12.4 SHALL AFFECT THE RIGHT OF AGENT OR
ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
THE RIGHT OF AGENT OR ANY LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST
Borrower OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
12.5 Survival of Representations and Warranties. All of Borrower's
representations, and warranties contained in this Agreement shall survive the
execution, delivery, and acceptance thereof by the parties, notwithstanding any
investigation by Agent, Lenders or their agents.
12.6 Other Security and Guaranties. Agent may, without notice or
demand and without affecting Borrower's obligations hereunder, from time to
time: (a) take from any Person and hold collateral (other than the Collateral)
for the payment of all or any part of the Obligations and exchange, enforce or
release such collateral or any part thereof; and (b) accept and hold any
endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations, or any other Person in any way obligated to pay all or
any part of the Obligations.
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12.7 Fees and Expenses. Borrower shall pay to Agent on demand all
costs and expenses that Agent and Lenders pay or incur in connection with the
negotiation, preparation, consummation, administration, enforcement, and
termination of this Agreement and the other Loan Documents, including, without
limitation: (a) attorneys' and paralegals' fees and disbursements of counsel to
Agent and Lenders; (b) costs and expenses (including attorneys' and paralegals'
fees and disbursements) for any amendment, supplement, waiver, consent, or
subsequent closing in connection with the Loan Documents and the transactions
contemplated thereby; (c) costs and expenses of lien and title searches; (d)
taxes, fees and other charges for recording the Mortgages, filing financing
statements and continuations, and other actions to perfect, protect, and
continue Agent's Liens; (e) sums paid or incurred to pay any amount or take any
action required of Borrower under the Loan Documents that Borrower fails to pay
or take; (f) costs of appraisals, inspections, and verifications of the
Collateral; (g) costs and expenses of preserving and protecting the Collateral;
(h) costs and expenses (including attorneys' and paralegals' fees and
disbursements) paid or incurred to obtain payment of the Obligations, enforce
Agent's Liens, sell or otherwise realize upon the Collateral, and otherwise
enforce the provisions of the Loan Documents, or to defend any claims made or
threatened against Agent or Lenders arising out of the transactions contemplated
hereby (including without limitation, preparations for and consultations
concerning any such matters); and (k) all fees payable to Agent as set forth in
Article 3 hereof. The foregoing shall not be construed to limit any other
provisions of the Loan Documents regarding costs and expenses to be paid by
Borrower. Notwithstanding the foregoing, Borrower shall not be responsible for
Agent's and Lenders' fees and expenses in excess of $50,000 for legal counsel in
connection with the closing of the transactions contemplated by this Agreement.
12.8 Notices. Except as otherwise provided herein, all notices,
demands and requests that either party is required or elects to give to the
other shall be in writing, or by a telecommunications device capable of creating
a written record, and any such notice shall become effective (a) upon personal
delivery thereof, including, but not limited to, delivery by overnight mail and
courier service, (b) four (4) days after it shall have been mailed by United
States mail, first class, certified or registered, with postage prepaid, or (c)
in the case of notice by such a telecommunications device, when properly
transmitted, in each case addressed to the party to be notified as follows:
If to Agent: Cameron Capital Ltd.
10 Cavendish Road
Hamilton, HM 19
Bermuda
Attention: Nic Snelling
Telecopy No. 441.295.9022
with a copy to: Freeborn & Peters
950 Seventeenth Street
Denver, Colorado
Attention: Kenneth S. Witt
Telecopy No. 303.628.4240
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<PAGE>
If to Borrower: Country Star Restaurants, Inc.
11150 Santa Monica Blvd.
Los Angeles, California
Attention: Chief Operating Officer
Telecopy No. 310.268.2208
with a copy to: Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022
Attention: Clifford A. Brandeis
Telecopy No. 212.223.6433
or to such other address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other com munication.
12.9 Indemnity. Borrower agrees to (i) reimburse Agent and Lenders
for any costs and expenses (including, without limitation, attorneys' and
paralegals' fees and expenses) incurred by Agent and Lenders in defending any
suit brought against it by Borrower or any other Person in connection with the
transactions contemplated by this Agreement, and (ii) indemnify and hold Agent
and Lenders and their respective officers, directors, employees, attorneys and
agents (collectively, the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever incurred by
the Indemnitees, whether direct, indirect or consequential, as a result of or
arising from or relating to any proceeding by any Person, whether threatened or
initiated, asserting any claim for legal or equitable remedy against any Person
under any statute or regulation (including, without limitation, any federal or
state securities or commercial laws or under any common law or equitable cause
or otherwise, including any liability and costs under Environmental Laws or
common law principles arising from or in connection with the past, present or
future operations of Borrower or its predecessors in interest, or the past,
present or future environmental condition of Borrower's property, the presence
of asbestos-containing materials at or on such property, or the Release or
threatened Release of any Contaminant from such property), in any way arising
from or in connection with the negotiation, preparation, execution, delivery,
enforcement, performance and administration of this Agreement or any other
document executed in connection herewith, provided that Borrower shall have no
obligation hereunder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of any Indemnitee seeking such
indemnification. To the extent that the indemnity set forth in this Section may
be unenforceable because it is violative of any law or public policy, Borrower
shall pay the maximum portion which it is permitted to pay under applicable law.
Any Indemnitee will promptly notify Borrower of the commencement of any legal
proceeding which may give rise to any indemnified liability under the foregoing
indemnity and shall permit Borrower to participate in the defense of such
Indemnitee in any such proceeding. The foregoing indemnity shall survive the
payment of the Obligations and the termination of this
-46-
<PAGE>
Agreement. All of the foregoing fees, costs and expenses shall be part of the
Obligations, payable upon demand, and secured by the Collateral.
12.10 Waiver of Notices. Unless otherwise expressly provided herein,
Borrower waives presentment, protest and notice of demand or dishonor and
protest as to any instrument, as well as any and all other notices to which it
might otherwise be entitled. No notice to or demand on Borrower which Agent or
Lender may elect to give shall entitle Borrower to any or further notice or
demand in the same, similar or other circumstances.
12.11 Binding Effect; Assignment; Disclosure. The provisions of this
Agreement shall be binding upon and inure to the benefit of the respective
representatives, successors and assigns of the parties hereto; provided,
however, that no interest herein may be assigned by Borrower without the prior
written consent of Agent. With respect to Borrower, successors and assigns shall
include, without limitation, any receiver, trustee or debtor-in-possession of or
for Borrower. The rights and benefits of Agent or any Lender hereunder shall, if
Agent and Lenders so agree, inure to any party acquiring any interest in the
Obligations or any part thereof.
12.12 Modification. This Agreement, together with the other Loan
Documents, is intended by Borrower, Agent, and Lenders to be the final,
complete, and exclusive expression of the agreement between them. This Agreement
supersedes any and all prior oral or written agreements relating to the subject
matter hereof. No modification, rescission, waiver, release, or amendment of any
provision of this Agreement shall be made, except by a written agreement signed
by Borrower and a duly authorized officer of each of Agent and Lenders.
12.13 Counterparts. This Agreement may be executed in any number of
counterparts, and by Agent, Lenders and Borrower in separate counterparts, each
of which shall be an original, but all of which shall together constitute one
and the same agreement.
12.14 Captions. The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
12.15 Right of Set Off. Each Lender is hereby authorized from time
to time to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender or any affiliate of such Lender to or for the credit
or the account of Borrower against any and all of the Obligations, whether or
not then due and payable.
12.16 Assignment of a Lender's Interest; Participating Lender's
Security Interests. Agent shall have the right at any time to assign (through
participation, outright assignment, or otherwise) to one or more financial
institutions all or a portion of its Loans owing to it as a Lender and its other
rights and obligations hereunder. If a third party shall at any time participate
with Agent in the Loans, Borrower hereby grants to such participating lender,
and Agent and such participating lender shall have and are hereby given, a
continuing Lien on and security interest in any money, securities and other
property of Borrower in the custody or possession of the participating
-47-
<PAGE>
lender, including the right of set-off, to the extent of the participating
lender's participation in the Obligations, and such participating lender shall
be deemed to have the same right of set-off to the extent of participating
lender's participation in the Obligations under this Agreement as it would have
if it were a direct lender. Each reference to "Lender" in this Agreement shall
be a reference to Lender's successors and assigns. Borrower shall only be
required to communicate with and make payments to Agent, on behalf of Lenders,
in connection with the making of and repayment of the Loans. Cameron shall be
the Agent under this Agreement and the other Loan Documents until Cameron (or
its successor) shall notify Borrower of the appointment of a successor Agent.
12.17 Appointment of Agent. Each Lender hereby designates and
appoints Cameron as its Agent under this Agreement and the other Loan Documents,
and each Lender hereby irrevocably authorizes the Agent to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers as are set forth herein or therein, together with
such other powers as are reasonably incidental thereto. The provisions of this
Section are solely for the benefit of the Agent and the Lenders, and Borrower
shall have no rights as a third party beneficiary of any of the provisions
hereof. In performing its functions and duties under this Agreement, the Agent
shall act solely as agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for any Borrower. The Agent may perform any of its duties under this
Agreement, or under the other Loan Documents, by or through its agents or
employees. The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement or in the other Loan Documents.
12.18 Investment Representations of each Lender. (a) Each Lender is
aware that no federal or state agency has passed upon the securities (the
"Securities") evidenced by and issuable in connection with the Warrants and the
Convertible Note or made any finding or determination concerning the fairness of
the investment evidenced thereby; (b) each Lender has had an opportunity to ask
questions of and receive answers from representatives of Borrower concerning the
terms and conditions of such investment (c) the Securities will be acquired for
each Lender's own account, for investment only and not with a view toward resale
or distribution in a manner which would require registration under the
Securities Act; (d) each Lender acknowledges that, until the "Registration
Statement" (as defined in the Registration Rights Agreement) is declared
effective by the SEC, there are substantial restrictions on the transferability
of the Securities as required pursuant to federal and state securities laws; (e)
each Lender agrees to be responsible for compliance with all conditions on
transfer imposed by any state blue sky or securities law; (f) each Lender is an
"accredited investor" as defined in Rule 501(a) under the Securities Act; (g)
each Lender is an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, and is a corporation, Massachusetts or similar
business trust or partnership not formed for the specific purpose of acquiring
the securities offered, with total assets in excess of $5,000,000; (h) each
Lender agrees to furnish any additional information requested to assure
compliance with applicable federal and state securities laws in connection with
the purchase and sale of the Securities; and (f) each Lender acknowledges that
each certificate representing any Securities shall be stamped with a restrictive
legend substantially in the form of Exhibit E attached hereto.
[Signature Page Immediately Follows]
-48-
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as
of the date first above written.
COUNTRY STAR RESTAURANTS, INC.
By: /s/ Robert J. Schuster
----------------------------
Title: Chief Executive Officer
CAMERON CAPITAL LTD.,
as Agent and as a Lender
By: /s/ N. Snelling
----------------------------
Title: Chief Executive Officer
[Signature Page to Loan and Security Agreement]
-49-
<PAGE>
EXHIBIT A
to
Loan and Security Agreement
between
Cameron Capital Ltd.,
as Agent for Lenders
and
Country Star Restaurants, Inc.
CONVERTIBLE NOTE
[Attached]
<PAGE>
CONVERTIBLE NOTE
$4,000,000 February 12, 1997
FOR VALUE RECEIVED, the undersigned, COUNTRY STAR RESTAURANTS, INC., a
Delaware corporation ("Borrower" or the "Corporation"), HEREBY IRREVOCABLY
PROMISES TO PAY to the order of CAMERON CAPITAL LTD., a Bermuda corporation
(together with its successors and assigns, "Holder"), the principal sum of FOUR
MILLION AND 00/100 DOLLARS ($4,000,000) together with interest on the principal
balance hereof at the rates provided below from the date such principal is
advanced until payment in full thereof.
This Convertible Note is the Convertible Note referred to in, and is
entitled to the benefit of, the Loan and Security Agreement dated as of February
12, 1997 between Borrower and Holder (as amended, restated, supplemented, or
otherwise modified from time to time, the "Loan Agreement"), which Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof and to which reference is hereby made for a more complete
statement of the terms and conditions under which the loan evidenced hereby was
made and is to be repaid. Any capitalized terms used herein, unless otherwise
defined herein, shall have the meanings given to such terms in the Loan
Agreement.
1. Payment of Principal. The entire principal balance of this Convertible
Note shall be payable in immediately available funds on October 9, 1999;
provided, however, that notwithstanding the foregoing, the principal balance
hereof shall be payable in full upon acceleration as provided in the Loan
Agreement. Such principal payment shall be accompanied by a premium calculated
in the same manner as the prepayment premium as set forth in Section 4.
2. Interest. Borrower further promises to pay Holder interest on the
average daily outstanding principal amount hereof, on June 30 and December 31 of
each year, commencing on December 31, 1997, in arrears, at a rate of seven
percent (7%) per annum. Effective immediately upon the occurrence of an Event of
Default, the principal balance hereof and, to the extent permitted by applicable
law, any interest thereon not paid when due, shall bear interest payable upon
Holder's demand therefor at a rate which is ten percent (10.0%) in excess of the
rate otherwise payable under this Convertible Note.
3. Interest Payments After Default; Premium Payable if Registration Not
Effected.
a. Interest After Default. Following the occurrence of an Event of
Default and in addition to any other remedies Holder may have hereunder or under
the Loan Agreement, Borrower shall pay interest on the principal balance hereof
and, to the extent permitted by applicable law, any interest thereon not paid
when due, upon Holder's demand therefor from time to time at any time or, if no
such demand has been made, in accordance with the schedule set forth in Section
2 above.
b. Premium if Registration Not Effected. In the event the
Registration Statement required to be filed by the Company pursuant to the
Registration Rights Agreement of even date
<PAGE>
between the Borrower and the Holder is not filed with the Securities and
Exchange Commission (the "Commission") on or before May 1, 1997, or declared
effective by the Commission on or before June 30, 1997, the Borrower shall, for
each month or portion thereof that said Registration Statement is not filed or
declared effective, as the case may be, in addition to the interest payable on
the Convertible Note, pay the Holder a premium equal to three percent (3%) of
the face amount of the Convertible Note, payable monthly in advance, commencing
May 2, 1997 or July 1, 1997 as the case may be. The premium to be paid, if any,
shall constitute liquidated damages for the Borrower's failure to cause the
Registration Statement to be filed or to become effective. The parties agree
that the foregoing damages are reasonable and that the anticipated damages for
the failure of the Borrower to effect such registration are uncertain in amount
and difficult to be proved. The premium shall be payable by wire transfer of
immediately available funds unless the Holder agrees to accept part or all of
the payment of the premium in Common Stock. In such event, the Borrower shall
issue to the Holder such number of fully paid and non-assessable shares of
Common Stock as shall have an aggregate average closing bid price (as reported
by The Nasdaq Stock Market) for the five (5) consecutive trading days prior to
the date such premium is payable equal in amount to the cash payment of the
premium which the Borrower and the Holder have elected to pay in kind.
4. Prepayments. Borrower may prepay the principal balance hereof in
immediately available funds in whole or in part at any time upon ten (10)
business days' prior written notice. During such ten (10) day period, Holder
may, in its sole discretion, in lieu of receiving such prepayment, convert this
Convertible Note in accordance with the terms hereof. Each prepayment of
principal shall be accompanied by payment of all accrued but unpaid interest on
the principal balance hereof to the date of prepayment. Any prepayment of less
than all of the outstanding principal hereunder shall be applied to the
installments of principal hereunder in the inverse order of maturity. Each
prepayment shall also be accompanied by a substitute Convertible Note duly
executed by Borrower in the same form as this Convertible Note, except that the
principal amount of such substitute Convertible Note shall reflect the reduced
principal amount under this Convertible Note. Upon receipt of such prepayment
from Borrower and such substitute Convertible Note, Holder will surrender this
Convertible Note to Borrower.
5. Computation of Interest; Method of Payments. Accrued interest charges
hereunder shall be computed on the basis of a year of 360 days for the actual
number of days elapsed. If any payment of principal or interest hereunder shall
become due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in connection with
such payment.
Both principal and interest hereunder are payable in lawful money of the
United States of America to Holder at The Bank of Bermuda International, New
York, New York for credit to The Bank of Bermuda Limited, Hamilton Bermuda (or
to such other accounts as Holder may direct Borrower) by wire transfer in
immediately available funds prior to noon Atlantic standard time (AST) on the
date such payments are due, or as otherwise provided herein or in the Loan
Agreement; provided, however, that Holder may elect, in its sole discretion, to
receive payment for part or all of any accrued interest hereunder in shares of
Common Stock, in lieu of immediately available
2
<PAGE>
funds, in such number of shares to be determined based upon the average closing
bid price (as reported by the Nasdaq Stock Market) of the Common Stock for the
five (5) consecutive trading days immediately prior to the date that such
interest is payable.
6. Other Charges. In addition to the interest charges described herein,
the Loan Agreement provides for the payment by Borrower of various other charges
and fees as set forth more fully in the Loan Agreement.
7. Acceleration. Upon and after the occurrence of an Event of Default,
this Convertible Note may, in accordance with the terms of the Loan Agreement,
and without demand, notice or legal process of any kind, be declared and
immediately shall become due and payable.
8. Certain Waivers by Borrower. Demand, presentment, protest and notice of
nonpayment and protest, notice of intention to accelerate maturity, notice of
acceleration of maturity and notice of dishonor are hereby waived by Borrower.
9. Permissible Rates of Interest. In no contingency or event whatsoever
shall interest charged hereunder, however such interest may be characterized or
computed, exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that Holder has received interest
hereunder in excess of the highest rate applicable hereto, Holder shall apply
such amounts in accordance with Section 3.2 of the Loan Agreement.
10. Conversion Rights.
a. Right to Convert. Part or all of the principal amount of this
Convertible Note may be converted, at the option of the Holder, at any time
after ninety (90) days from the date hereof and before it is paid in full in
accordance herewith, and without the payment of any additional consideration
thereof, into the number of fully paid, nonassessable shares of common stock,
$.001 par value per share, of the Corporation (the "Common Stock"), as is
determined by dividing the principal amount of this Convertible Note requested
by the Holder to be converted into Common Stock (as adjusted for stock splits,
stock dividends, combinations and similar recapitalizations affecting this
Convertible Note) by the lesser of (i) $1.33 (the "Fixed Conversion Price"), or
(ii) Eighty Percent (80%) of the average closing bid price (as reported by The
Nasdaq Stock Market) of the Common Stock for the five (5) consecutive trading
days immediately prior to the Date of Conversion, as defined below in Section
10.b.(ii) (such value is hereinafter referred to as the "Formula Conversion
Price"). Notwithstanding the foregoing, in no event shall the Convertible Note
be convertible into a cumulative aggregate number of shares of Common Stock in
excess of 3,000,000 (as adjusted for stock splits, reverse splits and similar
recapitalizations affecting such shares, the "Maximum Number of Shares"). In the
event the Holder of the Convertible Note (i) subsequent to having converted the
Convertible Note into the Maximum Number of Shares or (ii) upon the conversion
of the Convertible Note such that the number of shares of Common Stock issuable
upon conversion of the Convertible Note (without giving effect to the preceding
sentence) would exceed the Maximum Number of Shares, submit a written notice to
the Corporation
3
<PAGE>
demanding redemption ("Notice of Redemption") of the principal and accrued
interest remaining after the conversion of the Convertible Note into the Maximum
Number of Shares, the Corporation shall redeem such remaining principal balance
and accrued interest for a price equal to such principal and accrued interest
plus a premium calculated in the same manner as the prepayment premium described
in Section 4 (the "Redemption Amount"). The Corporation shall pay such
Redemption Amount to the Holder within fifteen (15) calendar days of the date of
the Notice of Redemption, against delivery of the Convertible Note.
b. Mechanics of Conversion.
(i) No fractional shares of Common Stock shall be issued upon
conversion of this Convertible Note. In lieu of any fractional share to which
the Holder would otherwise be entitled, the Corporation shall round up to the
nearest whole share. In order to convert the Convertible Note into shares of
Common Stock, the Holder shall surrender the Convertible Note, either by
overnight courier or 2-day courier, to the office of the Corporation or its
transfer agent for the Convertible Notes, if any, and shall give written notice
to the Corporation at such office that the Holder elects to convert the same,
the principal amount of the Convertible Note so converted and a calculation of
the Conversion Price (with an advance copy of the notice by facsimile);
provided, however, that the Corporation shall not be obligated to issue
certificates evidencing shares of Common Stock issuable upon such conversion
unless the Convertible Note is delivered to the Corporation or its transfer
agent as provided above, or the Holder notifies the Corporation or its transfer
agent that the Convertible Note has been lost, stolen or destroyed and executes
an agreement satisfactory to the Corporation to indemnify the Corporation from
any loss incurred by it in connection with the Convertible Note.
(ii) The Corporation shall use its best efforts to issue and
deliver, within three (3) business days after delivery to the Corporation or its
transfer agent of such Convertible Note or such agreement of indemnification, to
the Holder of this Convertible Note at the address of the Holder on the books of
the Corporation, a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled as aforesaid. The date on
which notice of conversion is received by the Corporation (the "Date of
Conversion") shall be deemed to be the date of conversion, provided this
Convertible Note which may be converted is received by the Corporation or its
transfer agent, as the case may be, within three (3) business days thereafter
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date. If the
Convertible Note to be converted is not received by the Corporation or its
transfer agent within three (3) business days after the Date of Conversion, the
notice of conversion shall become null and void. In addition, if the Convertible
Note should be converted in part only, the Corporation shall, upon surrender of
this Convertible Note, issue, execute and deliver a new Convertible Note
representing the balance of the Convertible Note not so converted.
c. Restriction on Conversion. In no event shall the Holder of this
Convertible Note be entitled to convert the Convertible Note to the extent such
conversion would result in such Holder's beneficially owning more than five
percent (5%) of the outstanding shares of the Corporation's Common Stock. For
these purposes, beneficial ownership shall be defined and
4
<PAGE>
calculated in accordance with Rule 13d-3, promulgated under the Securities
Exchange Act of 1934, as amended.
11. Corporate Events.
a. Notices of Record Date. In the event of (i) any declaration by
the Corporation of a record date of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution (other than any record date declared in
connection with regularly scheduled dividend dates for the Corporation's 6%
Cumulative Convertible Series A Preferred Stock) or (ii) any capital
reorganization of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation, any merger or consolidation of the
Corporation and any other entity or person, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to the Holder of the Convertible Note at least ten (10) days prior to the
record date specified therein, a notice specifying (A) the date on which any
such record date is to be declared for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (C) the time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) become eligible to receive securities or
other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution or winding up.
b. Corporate Changes. The Fixed Conversion Price shall be
appropriately adjusted to reflect any stock dividend, stock split or share
combination of the Common Stock. If the Corporation shall, during the five (5)
consecutive trading-day period applicable in determining the Formula Conversion
Price for any shares of Common Stock, affect any stock dividend, stock split or
share combination, then for purposes of calculating the Formula Conversion Price
applicable to such conversion, the closing bid price for the Common Stock for
any trading day prior to such action which falls in such five (5) trading-day
period shall be adjusted to a price per share giving effect to such action. In
the event of a merger, reorganization, recapitalization or similar event of or
with respect to the Corporation (a "Corporate Change") (other than a Corporate
Change in which all or substantially all of the consideration received by the
holders of the Corporation's equity securities upon such Corporate Change
consists of cash or assets other than securities issued by the acquiring entity
or any affiliate thereof), the Convertible Note shall be assumed by the
acquiring entity and thereafter the Convertible Note shall be convertible into
such class and type of securities as the Holder would have received had the
Holder converted the Convertible Note immediately prior to such Corporate
Change, as appropriately adjusted to equitably reflect the Conversion Price and
any stock dividend, stock split or share combination of the Common Stock after
such corporate event, and in any such case appropriate provisions shall be made
with respect to the rights and interests of the Holder of the Convertible Note
to the end that the provisions hereof (including, without limitation, provisions
for the adjustment of the Conversion Price and of the number of shares issuable
upon conversion of the Convertible Note) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities thereafter
deliverable upon the exercise hereof.
5
<PAGE>
12. Spin Offs, Liquidating Distributions. In the event that the
Corporation shall make any distribution of its assets upon or with respect to
its capital stock, as a liquidating or partial liquidating dividend, or other
than as a dividend payable out of earnings or any surplus legally available for
dividends under the laws of the state of incorporation of the Corporation, the
Holder of the Convertible Note shall, upon the exercise of his right to convert
after the record date for such distribution or, in the absence of a record date,
after the date of such distribution, receive, in addition to the shares of
Common Stock so converted, the amount of such assets (or, at the option of the
Corporation, a sum equal to the value thereof at the time of distribution as
determined by the Board of Directors in its sole discretion) which would have
been distributed to the Holder if he had exercised his right to convert
immediately prior to the record date for such distribution or, in the absence of
a record date, immediately prior to the date of such distribution.
13. Reservation of Stock Issuable Upon Conversion. Subject to the
limitation on the number of shares issuable upon conversion of the Convertible
Note set forth in Section 10(a) above, the Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock solely for the purpose of effecting the conversion of the Convertible
Note, such number of its shares of Common Stock as shall from time to time be
sufficient to affect the conversion of the entire outstanding principal balance
of this Convertible Note; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to affect the conversion
of the entire outstanding principal balance of this Convertible Note, the
Corporation will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
14. Voting Rights. The Holder of this Convertible Note will not have any
voting rights, except as for the portions of this Convertible Note that have
been converted in accordance herein.
15. Notices. All notices, consents, waivers, and other communications
under this Convertible Note must made in accordance with the terms of Section 12
of the Loan Agreement.
16. Invalidity of Certain Provisions. Whenever possible, each provision of
this Convertible Note shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Convertible Note shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Convertible Note.
17. Incorporation by Reference of Certain Provisions of the Loan
Agreement. All of the representations, warranties, covenants, promises and other
agreements of the parties set forth in the Loan Agreement are incorporated by
reference herein. Any Event of Default under the Loan Agreement shall be an
event of default hereunder.
6
<PAGE>
THIS CONVERTIBLE NOTE SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS AND
DECISIONS AND NOT THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, the undersigned has executed this Convertible Note on
behalf of the Corporation on the day first written above.
COUNTRY STAR RESTAURANTS, INC.
By: /s/ Peter R. Feinstein
------------------------------------
Peter R. Feinstein, President
ATTEST:
/s/ Robert J. Schuster
- - -----------------------------
Robert J. Schuster, Secretary
7
<PAGE>
EXHIBIT B
to
Loan and Security Agreement
between
Cameron Capital Ltd.,
as Agent for Lenders
and
Country Star Restaurants, Inc.
REGISTRATION RIGHTS AGREEMENT
[Attached]
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
February 12, 1997, is between Country Star Restaurants, Inc., a Delaware
corporation (the "Company"); and Cameron Capital Ltd. ("Cameron") and the other
parties who may execute and deliver counterpart signature pages to this
Agreement from time to time (who are referred to collectively with Cameron as
the "Investors").
RECITALS
A. The Investors have agreed to lend certain monies to the Company
pursuant to that certain Loan and Security Agreement dated as of February 12,
1997 (the "Loan Agreement") provided that, among other things, certain
registration rights are granted to the Investors.
B. Pursuant to the Loan Agreement, the Company: (i) has issued to Cameron
a Common Stock purchase warrant (the "Cameron Warrant") and a Term Loan Note
that is convertible into Common Stock (the "Convertible Note"); and (ii) is
obligated to issue additional Common Stock purchase warrants to Investors making
additional advances under the Loan Agreement (together with the Cameron Warrant,
the "Warrants").
C. The Company deems it desirable to grant certain securities registration
rights to the Investors in order to induce the Investors to lend it certain
monies pursuant to the Loan Agreement.
AGREEMENT
In consideration of the premises and the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. In addition to the capitalized terms defined elsewhere in
this Agreement, the following capitalized terms shall have the following
meanings when used in this Agreement:
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock of the Company.
"Holders" means the holders of Registrable Shares who are parties to
this Agreement or successors or assigns or subsequent holders of the Registrable
Shares.
"Person" means a natural person, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or other entity, or a governmental
entity or any department, agency or political subdivision thereof.
<PAGE>
"Registrable Shares" means, at any time, any shares of Common Stock
issued or issuable upon conversion of the Convertible Note or exercise of the
Warrants, and any shares of Common Stock issued as, or issued or issuable
directly or indirectly upon the conversion or exercise of other securities
issued as, a dividend or other distribution with respect to or in replacement of
the Convertible Note, Warrants or other Registrable Shares; provided, however,
that Registrable Shares shall not include any shares the sale of which has been
registered pursuant to the Securities Act or which have been sold to the public
pursuant to Rule 144, promulgated under the Securities Act. For purposes of this
Agreement, a Person will be deemed to be a holder of Registrable Shares whenever
such Person has the right to acquire such Registrable Shares (by conversion,
exercise or otherwise), whether or not such acquisition has actually been
effected.
"Registration Expenses" has the meaning ascribed to it in Section
2.6 of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
2. Securities Act Registration.
2.1. Registration of Registrable Shares. The Company shall register under
the Securities Act, at the Company's expense, all of the shares of Common Stock
issuable upon the conversion in full of the Convertible Note and upon exercise
of all of the Warrants (the "Registrable Shares") and in connection therewith
shall file a registration statement with respect to the Registrable Shares (the
"Registration Statement") with the Commission on or before the earlier of (i) 15
days after the Company files its annual report on Form 10-K or 10-KSB, and (ii)
May 1, 1997. The Company shall cause the Registration Statement to become
effective by no later than June 30, 1997. Notice of effectiveness of the
Registration Statement shall be furnished promptly to the Investors. The Company
shall maintain the effectiveness of the Registration Statement and from time to
time will amend or supplement such Registration Statement and the prospectus
contained therein as and to the extent necessary to comply with the Securities
Act. The effectiveness of the Registration Statement shall be maintained with
respect to the Registrable Shares until the later to occur of the second
anniversary of the date of the respective Warrants and Convertible Note or such
date as all of the Registrable Shares may be sold during any one period of three
(3) consecutive months pursuant to Rule 144 under the Securities Act or
otherwise without registration.
2.2. Amendments. The Company shall prepare and file with the Commission
such amendments and supplements to the Registration Statement and the prospectus
used in connection with such Registration Statement necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement.
2.3. Notice. The Company shall notify each seller of Registrable Shares
covered by the Registration Statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or
2
<PAGE>
incomplete in light of the circumstances then existing, and at the request of
any such seller, prepare and furnish to such seller a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such shares, such
prospectus shall not include any untrue statement of a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in light of the circumstances then existing.
2.4. Prospectus. The Company shall furnish to the Investors such number of
copies of a prospectus in conformity with the requirements of the Securities
Act, and such other documents as may reasonably be requested in order to
facilitate the disposition of the Registrable Shares owned by the Investors.
2.5. Blue Sky. The Company shall register and qualify the securities
covered by such Registration Statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Investors;
provided, however, that the Company shall not be required in connection
therewith, or as a condition thereto, to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act.
2.6. Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Agreement, including, but not limited to,
all registration and filing fees, fees and expenses and compliance with federal,
state and foreign securities laws, printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Company and its
independent certified public accountants, underwriters (excluding discounts and
commissions attributable to the Registrable Shares included in such
registration) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), will be borne by the Company. In
addition, the Company will pay its internal expenses (including, but not limited
to, all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance obtained by the Company and the expenses and
fees for listing the securities to be registered on each securities exchange or
quotation system.
2.7. Other Matters. (a) The Company shall provide a transfer agent and
registrar for all Registrable Shares to be registered hereunder and a CUSIP
number of all Registrable Shares, in each case not later than the effective date
of such registration.
(b) The Company will use its best efforts to cause the Registrable Shares
to be duly approved for listing on The Nasdaq Stock Market on or prior to the
effectiveness of the Registration Statement.
(c) The Company will use its best efforts to maintain the listing of its
Common Stock on The Nasdaq Stock Market, for at least a sixty (60) month period
commencing on the Effective Date.
(d) The Company will make and keep public information regarding the
Company available as those terms are understood and defined in Rule 144 under
the Securities Act, at all times from and after the Effective Date;
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<PAGE>
(e) The Company will file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Securities Exchange Act.
3. Indemnification.
3.1. Indemnification by the Company. In the event that the Company
registers under the Securities Act any of the Registrable Shares held by the
Investors, the Company shall indemnify and hold harmless the Investors and each
underwriter (if any) of such shares (including any broker or dealer through whom
any of the shares may be sold) and each person, if any, who controls any of the
Investors or any such underwriter within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Securities Exchange Act from and against
any and all losses, claims, damages, expenses or liabilities, joint or several,
to which they or any of them become subject under the Securities Act or the
Securities Exchange Act or otherwise, and, except as hereinafter provided, shall
reimburse the Investors and each of the underwriters and each such controlling
person, if any, for any legal or other expenses reasonably incurred by them or
any of them in connection with investigating or defending any actions whether or
not resulting in any liability, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or in the prospectus (or the Registration Statement or
prospectus as from time to time amended or supplemented by the Company) or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such untrue statement or omission was
made in such Registration Statement or prospectus in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by that specific Investor (insofar as indemnification of that specific
Investor is concerned) or any underwriter (insofar as indemnification of any
such underwriter is concerned) relating thereto expressly for use therein.
Promptly after receipt by the Investors or any underwriter or any person
controlling any of them, as the case may be, of notice of a claim to which the
foregoing indemnification applies, the Investors or such other persons shall
notify the Company in writing of the commencement thereof, and, subject to the
provisions hereinafter stated, the Company shall assume the defense of such
action (including the employment of counsel, who shall be counsel satisfactory
to the Investors or such underwriter or controlling person, as the case may be,
and the payment of expenses) insofar as such action shall relate to any alleged
liability in respect of which indemnity may be sought against the Company. The
Investors or any underwriter or any such controlling persons shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof but the fees and expenses of such counsel shall not be at the
expense of the Company unless: (i) the employment of such counsel has been
specifically authorized by the Company, (ii) the Company has failed to assume
the defense and employ counsel, or (iii) the named parties of any such action,
suit or proceeding (including any impleaded parties) include both the person or
persons seeking indemnification (the "indemnified person") and the Company and
such indemnified person shall have been advised by its counsel that
representation of the indemnified person and the Company by the same counsel
would be inappropriate under applicable standards of professional conduct
(whether or not such representation by the same counsel has been proposed) due
to actual or potential differing interests between them (in which case the
Company shall not have the right to assume the defense of such action, suit or
proceeding on behalf of such indemnified person). The Company shall not be
liable to indemnify any person for any settlement by such person of any such
action effected without the Company's consent.
4
<PAGE>
3.2. Indemnification by the Investors. Each Investor, severally and not
jointly, shall indemnify the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Securities Exchange Act, against all
losses, claims, damages, expenses or liabilities or actions to which they or any
of them become subject under the Securities Act or the Securities Exchange Act
or otherwise, and shall reimburse the Company, its officers and directors and
each such controlling person, if any, for any legal or other expenses reasonably
incurred by them or any of them in connection with investigating or defending
any actions whether or not resulting in any liability, insofar as such losses,
claims damages, expenses, liabilities or actions arise out of or are based upon
any information relating to that specific Investor furnished by or on behalf of
that specific Investor in writing specifically for inclusion in such
Registration Statement. Notwithstanding the above, the liability of each
Investor under this Section 3.2 shall not exceed the proceeds (net of
underwriting discounts or commissions) received by that Investor upon the sale
of the Registrable Shares.
3.3 Payment. Any losses, claims, damages, liabilities and reasonable
expenses for which an indemnified party is entitled to indemnification under
Sections 3.1 and 3.2 of this Agreement shall be paid by the indemnifying party
to the indemnified party as such losses, claims, damages, liabilities and
expenses are incurred.
4. Representations, Warranties and Covenants of the Company. The Company
hereby incorporates by reference all of its representations, warranties and
covenants as set forth in the Loan Agreement.
5. Representations and Warranties of the Investors. Each of the Investors
hereby incorporates by reference all of its respective representations,
warranties and covenants as set forth in the Loan Agreement.
6. Brokers. The Company hereby agrees to indemnify each Investor and holds
each Investor harmless from any liability for any brokers' or finders' fee with
respect to this Agreement or the transactions contemplated hereby for which the
Company is responsible.
7. Waiver, Amendment. Neither this Agreement nor any provisions hereof
shall be modified, changed, discharged or terminated except by an instrument in
writing, signed by the party against whom any waiver, change, discharge or
termination is sought.
8. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, their respective successors and assigns,
and no other person shall have any right or obligation hereunder. Neither this
Agreement nor any right, remedy, obligation or liability arising hereunder or by
reason hereof shall be assignable by the Company without the prior written
consent of the other party and any assignment in violation hereof shall be void.
This Agreement, and all of each Investor's rights, remedies, obligations or
liabilities arising hereunder or by reason hereof, may be assigned by that
specific Investor.
5
<PAGE>
9. Governing Law; Choice of Forum. This Agreement shall be interpreted and
the rights and liabilities of the parties hereto determined in accordance with
the internal laws (as opposed to the conflict of laws provisions) of the state
of Illinois. The parties hereto hereby agree to the exclusive jurisdiction of
the United States District Court of the Northern District of Illinois and the
State Courts of Illinois located in Cook County, Illinois and waive any
objection based on venue or forum non conveniens with respect to any action
instituted therein, and agree that any dispute concerning the relationship
between the Investors on the one hand and the Company on the other hand or the
conduct of any party in connection with this Agreement or otherwise shall be
heard only in the courts described above.
10. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
11. Multiple Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
will constitute one and the same instrument. However, in enforcing any party's
rights under this Agreement it will be necessary to produce only one copy of
this Agreement signed by the party to be charged.
12. Notices. All notices, consents, waivers, and other communications
under this Agreement must made in accordance with the terms of Section 12 of the
Loan Agreement.
13. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns.
14. Effect of Company's Noncompliance. Failure by the Company to comply
with any of the above provisions shall constitute a default under the Loan
Agreement.
[Signature Page Immediately Follows]
6
<PAGE>
This Agreement has been executed by the parties below to be effective as
of the date set forth on the first page of this Agreement.
COUNTRY STAR
RESTAURANTS, INC.
By:______________________________
Name:____________________________
Title:___________________________
INVESTORS:
CAMERON CAPITAL LTD.
By:______________________________
Name:____________________________
Title:___________________________
_________________________________
Name of Investor
By:______________________________
Name:____________________________
Title:___________________________
[Signature Page to Registration Rights Agreement]
<PAGE>
EXHIBIT C
to
Loan and Security Agreement
between
Cameron Capital Ltd.,
as Agent for Lenders
and
Country Star Restaurants, Inc.
WARRANT
[Attached]
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK OF COUNTRY STAR RESTAURANTS, INC. TO
BE ISSUED UPON ANY EXERCISE OF THE WARRANT HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR
TRANSFER UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT, OR
IN THE OPINION OF COUNSEL, SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS IS NOT REQUIRED.
WARRANT
to Purchase Shares
of
Common Stock
of
COUNTRY STAR RESTAURANTS, INC.
___________ , 1997
This certifies that, for value received, Cameron Capital Ltd. ("CC") and
any subsequent transferee of this Warrant (each, a "Holder") is entitled to
purchase, subject to the provisions of this Warrant, from Country Star
Restaurants, Inc., a Delaware corporation (the "Issuer"), at any time or from
time to time on or after the date hereof and on or before_______, 2002 (the
"Expiration Date"), ________________ Thousand (_________) fully paid and
nonassessable shares of common stock (the "Common Stock"), of the Issuer at an
exercise price of Sixty Two and One-Half Cents ($.625) per share, subject to
adjustment pursuant to the terms hereunder (the "Exercise Price") (such shares
of Common Stock and other securities issued and issuable upon exercise of this
Warrant sometimes are referred to herein as the "Warrant Shares").
Section 1. Definitions.Capitalized terms not otherwise defined herein
shall have the meanings assigned to them in the Loan and Security Agreement (the
"Loan Agreement") dated February 12, 1997 between and among CC, the Issuer and
other parties who from time to time execute the Loan Agreement.
<PAGE>
Section 2. Exercise of Warrant.
(a) Subject to the provisions hereof, this Warrant may be exercised,
in whole or in part, but not as to a fractional share, at any time or from
time to time on or after the date hereof and on or before the Expiration
Date, by presentation and surrender hereof to the Issuer at the address
which, in accordance with the provisions of Section 9 hereof, is then
effective for notices to the Issuer, with the Election to Purchase Form
annexed hereto as Schedule One, duly executed and accompanied by payment
to the Issuer as further set forth below in this Section 2, for the
account of the Issuer, of the Exercise Price for the number of Warrant
Shares specified in such form. If this Warrant should be exercised in part
only, the Issuer shall, upon surrender of this Warrant, execute and
deliver a new Warrant evidencing the rights of the Holder hereof to
purchase the balance of the Warrant Shares purchasable hereunder. The
Issuer shall maintain at its principal place of business a register for
the registration of this Warrant and registration of transfer of this
Warrant. The Exercise Price for the number of Warrant Shares specified in
the Election to Purchase Form shall be payable in United States Dollars by
certified or official bank check payable to the order of the Issuer or by
wire transfer of immediately available funds to an account specified by
the Issuer for that purpose.
(b) Certificates representing Warrant Shares shall bear the
following restrictive legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act").
They may not be offered or transferred by sale, assignment, pledge
or otherwise unless (i) a registration statement for the securities
under the Securities Act is in effect or (ii) the corporation has
received an opinion of counsel, which opinion is satisfactory to the
corporation, to the effect that such registration is not required
under the Securities Act."
(c) Notwithstanding any provisions herein to the contrary, if the
Fair Market Value (hereinafter defined) of one share of Common Stock is
greater than the Exercise Price (at the date of calculation as set forth
below), in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being canceled) by surrender of this Warrant at
the principal office of the Issuer together with the properly endorsed
Notice of Exercise and notice of such election in which event the Issuer
shall issue to the Holder a number of shares of Common Stock computed
using the following formula:
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<PAGE>
X = [Y(A-B)]/A
Where X = the number of shares of Common Stock to be issued
to the Holder
Y = the number of shares of Common Stock purchasable
under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the
Warrant being canceled (at the date of such
calculation)
A = the Fair Market Value of one share of the
Issuer's Common Stock (at the date of such
calculation)
B = Exercise Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, Fair Market Value of one share of
Common Stock shall be the average closing bid price (as reported by The
Nasdaq Stock Market) of the Issuer's Common Stock for the five (5)
consecutive trading days ending on the trading day immediately preceding
the date of the Election to Purchase.
Section 3. Reservation of Shares; Preservation of Rights of Holder. The
Issuer hereby agrees that there shall be reserved for issuance and/or delivery
upon exercise of this Warrant, such number of Warrant Shares as shall be
required for issuance or delivery upon exercise of this Warrant. The Warrant
surrendered upon exercise shall be canceled by the Issuer. After the Expiration
Date, no shares of Common Stock shall be subject to reservation in respect of
this Warrant. The Issuer further agrees (i) that it will not, by amendment of
its Certificate of Incorporation or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observation or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by the Issuer,
(ii) promptly to take such action as may be required of the Issuer to permit the
Holder to exercise this Warrant and the Issuer duly and effectively to issue
shares of its Common Stock or other securities as provided herein upon the
exercise hereof, and (iii) promptly to take all action required or provided
herein to protect the rights of the Holder granted hereunder against dilution.
Without limiting the generality of the foregoing, should the Warrant Shares at
any time consist in whole or in part of shares of capital stock having a par
value, the Issuer agrees that before taking any action which would cause an
adjustment of the Exercise Price so that the same would be less than the then
par value of such Warrant Shares, the Issuer shall take any corporate action
which may, in the opinion of its counsel, be necessary in order that the Issuer
may validly and legally issue fully paid and nonassessable shares of such Common
Stock at the Exercise Price as so adjusted. The Issuer further agrees that it
will not establish a par value for its Common Stock while this Warrant is
outstanding in an amount greater than the Exercise Price.
3
<PAGE>
Section 4. Exchange, Transfer, Assignment or Loss of Warrant. Any
attempted transfer of this Warrant, the Warrant Shares or any new Warrant not in
accordance with this Section shall be null and void, and the Issuer shall not in
any way be required to give effect to such transfer. No transfer of this Warrant
shall be effective for any purpose hereunder until (i) written notice of such
transfer and of the name and address of the transferee has been received by the
Issuer, and (ii) the transferee shall first agree in a writing deposited with
the Secretary of the Issuer to be bound by all the provisions of this Warrant.
Upon surrender of this Warrant to the Issuer by any transferee authorized under
the provisions of this Section 4, the Issuer shall, without charge, execute and
deliver a new Warrant registered in the name of such transferee at the address
specified by such transferee, and this Warrant shall promptly be canceled. The
Issuer may deem and treat the registered holder of any Warrant as the absolute
owner thereof for all purposes, and the Issuer shall not be affected by any
notice to the contrary. Any Warrant, if presented by an authorized transferee,
may be exercised by such transferee without prior delivery of a new Warrant
issued in the name of the transferee.
Upon receipt by the Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Issuer will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute a separate contractual obligation on the
part of the Issuer, whether or not the Warrant so lost, stolen, destroyed or
mutilated shall be at any time enforceable by anyone.
Section 5. Rights of Holder. Neither a Holder nor his transferee by devise
or the laws of descent and distribution or otherwise shall be, or have any
rights or privileges of, a stockholder of the Issuer with respect to any Warrant
Shares, unless and until certificates representing such Warrant Shares shall
have been issued and delivered thereto.
Section 6. Adjustments in Exercise Price and Warrant Shares. The Exercise
Price and Warrant Shares shall be subject to adjustment from time to time as
provided in this Section 6.
(a) If the Issuer is recapitalized through the subdivision or
combination of its outstanding shares of Common Stock into a larger or
smaller number of shares, the number of shares of Common Stock for which
this Warrant may be exercised shall be increased or reduced, as of the
record date for such recapitalization, in the same proportion as the
increase or decrease in the outstanding shares of Common Stock, and the
Exercise Price shall be adjusted so that the aggregate amount payable for
the purchase of all Warrant Shares issuable hereunder immediately after
the record date for such recapitalization shall equal the aggregate amount
so payable immediately before such record date.
(b) If the Issuer declares a dividend on Common Stock, or makes a
distribution to holders of Common Stock, and such dividend or distribution
is payable or made in Common Stock or securities convertible into or
exchangeable for Common Stock, or rights to purchase Common Stock or
securities convertible into or exchangeable for Common
4
<PAGE>
Stock, the number of shares of Common Stock for which this Warrant may be
exercised shall be increased, as of the record date for determining which
holders of Common Stock shall be entitled to receive such dividend or
distribution, in proportion to the increase in the number of outstanding
shares (and shares of Common Stock issuable upon conversion of all such
securities convertible into Common Stock) of Common Stock as a result of
such dividend or distribution, and the Exercise Price shall be adjusted so
that the aggregate amount payable for the purchase of all the Warrant
Shares issuable hereunder immediately after the record date for such
dividend or distribution shall equal the aggregate amount so payable
immediately before such record date.
(c) If the Issuer declares a dividend on Common Stock (other than a
dividend covered by subsection (b) above) or distributes to holders of its
Common Stock, other than as part of its dissolution or liquidation or the
winding up of its affairs, any shares of its capital stock, any evidence
of indebtedness or any cash or other of its assets (other than Common
Stock or securities convertible into or exchangeable for Common Stock),
the Holder shall receive notice of such event as set forth in Section 8
below.
(d) In case of any consolidation of the Issuer with, or merger of
the Issuer into, any other corporation (other than a consolidation or
merger in which the Issuer is the continuing corporation and in which no
change occurs in its outstanding Common Stock), or in case of any sale or
transfer of all or substantially all of the assets of the Issuer, or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Issuer, except where the Issuer is the surviving
entity and no change occurs in its outstanding Common Stock), the
corporation formed by such consolidation or the corporation resulting from
such merger or the corporation which shall have acquired such assets or
securities of the Issuer, as the case may be, shall execute and deliver to
the Holder simultaneously therewith a new Warrant, satisfactory in form
and substance to the Holder, together with such other documents as the
Holder may reasonably request, entitling the Holder thereof to receive
upon exercise of such Warrant the kind and amount of shares of stock and
other securities and property receivable upon such consolidation, merger,
sale, transfer, or exchange of securities, or upon the dissolution
following such sale or other transfer, by a holder of the number of shares
of Common Stock purchasable upon exercise of this Warrant immediately
prior to such consolidation, merger, sale, transfer, or exchange. Such new
Warrant shall contain the same basic other terms and conditions as this
Warrant and shall provide for adjustments which, for events subsequent to
the effective date of such written instrument, shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 6. The above provisions of this paragraph (d) shall similarly
apply to successive consolidations, mergers, exchanges, sales or other
transfers covered hereby.
(e) If the Issuer shall, at any time before the expiration of this
Warrant, sell all or substantially all of its assets and distribute the
proceeds thereof to the Issuer's stockholders, the Holder shall, upon
exercise of this Warrant have the right to receive, in lieu of the shares
5
<PAGE>
of Common Stock of the Issuer that the Holder otherwise would have been
entitled to receive, the same kind and amount of assets as would have been
issued, distributed or paid to the Holder upon any such distribution with
respect to such shares of Common Stock of the Issuer had the Holder been
the holder of record of such shares of Common Stock receivable upon
exercise of this Warrant on the date for determining those entitled to
receive any such distribution. If any such distribution results in any
cash distribution in excess of the Exercise Price provided by this Warrant
for the shares of Common Stock receivable upon exercise of this Warrant,
the Holder may, at the Holder's option, exercise this Warrant without
making payment of the Exercise Price and, in such case, the Issuer shall,
upon distribution to the Holder, consider the Exercise Price to have been
paid in full and, in making settlement to the Holder, shall obtain receipt
of the Exercise Price by deducting an amount equal to the Exercise Price
for the shares of Common Stock receivable upon exercise of this Warrant
from the amount payable to the Holder.
(f) If an event occurs which is similar in nature to the events
described in this Section 6, but is not expressly covered hereby, the
Board of Directors of the Issuer shall make or arrange for an equitable
adjustment to the number of Warrant Shares and the Exercise Price.
(g) The term "Common Stock" shall mean the Common Stock of the
Issuer as the same exists at February 12, 1997 or as such stock may be
constituted from time to time, except that for the purpose of this Section
6, the term "Common Stock" shall include any stock of any class of the
Issuer which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Issuer and which is not subject to
redemption by the Issuer.
(h) The Issuer shall retain a firm of independent public accountants
of recognized standing (who may be any such firm regularly employed by the
Issuer) to make any computation required under this Section 6, and a
certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 6.
(i) Whenever the number of Warrant Shares or the Exercise Price
shall be adjusted as required by the provisions of this Section 6, the
Issuer forthwith shall file in the custody of its secretary or an
assistant secretary, at its principal office, and furnish to each Holder
hereof, a certificate prepared in accordance with paragraph (h) above,
showing the adjusted number of Warrant Shares and the adjusted Exercise
Price and setting forth in reasonable detail the circumstances requiring
the adjustments.
(j) Notwithstanding any other provision, this Warrant shall be
binding upon and inure to the benefit of any successors and assigns of the
Issuer.
(k) No adjustment in the Exercise Price in accordance with the
provisions of this Section 6 need be made if such adjustment would amount
to a change in such Exercise Price
6
<PAGE>
of less than $.01; provided however, that the amount by which any
adjustment is not made by reason of the provisions of this paragraph (k)
shall be carried forward and taken into account at the time of any
subsequent adjustment in the Exercise Price.
(l) If an adjustment is made under this Section 6 and the event to
which the adjustment relates does not occur, then any adjustments in
accordance with this Section 6 shall be readjusted to the Exercise Price
and the number of Warrant Shares which would be in effect had the earlier
adjustment not been made.
Section 7. Taxes on Issue or Transfer of Common Stock and Warrant. The
Issuer shall pay any and all documentary stamp or similar issue or transfer
taxes payable in respect of the issue or delivery of shares of Common Stock or
other securities on the exercise of this Warrant. The Issuer shall not be
required to pay any tax which may be payable in respect of any transfer of this
Warrant or in respect of any transfers involved in the issue or delivery of
shares or the exercise of this Warrant in a name other than that of the Holder
and the person requesting such transfer, issue or delivery shall be responsible
for the payment of any such tax (and the Issuer shall not be required to issue
or deliver said shares until such tax has been paid or provided for).
Section 8. Notice of Adjustment. So long as this Warrant shall be
outstanding, (a) if the Issuer shall propose to pay any dividends or make any
distribution upon the Common Stock, or (b) if the Issuer shall offer generally
to the holders of Common Stock the right to subscribe to or purchase any shares
of any class of Common Stock or securities convertible into Common Stock or any
other similar rights, or (c) if there shall be any proposed capital
reorganization of the Issuer in which the Issuer is not the surviving entity,
recapitalization of the capital stock of the Issuer, consolidation or merger of
the Issuer with or into another corporation, sale, lease or other transfer of
all or substantially all of the property and assets of the Issuer, or voluntary
or involuntary dissolution, liquidation or winding up of the Issuer, or (d) if
the Issuer shall give to its stockholders any notice, report or other
communication respecting any significant or special action or event, then in
such event, the Issuer shall give to the Holder, at least ten (10) days prior to
the relevant date described below, a notice containing a description of the
proposed action or event and stating the date or expected date on which a record
of the Issuer's stockholders is to be taken for any of the foregoing purposes,
and the date or expected date on which any such dividend, distribution,
subscription, reclassification, reorganization, consolidation, combination,
merger, conveyance, sale, lease or transfer, dissolution, liquidation or winding
up is to take place and the date or expected date, if any is to be fixed, as of
which the holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities or other property deliverable upon such
event.
Section 9. Notice. Any notice to be given or to be served upon any party
in connection with the Warrant must be in writing and will be deemed to have
been given and received upon confirmed receipt, if sent by facsimile, or two (2)
days after it has been submitted for delivery by
7
<PAGE>
Federal Express or an equivalent carrier, charges prepaid and addressed to the
following addresses with a confirmation of delivery:
If to the Issuer, to:
Country Star Restaurants, Inc.
11150 Santa Monica Boulevard, Suite 650
Los Angeles, California 90025
Attn.: Peter R. Feinstein, President
Telephone: (310) 268-2200
Facsimile: (310) 268-2208
with a copy simultaneously by like means to:
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022
Attn.: Clifford A. Brandeis
Telephone: (212) 223-6700
Facsimile: (212) 223-6433
If to the Holder, to:
Cameron Capital Ltd.
10 Cavendish Road
Hamilton HM 19
Bermuda
Attn.: Nic Snelling
Telephone: (441) 295-5455
Facsimile: (441) 295-9022
with a copy simultaneously by like means to:
Freeborn & Peters
950 17th Street, Suite 2600
Denver, Colorado 80202
Attn.: Kenneth S. Witt
Telephone: (303) 628-4200
Facsimile: (303) 628-4240
Any party may, at any time by giving notice to the other party, designate any
other address in substitution of an address established pursuant to the
foregoing to which such notice will be given.
8
<PAGE>
Section 10. Registration Rights. This Warrant and the Warrant Shares are
and shall remain subject to the Registration Rights Agreement dated January __,
1997 between and among CC, the Issuer and other parties who from time to time
execute the Registration Rights Agreement.
Section 11. Governing Law; Choice of Forum. (a) This Warrant shall be
interpreted and the rights and liabilities of the parties hereto determined in
accordance with the internal laws (as opposed to the conflict of laws
provisions) of the State of Illinois.
(b) Holder and Issuer hereby agree to the exclusive jurisdiction of
the United States District Court of the Northern District of Illinois and the
State Courts of Illinois located in Cook County, Illinois and waive any
objection based on venue or forum non conveniens with respect to any action
instituted therein, and agree that any dispute concerning the relationship
between Holder and Issuer or the conduct of either party in connection with this
Warrant or otherwise shall be heard only in the courts described above.
Dated: _______________, 1997
COUNTRY STAR RESTAURANTS, INC.
By:____________________________
Name:__________________________
Title:_________________________
ATTEST:
___________________________________
, Secretary
[Signature Page to Warrant to Purchase Shares of Common Stock
of Country Star Restaurants, Inc.]
9
<PAGE>
Schedule One
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise this Warrant and to
purchase ______ shares of Country Star Restaurants, Inc. Common Stock issuable
upon the exercise of this Warrant, and requests that certificates for such
shares be issued in the name of:
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Address)
________________________________________________________________________________
(United States Social Security or other taxpayer
identifying number, if applicable)
and, if different from above, be delivered to:
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Address)
and, if the number of Warrant Shares so purchased are not all of the Warrant
Shares issuable upon exercise of this Warrant, that a Warrant to purchase the
balance of such Warrant Shares be registered in the name of, and delivered to,
the undersigned at the address stated below.
Date: __________ __, _____
Name of Registered Owner:_______________________________________________________
________________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
Signature:______________________________________________________________________
10
<PAGE>
Exhibit D
CAMERON CAPITAL LTD.
LOANS
TO
COUNTRY STAR RESTAURANTS, INC.
LIST OF CLOSING DOCUMENTS(1)
February 3, 1997
A. Principal Loan and Security Documents
1. Loan and Security Agreement (the "Loan Agreement") among Country Star
Restaurants, Inc., a Delaware corporation ("Borrower"), and Cameron
Capital Ltd. ("Cameron"), as agent ("Agent") for the lenders from time to
time party thereto ("Lenders").
Exhibits
Exhibit A - Term Loan Note
Exhibit B - Registration Rights Agreement
Exhibit C - Warrant
Exhibit D - List of Closing Documents
Exhibit E - Restrictive Legend
Schedules
Schedule 5.3 - Locations of Collateral
Schedule 7.2 - Permitted Liens
Schedule 7.4 - Trade Names
Schedule 7.5 - Affiliates
Schedule 7.11 - Real Property and Leases
Schedule 7.12 - Proprietary Rights
Schedule 7.14 - Litigation
Schedule 7.16 - Labor Contracts and Disputes
Schedule 7.17 - Environmental Matters
Schedule 7.21 - Employee Benefit Plans
Schedule 7.26 - Bank Accounts
Schedule 7.29 - Transactions with Affiliates
- - ----------
(1) This List of Closing Documents does not include payment of fees or amounts
due any party or third person in connection herewith, including title
insurance fees, filing fees and fees payable pursuant to Subsection 9.1(d)
of the Loan and Security Agreement listed as Item 1. Capitalized terms
used and not otherwise defined herein have the meanings given such terms
in the Loan and Security Agreement.
<PAGE>
2. Convertible Note executed by Borrower and made payable to the order of
Cameron in the original principal amount of $4,000,000.
3. Use of Proceeds Schedule delivered by Borrower to Agent, listing the
amounts and payees for the Line of Credit Loans made on the Closing Date.
B. Personal Property Security Documents
4. Trademark Security Agreement executed by Borrower granting Agent a
security interest in all of Borrower's trademarks, trade names and service
marks as security for the Obligations.
5. Pledge Agreement executed by Borrower in favor of Agent, evidencing the
pledge of 51% of the issued and outstanding membership interests in
Country Star Las Vegas, LLC ("CSLV") as security for the Obligations,
together with:
a. Pledge Instruction to CSLV from Borrower; and
b. Initial Transaction Statement executed by CSLV.
C. Miscellaneous Personal Property Documents
6. Insurance Certificates and loss payable endorsements in favor of Agent
with respect to the insurance policies held by the Borrower.
D. Real Property Security Documents
7. Leasehold Mortgages or Deeds of Trust executed on behalf of the Borrower,
as mortgagor, in favor of Agent, as mortgagee, relating to the Borrower's
leasehold interest in the real properties located at:
a. 3030 Peachtree Road, Atlanta, Georgia 30305;
b. 3724 Las Vegas Blvd. South, Las Vegas, Nevada 89109; and
c. 1000 Universal Center Drive, Universal City Walk No. 195,
Universal City, California 91608.
(collectively, the "Real Property").
8. Landlord's Waiver and Consent in favor of Agent from each lessor of the
Real Property.
9. Title Insurance Policies issued by Ticor Title Insurance Company relating
to the Leasehold Mortgages or Deeds of Trust identified above.
E. Organizational and Other Corporate Documents.
2
<PAGE>
10. Certificate of Incorporation, together with all amendments thereto, if
any, for the Borrower, certified by the Secretary of State of the State of
Delaware.
11. Certificates of Good Standing for the Borrower issued by the Secretary of
State of the States of Delaware, California, Nevada, and Georgia.
12. Certificate signed by the Secretary of Borrower, certifying among other
things: (i) that the Certificate of Incorporation of the Borrower have not
been amended since the date of the certified Certificate of Incorporation
referenced above for such entity; (ii) the accuracy and currency of the
By-laws of the Borrower attached thereto; (iii) the attached resolutions
of the Board of Directors of the Borrower approving and authorizing the
execution, delivery and performance of the documents to which the Borrower
is a party; and (iv) where applicable, the names, incumbency and
signatures of the officers of the Borrower executing the documents
referred to in this List of Closing Documents and/or in clause (iii)
above.
13. Certificate of the Chief Executive Officer and the Chief Financial Officer
of the Borrower, certifying that the conditions specified in Subsection
9.1(a) of the Loan Agreement have been fulfilled, as required pursuant to
Subsection 9.1(b).
14. Certificate of the President and Chief Financial Officer of the Borrower
pursuant to Section 9.2(a) of the Loan Agreement, certifying (i) the
correctness of certain representations and warranties contained in the
Loan Agreement and (ii) the absence of any Event of Default.
F. Search Reports and UCC Filings
15. Copies of pre-filing UCC lien search reports of filings against the
Borrower and in the filing offices identified below:
a. Secretary of State of State of California;
b. Secretary of State of Florida;
c. Clerk of Superior Court of Fulton County, Georgia and the Georgia
Clerks' Cooperative Authority(2); and
d. Secretary of State of State of Nevada.
16. Copies of pre-filing search reports of fixture filings against the
Borrower in the filing offices identified below:
a. Recorder of Los Angeles County, California;
b. Clerk of Circuit Court of Orange County, Florida;
c. Clerk of Superior Court of Fulton County, Georgia; and
d. Recorder of Clark County, Nevada.
- - ----------
(2) A central database indexing report, not a filing office.
3
<PAGE>
17. Copies of pre-closing tax and judgment lien (state and federal) search
reports of filings against the Borrower and in the filing offices
identified below:
a. Recorder of Los Angeles County, California;
b. Clerk of Circuit Court of Orange County, Florida;
c. Clerk of Superior Court of Fulton County, Georgia; and
d. Secretary of State of Nevada and Recorder of Clark County, Nevada.
18. Copies of pre-closing lien search reports of filings against CSLV in the
filing offices identified below:
a. UCC lien search reports from the Secretary of State of Nevada and
the Recorder of Clark County, Nevada;
b. Searches of UCC fixture filings from the Recorder of Clark County,
Nevada; and
c. Tax lien and judgment lien (state and federal) filings with the
Secretary of State of Nevada and the Recorder of Clark County,
Nevada.
19. UCC-1 Financing Statements filed against Borrower as Debtor listing Agent
as Secured Party in the filing offices identified below:
a. Secretary of State of State of California;
b. Secretary of State of Florida;
c. Clerk of Superior Court of Fulton County, Georgia; and
d. Secretary of State of State of Nevada.
20. UCC Fixture Filings filed against Borrower as Debtor listing Agent as
Secured Party in the filing offices identified below:
a. Recorder of Los Angeles County, California;
[b. Clerk of Circuit Court of Orange County, Florida;]
c. Clerk of Superior Court of Fulton County, Georgia; and
d. Recorder of Clark County, Nevada.
21. Post-filing UCC lien search reports of filings in the filing offices
identified in items 19 and 20 above.
G. Legal Opinion
22. Opinion of Zukerman Gore & Brandeis, LLP, counsel to the Borrower,
addressed to the Agent.
H. Related Documents
23. Warrant to Purchase Shares of Common Stock of Country Star Restaurants,
Inc.
4
<PAGE>
24. Registration Rights Agreement by and between Country Star Restaurants,
Inc. and the other parties signatories thereto.
25. Waiver of Josephthal Lyon & Ross with respect to any fees due in
connection with the transactions contemplated by the Loan Agreement.
26. Consulting Agreements by and between Country Star Restaurants, Inc. and,
respectively, Robert J. Schuster and Peter R. Feinstein.
27. Notice of effectiveness of Mr. Feinstein's Consulting Agreement.
28. Undated resignation letters from each of Borrower's board members.
29. Letter from counsel to the Borrower, addressed to the Agent, advising the
Agent under Section 7.28 of the Loan Agreement that the Borrower may be
obligated to pay a brokerage commission to J.W. Charles Securities, Inc.
30. Certificate representing 4,000 shares of Borrower's Series B Preferred
Stock, duly endorsed or accompanied by a letter of transmittal or stock
power, to be delivered by Cameron in exchange for the Convertible Note.
31. Letter agreement between Cameron and the Borrower terminating Section 3 of
the October 9, 1996 Subscription Agreement.
32. Certificate registered in the name of Cameron representing 365,522 shares
of Borrower's Common Stock.
I. Post-Closing Matters
33. Letter from Cameron to Borrower as to assignment or participation and
appointment of successor Agent, if necessary.
34. Form D filed by the Borrower with the U.S. Securities and Exchange
Commission and relating to the issuance of Cameron Stock to Cameron.
35. Add lenders to Borrower's insurance policies as additional loss payees and
insureds, as required by Section 8.5 of Loan Agreement.
36. Notify the NASD's Market Surveillance Department (1-800-537-3929) at least
10 minutes prior to issuing press release.
37. Issue press release announcing the recapitalization (note: The Nasdaq
Stock Market requires prompt disclosure of materials events - see Rule
4120 and IM-4120-1 of The Nasdaq Stock Market).
5
<PAGE>
38. File Form 8-K with SEC and Nasdaq disclosing change in control under Item
2 (due 15 days after change in control).
6
<PAGE>
EXHIBIT E
to
Loan and Security Agreement
between
Cameron Capital Ltd.,
as Agent for Lenders
and
Country Star Restaurants, Inc.
RESTRICTIVE LEGEND
Each certificate representing any Securities shall be stamped with a
restrictive legend substantially in the form of the following:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act").
They may not be offered or transferred by sale, assignment, pledge or
otherwise unless (i) a registration statement for the securities under
the Securities Act is in effect or (ii) the corporation has received
an opinion of counsel, which opinion is satisfactory to the
corporation, to the effect that such registration is not required
under the Securities Act.
<PAGE>
LOAN AND SECURITY AGREEMENT
BETWEEN
CAMERON CAPITAL LTD
AND
COUNTRY STAR RESTAURANTS, INC.
SCHEDULE 5.3
LOCATION OF COLLATERAL
A: Executive Offices 11150 Santa Monica Blvd.
Suite 650
Los Angeles, CA 90025
B) Facilities and Locations
Not owned by borrower:
1. Country Star Hollywood
Lessor: MCA & Universal Studios
1000 Universal Center Drive
Suite 195
Universal City, CA 91608
2. Country Star Hollywood - Warehouse
Lessor: Haig Bazonian
4242 Lankershim Blvd.
N. Hollywood, CA 91602
3. Country Star Atlanta
Lessor: Peter Blum
3030 Peachtree Road, NE
Atlanta, GA 30327
Lender: Dime Savings Bank of New York
EAB Plaza, East Tower
13th Floor
Uniondale, NY 11556
4. Country Star Las Vegas
Lessor: Melvin D. Close, Jr.
3724 Las Vegas Blvd., South
Las Vegas, NV 89109
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
PERMITTED LIENS
SCHEDULE 7.2
ATLANTA
A. Mercury Construction $190,000.00 (approx) Bonded
B. Todays Custom Furniture $92,703.82 Bonded
C. Baldwin Brass $8,868.02 Bonded
D. Pinnacle Construction $240,000.00 (approx)
LAS VEGAS
A. GB Mannisto Net $180,000.00
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
TRADE NAMES
SCHEDULE 7.4
Trademark Registration Date Registration No.
- - --------- ----------------- ---------------
COUNTRY STAR January 26, 1971 906,886
COUNTRY STAR July 18, 1995 1,906,211
COUNTRY STAR and Design January 9, 1996 1,947,489
COUNTRY STAR April 16, 1996 1,967,853
COUNTRY STAR and Design August 20,1996 1,994,709
DESIGN August 27, 1996 1,997,347
Trademark and Service Mark Applications
None, except:
Trademark Registration Date Registration No.
- - --------- ----------------- ---------------
RATTLESNAKE BARBEQUE SAUCE June 24, 1994 74/541828
COUNTRY STAR September 23, 1994 74/577440
COWBOY MAGIC June 30, 1995 74/695979
COWBOY SALT July 7, 1995 74/699555
RODEO OUTLAW July 21, 1995 74/703926
BRIMSTONE October 6, 1995 74/002183
IT AIN'T COUNTRY 'TILL IT COOKS May 23, 1996 75/108862
AMERICAN MUSIC GRILL June 13, 1996 75/118348
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
AFFILIATES
SCHEDULE 7.5
No Affiliates Exist other than Country Star Las Vegas, LLC.
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
REAL PROPERTY AND LEASES
SCHEDULE 7.11
1) Company owns no Real Property
2) All leases of Real Property are listed on Schedule 5.3
3) There are no sub-leases
4) Leases as follows:
1) Micros - Atlanta
2) Postage Meters - Pitney Bowes
3) Phones - Toshiba (through Aloha)
4) Copiers - Toshiba
5) Facsimile machines - Toshiba
6) Computers - Dell through Sanwa Leasing
7) Van Lease - Hollywood Ford Motor
8) Sign - Hollywood/Las Vegas - Ad Art
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
LITIGATION
SCHEDULE 7.14
CLAIMED
-------
1. Today's Custom Furniture $98,000.00
2. Showbiz Entertainment $33,000.00
3. Roseangela Brown Wrongful termination
4. Lazarus Lighting $14,000.00
(owed $9300 - money in
construction escrow
Atlanta)
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
ENVIRONMENTAL MATTERS
SCHEDULE 7.17
No Environmental Matters Exist.
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
LABOR CONTRACTS AND DISPUTES
SCHEDULE 7.16
There are no Labor contracts or related disputes.
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
EMPLOYEE BENEFIT PLANS
SCHEDULE 7.21
No Employee Benefit Plan Exists.
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
BANK ACCOUNTS
SCHEDULE 7.26
Bank Account Account Number
- - ------------ --------------
Imperial Bank 4167800006
9920 S. La Cienega Blvd. 4167800005
Inglewood, CA 90301 09-098-224
09-098-232
09-098-240
09-098-216
09-098-194
09-098-208
Citibank 38712402
55 Water St., 47th Flr.
P.O. Box 1005
Wall Street Station
New York, NY 10268
First Trust of California 94820472
One California St., 4th Flr.
San Francisco, CA 94111
First Security 010-205-7621
4813 S. Eastern Ave. 010-205-8040
Las Vegas, NV 98119
Wachovia Bank 128-87-791
Main Office 128-87-780
Atlanta, GA 30302
<PAGE>
SCHEDULE 7.29
COUNTRY STAR RESTAURANTS, INC.
Transactions with Affiliates
1. Employment Agreement with Robert J. Schuster dated as of
July 1, 1996
2. Employment Agreement with Peter R. Feinstein dated as of
July 1, 1996
3. $59,500 Loan to Peter R. Feinstein as of January 2, 1996
TRADEMARK SECURITY AGREEMENT
THIS TRADEMARK SECURITY AGREEMENT ("Agreement") is made as of
February 12, 1997, by and between Country Star Restaurants, Inc., a Delaware
corporation ("Borrower"), and Cameron Capital Ltd., a Bermuda corporation, as
agent ("Agent") for "Lenders" (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Loan and Security Agreement of
even date herewith by and among Borrower, the financial institutions which from
time to time may become parties thereto (collectively, "Lenders"), and Agent (as
the same may from time to time be amended, restated, modified or supplemented,
the "Loan Agreement"), Agent and Lenders have agreed, among other things and
subject to certain conditions precedent, to make loans and other financial
accommodations to Borrower;
WHEREAS, Agent and Lenders have required Borrower to execute and
deliver this Agreement (i) in order to secure the prompt and complete payment,
observance and performance of all of the Obligations under the Loan Agreement
and the Loan Documents and (ii) as a condition precedent to providing certain
loans and financial accommodations under the Loan Agreement;
NOW, THEREFORE, in consideration of the premises set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower agrees as follows:
1. Defined Terms.
(a) Unless otherwise defined herein, each capitalized term used
herein that is defined in the Loan Agreement shall have the meaning specified
for such term in the Loan Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of like
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section references are to
this Agreement unless otherwise specified.
(c) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and vice versa, unless otherwise
specified.
2. Incorporation of Premises. The premises set forth above are
incorporated into this Agreement by this reference thereto and are made a part
hereof.
- 1 -
<PAGE>
3. Incorporation of the Loan Agreement. The Loan Agreement and the
terms and provisions thereof are hereby incorporated herein in their entirety by
this reference thereto.
4. Security Interest in Trademarks. To secure the complete and
timely payment, performance and satisfaction of all of the Obligations, Borrower
hereby mortgages and grants, with power of sale, to Agent for the benefit of
Agent and Lenders a first priority security interest in the following property
and interests in property of Borrower, now owned or existing and hereafter
acquired or arising:
(i) trademarks, registered trademarks, trademark applications,
service marks, registered service marks and service mark applications,
including, without limitation, the trademarks, registered trademarks,
trademark applications, service marks, registered service marks and
service mark applications listed on Schedule A attached hereto and made a
part hereof, and (a) all renewals thereof, (b) all income, royalties,
damages and payments now and hereafter due and/or payable under and with
respect thereto, including, without limitation, payments under all
licenses entered into in connection therewith and damages and payments for
past or future infringements or dilutions thereof, (c) the right to sue
for past, present and future infringements and dilutions thereof, (d) the
goodwill of Borrower's business symbolized by the foregoing and connected
therewith, and (e) all of Borrower's rights corresponding thereto
throughout the world (all of the foregoing trademarks, registered
trademarks and trademark applications, and service marks, registered
service marks and service mark applications, together with the items
described in clauses (a)-(e) in this paragraph 4(i), are sometimes
hereinafter individually and/or collectively referred to as the
"Trademarks"); and
(ii) rights under or interest in any trademark license agreements or
service mark license agreements with any other party, whether Borrower is
a licensee or licensor under any such license agreement, including,
without limitation, those trademark license agreements and service mark
license agreements listed on Schedule B attached hereto and made a part
hereof, together with any goodwill connected with and symbolized by any
such trademark license agreements or service mark license agreements, and
the right to prepare for sale and sell any and all Inventory now or
hereafter owned by Borrower and now or hereafter covered by such licenses
(all of the foregoing are hereinafter referred to collectively as the
"Licenses").
5. New Trademarks and Licenses. Borrower represents and warrants
that, (a) the Trademarks listed on Schedule A include all of the trademarks,
registered trademarks, trademark applications, service marks, registered service
marks and service mark applications now owned or held by Borrower, (b) the
Licenses listed on Schedule B include all of the trademark license agreements
and service mark license agreements under which Borrower is the licensee or
licensor and (c) no liens, claims or security interests in such Trademarks and
Licenses have been granted by Borrower to any Person other than Agent. If, prior
to the termination of this
- 2 -
<PAGE>
Agreement, Borrower shall (i) obtain rights to any new trademarks, registered
trademarks, trademark applications, service marks, registered service marks or
service mark applications, (ii) become entitled to the benefit of any
trademarks, registered trademarks, trademark applications, trademark licenses,
trademark license renewals, service marks, registered service marks, service
mark applications, service mark licenses or service mark license renewals
whether as licensee or licensor, or (iii) enter into any new trademark license
agreement or service mark license agreement, the provisions of paragraph 4 above
shall automatically apply thereto. Borrower shall give to Agent written notice
of events described in clauses (i), (ii) and (iii) of the preceding sentence
promptly after the occurrence thereof, but in any event not less frequently than
on a quarterly basis. Borrower hereby authorizes Agent to modify this Agreement
unilaterally (i) by amending Schedule A to include any future trademarks,
registered trademarks, trademark applications, service marks, registered service
marks and service mark applications and by amending Schedule B to include any
future trademark license agreements and service mark license agreements, which
are Trademarks or Licenses under paragraph 4 above or under this paragraph 5,
and (ii) by filing, in addition to and not in substitution for this Agreement, a
duplicate original of this Agreement containing on Schedule A or B thereto, as
the case may be, such future trademarks, registered trademarks, trademark
applications, service marks, registered service marks and service mark
applications, and trademark license agreements and service mark license
agreements.
6. Royalties. Borrower hereby agrees that the use by Agent and
Lenders of the Trademarks and Licenses as authorized hereunder in connection
with Agent's and Lenders' exercise of their rights and remedies under paragraph
14 or pursuant to the Loan Agreement shall be coextensive with Borrower's rights
thereunder and with respect thereto and without any liability for royalties or
other related charges to Borrower from Agent or any Lender.
7. Right to Inspect; Further Assignments and Security Interests.
From and after the occurrence of an Event of Default, Borrower agrees that
Agent, or a conservator appointed by Agent, shall have the right to establish
such reasonable additional product quality controls as Agent or such
conservator, in its sole and absolute judgment, may deem necessary to assure
maintenance of the quality of products sold by Borrower under the Trademarks and
the Licenses or in connection with which such Trademarks and Licenses are used.
Borrower agrees not to sell or assign its respective interests in, or grant any
license under, the Trademarks or the Licenses without the prior and express
written consent of Agent.
8. Nature and Continuation of Agent's Security Interest; Termination
of Agent's Security Interest. This Agreement is made for collateral security
purposes only. This Agreement shall create a continuing security interest in the
Trademarks and Licenses and shall terminate only when the Obligations have been
paid in full and the Loan Agreement has been terminated. When this Agreement has
terminated, Agent shall promptly execute and deliver to Borrower, at Borrower's
expense, all termination statements and other instruments as may be necessary or
proper to terminate Agent's security interest in the Trademarks and the
Licenses, subject to any disposition thereof which may have been made by Agent
pursuant to this Agreement or the Loan Agreement.
- 3 -
<PAGE>
9. Duties of Borrower. Borrower shall have the duty, to the extent
desirable in the normal conduct of Borrower's business, to: (i) prosecute
diligently any trademark application or service mark application that is part of
the Trademarks pending as of the date hereof or hereafter until the termination
of this Agreement, and (ii) make application for trademarks or service marks.
Borrower further agrees (i) not to abandon any Trademark or License without the
prior written consent of Agent, and (ii) to use its best efforts to maintain in
full force and effect the Trademarks and the Licenses that are or shall be
necessary or economically desirable in the operation of Borrower's business. Any
expenses incurred in connection with the foregoing shall be borne by Borrower.
Agent and Lenders shall not have any duty with respect to the Trademarks and
Licenses. Without limiting the generality of the foregoing, Agent and Lenders
shall not be under any obligation to take any steps necessary to preserve rights
in the Trademarks or Licenses against any other parties, but Agent or Lenders
may do so at its option from and after the occurrence of an Event of Default,
and all expenses incurred in connection therewith shall be for the sole account
of Borrower and shall be added to the Obligations secured hereby.
10. Agent's Right to Sue. From and after the occurrence of an Event
of Default, Agent shall have the right, but shall not be obligated, to bring
suit in its own name to enforce the Trademarks and the Licenses and, if Agent
shall commence any such suit, Borrower shall, at the request of Agent, do any
and all lawful acts and execute any and all proper documents required by Agent
in aid of such enforcement. Borrower shall, upon demand, promptly reimburse
Agent for all costs and expenses incurred by Agent in the exercise of its rights
under this paragraph 10 (including, without limitation, reasonable fees and
expenses of attorneys and paralegals for Agent).
11. Waivers. Agent's failure, at any time or times hereafter, to
require strict performance by Borrower of any provision of this Agreement shall
not waive, affect or diminish any right of Agent thereafter to demand strict
compliance and performance therewith nor shall any course of dealing between
Borrower and Agent have such effect. No single or partial exercise of any right
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right. None of the undertakings, agreements, warranties, covenants
and representations of Borrower contained in this Agreement shall be deemed to
have been suspended or waived by Agent unless such suspension or waiver is in
writing signed by an officer of Agent and directed to Borrower specifying such
suspension or waiver.
12. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but the provisions of this Agreement are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part hereof, in such jurisdiction, and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
13. Modification. This Agreement cannot be altered, amended or
modified in
- 4 -
<PAGE>
any way, except as specifically provided in paragraph 5 hereof or by a writing
signed by the parties hereto.
14. Cumulative Remedies; Power of Attorney. Borrower hereby
irrevocably designates, constitutes and appoints Agent (and all Persons
designated by Agent in its sole and absolute discretion) as Borrower's true and
lawful attorney-in-fact, and authorizes Agent and any of Agent's designees, in
Borrower's or Agent's name, to take any action and execute any instrument which
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, from and after the occurrence of an Event of Default and the giving
by Agent of notice to Borrower of Agent's intention to enforce its rights and
claims against Borrower, to (i) endorse Borrower's name on all applications,
documents, papers and instruments necessary or desirable for Agent in the use of
the Trademarks or the Licenses, (ii) assign, pledge, convey or otherwise
transfer title in or dispose of the Trademarks or the Licenses to anyone on
commercially reasonable terms, (iii) grant or issue any exclusive or
nonexclusive license under the Trademarks or, to the extent permitted, under the
Licenses, to anyone on commercially reasonable terms, and (iv) take any other
actions with respect to the Trademarks or the Licenses as Agent deems in its own
best interest. Borrower hereby ratifies all that such attorney shall lawfully do
or cause to be done by virtue hereof. This power of attorney is coupled with an
interest and shall be irrevocable until all of the Obligations shall have been
paid in full in cash and the Loan Agreement shall have been terminated. Borrower
acknowledges and agrees that this Agreement is not intended to limit or restrict
in any way the rights and remedies of Agent under the Loan Agreement, but rather
is intended to facilitate the exercise of such rights and remedies.
Agent shall have, in addition to all other rights and remedies given
it by the terms of this Agreement, all rights and remedies allowed by law and
the rights and remedies of a secured party under the Uniform Commercial Code as
enacted in any jurisdiction in which the Trademarks or the Licenses may be
located or deemed located. Upon the occurrence of an Event of Default and the
election by Agent, during the continuance of such Event of Default, to exercise
any of its remedies under Section 9-504 or Section 9-505 of the Uniform
Commercial Code with respect to the Trademarks and Licenses, Borrower agrees to
assign, convey and otherwise transfer title in and to the Trademarks and the
Licenses to Agent or any transferee of Agent and to execute and deliver to Agent
or any such transferee all such agreements, documents and instruments as may be
necessary, in Agent's sole discretion, to effect such assignment, conveyance and
transfer. All of Agent's rights and remedies with respect to the Trademarks and
the Licenses, whether established hereby, by the Loan Agreement, by any other
agreements or by law, shall be cumulative and may be exercised separately or
concurrently. Notwithstanding anything set forth herein to the contrary, it is
hereby expressly agreed that upon the occurrence of an Event of Default, Agent
may exercise any of the rights and remedies provided in this Agreement, the Loan
Agreement and any of the other Loan Documents.
15. Successors and Assigns. This Agreement shall be binding upon
Borrower and its successors and assigns, and shall inure to the benefit of Agent
and its nominees, successors and assigns. Borrower's successors and assigns
shall include, without limitation, a receiver, trustee or debtor-in-possession
of or for Borrower; provided, however, that Borrower
- 5 -
<PAGE>
shall not voluntarily assign or transfer its rights or obligations hereunder
without Agent's prior written consent.
16. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
AND THE RIGHTS AND DUTIES OF THE PARTIES SHALL BE GOVERNED BY IN ALL RESPECTS IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS)
AND DECISIONS OF THE STATE OF ILLINOIS.
17. Notices. All notices or other communications hereunder shall be
given in the manner and to the addresses set forth in the Loan Agreement.
18. Section Titles. The section titles herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
19. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
20. Conflict with Loan Agreement. Should any term or provision of
the Loan Agreement expressly conflict with the terms or provisions of this
Agreement, such term or provision of the Loan Agreement shall govern and
control.
[Signature Page Immediately Follows]
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
COUNTRY STAR RESTAURANTS, INC.
By: /s/ [ILLEGIBLE]
-----------------------------------
Title: CEO
Accepted and agreed to as of the day and year
first above written.
CAMERON CAPITAL LTD.,
as Agent
By: /s/ [ILLEGIBLE]
-----------------------------------
Title: CEO
[Signature Page to Trademark Security Agreement]
- 7 -
<PAGE>
Schedule A
to
Trademark Security Agreement
Dated as of February 12, 1997
Trademarks
None, except:
Trademark Registration Date Registration No.
- - --------- ----------------- ----------------
COUNTRY STAR January 26, 1971 906,886
COUNTRY STAR July 18, 1995 1,906,211
COUNTRY STAR January 9, 1996 1,947,489
and Design
COUNTRY STAR April 16, 1996 1,967,853
COUNTRY STAR August 20, 1996 1,994,709
and Design
DESIGN August 27, 1996 1,997,347
Trademark and Service Mark Applications
None, except:
Trademark Application Date Serial No.
- - --------- ----------------- ----------------
RATTLESNAKE BARBECUE June 24, 1994 74/541828
SAUCE
COUNTRY STAR September 23, 1994 74/577440
COWBOY MAGI C June 30, 1995 74/695979
COWBOY SALT July 7, 1995 74/699555
RODEO OUTLAW July 21, 1995 74/703926
BRIMSTONE October 6 1995 75/002183
IT AIN'T COUNTRY May 23, 1996 75/108862
'TIL IT COOKS
AMERICAN MUSIC GRILL June 13, 1996 75/118348
- 8 -
<PAGE>
Schedule B
to
Trademark Security Agreement
Dated as of February 12,
License Agreements
None, except:
- 9 -
<PAGE>
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
The foregoing Trademark Security Agreement was acknowledged before
me this 12th day of February, 1997, by Robert J. Schuster, a CEO and Secretary
of Country Star Restaurants, Inc., a Delaware corporation, on behalf of such
corporation.
/s/ Thomas C. Letsou
--------------------------------
Notary Public
________ County, _________
My commission expires:_______
THOMAS C. LETSOU
Notary Public, State of New York
No. 02LE5045171
Certificate filed in New York County
Commission Expires June 12, 1997
- 10 -
[Georgia]
Recording requested by and when recorded mail to:
Kenneth S. Witt
Freeborn & Peters
950 Seventeenth Street
Denver, Colorado 80202
- - --------------------------------------------------------------------------------
STATE OF GEORGIA
COUNTY OF FULTON
FIRST OPEN END LEASEHOLD DEED TO SECURE DEBT,
SECURITY AGREEMENT, FINANCING STATEMENT
AND ASSIGNMENT OF RENTS
THIS LEASEHOLD DEED TO SECURE DEBT, SECURITY AGREEMENT, FINANCING
STATEMENT AND ASSIGNMENT OF RENTS ("Leasehold Deed") made and given as of this
12th day of February 1997, made by ("Grantor"), in favor of CAMERON CAPITAL
LTD., a Bermuda corporation, having an office at 10 Cavendish Road, Hamilton HM
19, Bermuda ("Grantee"), as Agent for the Lenders who are parties to the Loan
Agreement referred to below (the "Lenders").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Loan and Security Agreement dated
as of the date hereof among Grantor, the Grantee and the Lenders (as such Loan
and Security Agreement may be extended, supplemented, modified, restated or
otherwise changed, the "Loan Agreement"), the Lenders may from time to time make
loans and extend financial accommodations to Grantor, which loans shall consist
of line of credit loans in the maximum principal amount of Three Million Five
Hundred Thousand and No/100 Dollars ($3,500,000.00) (the "Line of Credit Loan")
and a term loan in the principal amount of Four Million and No/100 Dollars
($4,000,000.00) ("Term Loan") (the Line of Credit Loan and Term Loan being
collectively referred to herein as the "Loan") (the Loan Agreement and all other
documents, instruments and agreements entered into in connection therewith are
hereinafter sometimes jointly referred to as the "Loan Documents"); and
1
<PAGE>
WHEREAS, the Loan shall mature on the dates and shall bear interest
at the rates specified in the Loan Agreement; and
WHEREAS, Grantee has required as a condition, among others, to its
execution and delivery of the Loan Agreement that Grantor enter into this
Leasehold Deed and grant Grantee the liens and security interests referred to
herein to secure the prompt and complete payment, observance and performance of
all of the "Obligations" (as defined in the Loan Agreement), that Grantor
execute and deliver this Leasehold Deed to Grantee; and
WHEREAS, the Obligations secured hereby shall not exceed an
aggregate principal amount, at any one time outstanding of Fifteen Million
Dollars and 00/100 ($15,000,000.00), provided, that the foregoing limitation
shall apply only to the lien upon the leasehold estate created by this Leasehold
Deed, and it shall not in any manner limit, affect or impair any grant of a
security interest or other right in favor of the Grantee under the provisions of
the Loan Agreement or under any other security agreement at any time executed by
Grantor;
NOW THEREFORE, FOR AND IN CONSIDERATION of the sum of TEN AND NO/100
DOLLARS ($10.00) and other valuable consideration, the receipt and sufficiency
whereof are hereby acknowledged, and in order to secure (i) the indebtedness of
Grantor hereinafter set forth, (ii) all amounts, sums and expenses paid
hereunder by Grantee according to the terms hereof and (iii) all other
obligations and liabilities of Grantor hereunder, together with interest on the
said indebtedness, obligations, liabilities, amounts, sums and expenses (all of
the aforesaid are hereinafter collectively referred to as the "Indebtedness"),
Grantor hereby grants, bargains, sells, warrants, conveys, aliens, remises,
releases, assigns, sets over and confirms to Grantee and the successors and
assigns of Grantee its respective interest in and to, all of the following
described land and interests in land, estates, easements, tenements, rights,
improvements, property, fixtures, machinery and equipment (collectively, the
"Secured Property"):
THAT CERTAIN estate for years and leasehold estate of, in and to all that
tract or parcel of land lying and being in Land Lot 99, of the 17th District,
Fulton County, State of Georgia, which land (the "Land") is more particularly
described on Exhibit A attached hereto and made a part hereof, being the
leasehold estate created by, arising under an by virtue of that certain Ground
Lease from 3030 Peachtree, L.L.C to Country Star Restaurants, Inc., dated March
9, 1995, a short form of which is recorded at Deed Book _______, page ______,
Fulton County, Georgia records; and including all of Borrower's right, title and
interest as lessee or tenant or otherwise in and to said leaseshold estate and
in and to the Ground Lease, including but not limited to, all rights ot
possession of the Land and the other property described in the Gound Lease and
any and all rights set forth in the Ground Lease with respect to the extension
and renewal fo the Ground Lease by lessee; and, subject to the restrictions
hereinafter set forth, together with all extensions and revewals of,
modifications and amendments to, and replacements of, the Ground Lease.
TOGETHER WITH all right, title and interest, if any, including any
after-acquired right, title and interest, and including any right of use or
occupancy, which Grantor may now have
2
<PAGE>
or hereafter acquire in and to (a) all easements, rights of way, gores of land
or any lands occupied by streets, ways, alleys, passages, sewer rights, water
courses, water rights and powers, and public places adjoining said Land, and any
other interests in property constituting appurtenances to the Premises, or which
hereafter shall in any way belong, relate or be appurtenant thereto and, (b) all
hereditaments, gas, oil, minerals, and easements, of every nature whatsoever,
located in or on the Premises and all other rights and privileges thereunto
belonging or appertaining and all extensions, additions, improvements,
betterments, renewals, substitutions and replacements to or of any of the rights
and interests described in subparagraphs (a) and (b) above (hereinafter the
"Property Rights"); and
TOGETHER WITH all right, title and interest, if any, including any
after-acquired right, title and interest, and including any right of use or
occupancy, which Grantor may now have or hereafter acquire in and to all
fixtures and appurtenances of every nature whatsoever now or hereafter located
in, on or attached to, and used or intended to be used in connection with, or
with the operation of, the Premises, including, but not limited to (a) all
apparatus, machinery and equipment of Grantor to the extent deemed fixtures
under law; and (b) all extensions, additions, improvements, betterments,
renewals, substitutions and replacements to or of any of the foregoing (all of
the foregoing items in this paragraph being referred to as the "Fixtures"); as
well as all personal property and equipment of every nature whatsoever now or
hereafter located in or on the Premises, including but not limited to (c) all
screens, window shades, blinds, wainscoting, storm doors and windows, floor
coverings, and awnings of Grantor; (d) all apparatus, machinery, equipment and
appliances of Grantor not included as Fixtures; (e) all items of furniture,
furnishings and personal property of Grantor; and (f) all extensions, additions,
improvements, betterments, renewals, substitutions and replacements to or of any
of the foregoing (c)-(e) (the items described in the foregoing (c)-(f) and any
other personal property referred to in this paragraph being the "Personal
Property") and in and to the proceeds of the Personal Property. It is mutually
agreed, intended and declared that the Premises and all of the Property Rights
and Fixtures owned by Grantor (referred to collectively herein as the "Real
Property") shall, so far as determined by law, be part and parcel of the Land
and for the purpose of this Leasehold Deed to be real estate and covered by this
Leasehold Deed. It is mutually agreed, intended and declared that the premises
and all of the Property Rights and Fixtures owned by Grantor (referred to
collectively herein as the "Real Property") shall, so far as permitted by law,
be deemed to form a part and parcel of the Land and for the purpose of this
Leasehold Deed to be real estate and covered by this Leasehold Deed. Subject to
the terms and conditions of the Loan Agreement, the remedies for any violation
of the covenants, terms and conditions of the agreements herein contained shall
be as prescribed herein or by general law, or, as to that part of the security
in which a security interest may be perfected under the Uniform Commercial Code,
by the specific statutory consequences now or hereafter enacted and specified in
the Uniform Commercial Code, all at the Grantee's sole election; and
TOGETHER WITH all the estate, right, title and interest of the
Grantor in and to (i) all judgments, insurance proceeds, awards of damages and
settlements resulting from condemnation proceedings or the taking of the Real
Property, or any part thereof, under the power of eminent domain or for any
damage (whether caused by such taking or otherwise) to the Real Property, or any
part thereof, or to any rights appurtenant thereto, and all proceeds of any
sales or other dispositions
3
<PAGE>
of the Real Property or any part thereof; and (except as otherwise provided
herein or in the Loan Agreement) the Grantee is hereby authorized to collect and
receive said awards and proceeds and to give proper receipts and acceptances
therefor, and to apply the same as provided in the Loan Agreement for
application of payments; and (ii) all contract rights, general intangibles,
actions and rights in action relating to the Real Property including, without
limitation, all rights to insurance proceeds and unearned premiums arising from
or relating to damage to the Real Property; and (iii) all proceeds, products,
replacements, additions, substitutions, renewals and accessions of and to the
Real Property. (The rights and interests described in this paragraph shall
hereinafter be called the "Intangibles").
As additional security for the Obligations secured hereby, Grantor
does (i) hereby pledge and assign to Grantee from and after the date hereof
(including any period of redemption), primarily and on a parity with the Real
Property, and not secondarily, all the rents, issues and profits of the Real
Property and all rents, issues, profits, revenues, royalties, bonuses, rights
and benefits due, payable or accruing (including all deposits of money as
advance rent, for security or as earnest money or as down payment for the
purchase of all or any part of the Real Property) (the "Rents") under any and
all present and future subleases, contracts or other agreements relative to the
ownership or occupancy of all or any portion of the Real Property, and (ii)
except to the extent such a transfer or assignment is not permitted by the terms
thereof, does hereby transfer and assign to Grantee all such subleases and
agreements (including all Grantor's rights under any contracts for the sale of
any portion of the Real Property and all revenues and royalties under any oil,
gas and mineral leases relating to the Real Property) (the "Subleases"). Grantee
hereby grants to Grantor the right to collect and use the Rents as they become
due and payable under the Subleases, but not more than one (1) month in advance
thereof, unless an "Event of Default" (as defined in the Loan Agreement) shall
have occurred provided that the existence of such right shall not operate to
subordinate this assignment to any subsequent assignment, in whole or in part,
by Grantor, and any such subsequent assignment shall be subject to the rights of
the Grantee under this Leasehold Deed. Grantor further agrees to execute and
deliver such assignments of subleases or assignments of land sale contracts as
Grantee may from time to time request. In the event of an Event of Default (1)
the Grantor agrees, upon demand, to deliver to the Grantee all of the Subleases
with such additional assignments thereof as the Grantee may request and agrees
that the Grantee may assume the management of the Real Property and collect the
Rents, applying the same upon the Obligations in the manner provided in the Loan
Agreement, and (2) the Grantor hereby authorizes and directs all tenants,
purchasers or other persons occupying or otherwise acquiring any interest in any
part of the Real Property to pay the Rents due under the Subleases to the
Grantee upon request of the Grantee. Grantor hereby appoints Grantee as its true
and lawful attorney in fact to manage said property and collect the Rents, with
full power to bring suit for collection of the Rents and possession of the Real
Property, giving and granting unto said Grantee and unto its agent or attorney
full power and authority to do and perform all and every act and thing
whatsoever requisite and necessary to be done in the protection of the security
hereby conveyed; provided, however, that (i) this power of attorney and
assignment of rents shall not be construed as an obligation upon said Grantee to
make or cause to be made any repairs that may be needful or necessary and (ii)
Grantee agrees that until such Event of Default as aforesaid, Grantee shall
permit Grantor to perform the aforementioned
4
<PAGE>
management responsibilities. Upon Grantee's receipt of the Rents, at Grantee's
option, it may pay: (1) reasonable charges for collection thereof, costs of
necessary repairs and other costs requisite and necessary during the continuance
of this power of attorney and assignment of rents, (2) general and special
taxes, insurance premiums, and (3) the balance of the Rents pursuant to the
provisions of the Loan Agreement. This power of attorney and assignment of rents
shall be irrevocable until this Leasehold Deed shall have been satisfied and
released of record and the releasing of this Leasehold Deed shall act as a
revocation of this power of attorney and assignment of rents. Grantee shall have
and hereby expressly reserves the right and privilege (but assumes no
obligation) to demand, collect, sue for, receive and recover the Rents, or any
part thereof, now existing or hereafter made, and apply the same in accordance
with the provisions of the Loan Agreement.
All of the property described above, and each item of property
therein described, not limited to but including the Lease, the Land, the
Premises, the Property Rights, the Fixtures, the Personal Property, the Real
Property, the Intangibles, the Rents and the Subleases, is herein referred to as
the "Mortgaged Property." Notwithstanding the foregoing, the term "Mortgaged
Property" shall include all right, title and interest of Grantor in and to the
present or future use of wastewater, wastewater capacity, drainage, water or
other utility facilities to the extent such use benefits the Mortgaged Property,
including without limitation, all reservations, commitments or receipts covering
any such use, whether now or hereafter acquired.
Nothing herein contained shall be construed as constituting the
Grantee a Grantee-in-possession in the absence of the taking of actual
possession of the Mortgaged Property by the Grantee. Nothing contained in this
Leasehold Deed shall be construed as imposing on Grantee any of the obligations
of the sublessor under any sublease of the Mortgaged Property in the absence of
an explicit assumption thereof by Grantee. In the exercise of the powers herein
granted to the Grantee, no liability shall be asserted or enforced against the
Grantee, all such liability being expressly waived and released by Grantor.
TO HAVE AND TO HOLD the Secured Property and all parts, rights, members
and appurtenances thereof, to the use, benefit and behoof of Grantee, its
successors and assigns, as an estate for years in accordance with the Lease.
THIS CONVEYANCE is intended to operate and is to be construed as a deed
passing title to the Secured Property to Grantee and is made under those
provisions of the existing laws of the State of Georgia relating to deeds to
secure debt, and not as a mortgage, and is given to secure the following
described indebtedness liabilities and obligations:
(a) The debt evidenced by the Loan Agreement in the maximum principal
amount of Fifteen Millions and NO/100 Dollars ($15,000,000.00) together with any
and all renewal or renewals, modification or modifications and extension or
extensions of the Indebtedness evidenced thereby, and together with any and all
accrued and unpaid interest thereon;
(b) Any and all additional advances made by Grantee to protect or preserve
the Secured
5
<PAGE>
Property or the lien or security title thereof on the Secured Property or to pay
taxes, to pay premiums on insurance on the Secured Property, or to repair or
maintain the Secured Property, or to complete improvements on the Secured
Property (whether or not the original Grantor remains the Owner of the Secured
Property at the time of such advances, and whether or not the original Grantee
remains the owner of the Indebtedness and this instrument);
(c) Any and all expenses incident to the collection of the Indebtedness
secured hereby, the foreclosure hereof by action in any court, or by exercise of
the power of sale herein contained; and
(d) The full and prompt payment and performance of any and all obligations
or covenants of Grantor to Grantee under the terms of any other agreements,
assignments or other instruments now or hereafter evidencing, securing or
otherwise relating to the Indebtedness evidenced by the Loan Documents.
The following provisions shall also constitute an integral part of this
Leasehold Deed:
1. Payment of Taxes on the Leasehold Deed. Grantor agrees that, if
the United States or any department, agency or bureau thereof or if the State or
any of its subdivisions having jurisdiction shall at any time require
documentary stamps to be affixed to this Leasehold Deed or shall levy, assess,
or charge any tax, assessment or imposition upon this Leasehold Deed or the
credit or indebtedness secured hereby or the interest of Trustee or Grantee in
the Premises or upon Trustee or Grantee by reason of or as holder of any of the
foregoing, then Grantor shall pay for such documentary stamps in the required
amount and deliver them to Grantee or pay (or reimburse Grantee for) such taxes,
assessments or impositions and, unless all such documentary stamps, taxes,
assessments and impositions are paid or reimbursed by Grantor when and as they
become due and payable, all sums hereby secured shall become immediately due and
payable, at the option of Grantee, notwithstanding anything contained herein or
in any law heretofore or hereafter enacted. Grantor agrees to exhibit to
Grantee, at any time upon request, official receipts showing payment of all
taxes, assessments and charges which Grantor is required or elects to pay under
this paragraph. Grantor agrees to indemnify Trustee and Grantee against
liability on account of such documentary stamps, taxes, assessments or
impositions, whether such liability arises before or after payment of the
Obligations and regardless of whether this Leasehold Deed shall have been
released.
2. Security Agreement.
(a) Insofar as the machinery, apparatus, equipment, fittings,
fixtures, building supplies and materials, articles of personal property,
contract rights, accounts and general intangibles either referred to or
described in this Security Deed, or in any way connected with the use and
enjoyment of the Secured Property by Grantor is concerned (other than any
personal property expressly excluded pursuant to the granting clauses hereof)
this Security Deed is hereby made and declared to be a security agreement,
encumbering each and every item of personal property
6
<PAGE>
included herein, in compliance with the provisions of the Uniform Commercial
Code as enacted in the State of Georgia. A financing statement or statements
reciting this Security Deed to be a security agreement, affecting all of said
personal property aforementioned, shall be executed by Grantor and appropriately
filed. The remedies for any violation of the covenants, terms and conditions of
the security agreement herein contained shall be (i) as prescribed herein, or
(ii) as prescribed by general law, or (iii) as prescribed by the specific
statutory consequences now or hereafter enacted and specified in said Uniform
Commercial Code, all at Grantee's sole election. Grantor and Grantee agree that
the filing of such financing statement(s) in the records normally having to do
with personal property shall never be construed as in anywise derogating from or
impairing this declaration and hereby stated intention of Grantor and Grantee
that everything used in connection with the production of income from the
Secured Property and/or adapted for use therein and/or which is described or
reflected in this Security Deed, is, and at all times and for all purposes and
in all proceedings both legal or equitable shall be, regarded as part of the
real estate irrespective of whether (a) any such item is physically attached to
the Premises, (b) serial numbers are used for the better identification of
certain items capable of being thus identified in a recital contained herein, or
(c) any such item is referred to or reflected in any such financing statements
so filed at any time. Similarly, the mention of any such financing statements of
the rights in and to (aa) the proceeds of any fire, casualty and/or hazard
insurance policy, or (bb) any award in condemnation proceedings for a taking or
for loss of value, or (cc) Grantor's interest as lessor in any present or future
lease or rights to income growing out of the use and/or occupancy of the Secured
Property, whether pursuant to lease or otherwise, shall never be construed as in
anywise altering any of the rights of Grantee as determined by this instrument
or impugning the priority of Grantee's lien granted hereby or by any other
recorded document, but such mention in such financing statements is declared to
be for the protection of Grantee in the event any court shall at any time hold
with respect to the foregoing (aa), (bb) or (cc), that notice of Grantee's
priority of interest to be effective against a particular class of persons, must
be filed in the Uniform Commercial Code records.
(b) Grantor shall execute and deliver to Grantee, in form and
substance satisfactory to Grantee, such "financing statements", real estate and
related notice filing and such further assurances as Grantee may from time to
time reasonably consider necessary to create, perfect and preserve Grantee's
security interest herein granted, and Grantee may cause such statements and
assurances to be recorded and filed at such times and places as may be required
or permitted by law to so create, perfect and preserve such security interest.
(c) The assignment and security interest herein granted shall
not be deemed or construed to constitute Grantee as a "trustee in possession" of
the Secured Property, to obligate Grantee to lease the Secured Property or
attempt to do same, or to take any action, incur any expense or perform or
discharge any obligation duty or liability whatsoever under any of the leases or
otherwise.
3. Subleases Affecting the Real Property. Grantor agrees faithfully
to perform all of its obligations under all present and future subleases or
other agreements relative to the occu-
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pancy of the Real Property at any time assigned to Grantee as additional
security, and to refrain from any action or inaction which would result in
termination of any such subleases or agreements or in the diminution of the
value thereof or of the rents or revenues due thereunder. All future sublessees
under any sublease of the Real Property, or any part thereof, made after the
date of recording of this Leasehold Deed shall, at Grantee's option and without
any further documentation, attorn to Grantee as sublessor if for any reason
Grantee becomes sublessor thereunder, and, upon demand, pay rent to Grantee, and
Grantee shall not be responsible under such sublease for matters arising prior
to Grantee becoming sublessor thereunder.
4. Use of the Real Property. Grantor agrees that it shall not permit
the public to use the Real Property in any manner that might tend, in Grantee's
reasonable judgment, to impair Grantor's leasehold interest in such property or
any portion thereof, or to make possible any claim or claims of easement by
prescription or of implied dedication to public use.
5. Indemnification. Grantor shall not use or permit the use of any
part of the Real Property for any illegal purpose, including, without
limitation, the violation of any environmental laws, statutes, codes,
regulations or practices. Without limiting any indemnification Grantor has
granted in the Loan Agreement, Grantor agrees to indemnify and hold harmless
Trustee and Grantee from and against any and all losses, suits, obligations,
fines, damages, judgments, penalties, claims, charges, costs and expenses
(including reasonable attorneys' and paralegals' fees, court costs and
disbursements) which may be imposed on, incurred or paid by or asserted against
the Real Property by reason or on account of or in connection with the (i)
construction, reconstruction or alteration of the Real Property, (ii) any
negligence or misconduct of Grantor, any sublessee of the Real Property, or any
of their respective agents, contractors, subcontractors, servants, employees,
licensees or invitees, (iii) any accident, injury, death or damage to any person
or property occurring in, on or about the Real Property or any street, drive,
sidewalk, curb or passageway adjacent thereto, or (iv) any other transaction
arising out of or in any way connected with the Mortgaged Property.
6. Insurance. Grantor shall, at its sole expense, obtain for,
deliver to, assign and maintain for the benefit of Trustee and Grantee, until
the Obligations are paid in full, insurance policies as specified in the Loan
Agreement. In the event of a casualty loss, the net insurance proceeds from such
insurance policies shall be paid and applied as specified in the Loan Agreement.
7. Condemnation Awards. Grantor hereby assigns to Grantee, as
additional security, all awards of damage resulting from condemnation
proceedings or the taking of or injury to the Real Property for public use, and
Grantor agrees that the proceeds of all such awards shall be paid and applied as
specified in the Loan Agreement.
8. Remedies.
(a) Upon the occurrence of any Event of Default, Grantee may
take such action, without notice or demand, as it deems advisable to protect and
enforce its rights against
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Grantor and in and to the Secured Property, including, but not limited to, the
following actions, each of which may be pursued concurrently or otherwise, at
such time and in such order as Grantee may determine, in its sole discretion,
without impairing or otherwise affecting the other rights and remedies of
Grantee: (1) declare the entire unpaid Indebtedness to be immediately due and
payable; or (2) notify all subtenants of the Premises and all others obligated
on leases of any part of the Premises that all rents and other sums owing on
leases have been assigned to Grantee and are to be paid directly to Grantee, and
to enforce payment of all obligations owing on subleases, by suit, ejectment,
cancellation, releasing, reletting or otherwise, whether or not Grantee has
taken possession of the Premises, and to exercise whatever rights and remedies
Grantee may have under any assignment of rents and leases; or (3) enter into or
upon the Premises, either personally or by its agents, nominees or attorneys and
dispossess Grantor and its agents and servants therefrom, and thereupon Grantee
may (i) use, operate, manage, control, insure, maintain, repair, restore and
otherwise deal with all and every part of the Premises and conduct the business
thereat; (ii) complete any construction on the Premises in such manner and form
as Grantee deems advisable; (iii) make alterations, additions, renewals,
replacements and improvements to or on the Secured Property; (iv) exercise all
rights and power of Grantor with respect to the Premises, whether in the name of
Grantor, or otherwise, including, without limitation, the right to make, cancel,
enforce or modify leases, obtain and evict tenants, and demand, sue for, collect
and receive all earnings, revenues, rents, issues, profits and other income of
the Premises and every part thereof, which rights shall not be in limitation of
Grantee's rights under any assignment of rents and leases securing the loan; and
(v) apply the receipts from the Premises to the payment of the Indebtedness,
after deducting therefrom all reasonable expenses (including reasonable
attorneys' fees) incurred in connection with the aforesaid operations and all
amounts necessary to pay the taxes, assessments, insurance and other charges in
connection with the Secured Property, as well as just and reasonable
compensation for the services of Grantee, its counsel, agents and employees; or
(4) institute proceedings for the complete foreclosure of this Security Deed
either at law, in equity or pursuant to Paragraph 8 (b) herein, in which case
the Secured Property may be sold for cash in one or more parcels; or (5) with or
without entry, to the extent permitted and pursuant to the procedures provided
by applicable law, institute proceedings for the partial foreclosure of this
Security Deed for the portion of the Indebtedness then due and payable (if
Grantee shall have elected not to declare the entire Indebtedness to be
immediately due and owing), subject to the continuing lien of this Security Deed
for the balance of the Indebtedness not then due;) or (6) sell for cash the
Secured Property or any part thereof and all estate, claim, demand, right, title
and interest of Grantor therein and rights of redemption thereof, pursuant to
power of sale or otherwise, at one or more sales, as an entity or in parcels, in
whole or in part, and as to the fee estate (or any lesser estate including only
the leasehold estate), at Grantee's election, and such estates shall not merge
unless elected by Grantee, at such time and place, upon such terms and after
such notice thereof, as may be required or permitted by law, and in the event of
a sale, by foreclosure or otherwise, of less than all of the Secured Property,
this Security Deed shall continue as a lien on the remaining portion of the
Secured Property; or (7) institute an action, suit or proceeding in equity for
the specific performance of any covenant, condition or agreement contained
herein or in the Lease Agreement or the Loan Agreement or other Loan Documents;
or (8) recover judgment on the Loan Agreement or other Loan Documents either
before, during or after any proceedings for the enforcement of this Security
Deed; or (9) apply for
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the appointment of a trustee, receiver, liquidator or conservator of the Secured
Property, without regard for the adequacy of the security for the Indebtedness
and without regard for the solvency of Grantor, any guarantor, or any other
person, firm or other entity liable for the payment of the Indebtedness; or (10)
pay or perform any default in the payment, performance or observance of any
term, covenant or condition of this Security Deed, and all payments made or
costs or expenses incurred by Grantee in connection therewith, shall be secured
hereby and shall be, without demand, immediately repaid by Grantor to Grantee
with interest thereon as provided above, the necessity for any such actions and
of the amounts to be paid to be in the sole judgment of Grantee, and Grantee may
enter and authorize others to enter upon the Secured Property or any part
thereof for the purpose of performing or observing any such defaulted term,
covenant or condition without thereby becoming liable to Grantor or any person
in possession holding under Grantor; or (11) pursue such other remedies as
Grantee may have under applicable law, in equity or under this Security Deed, or
any of the other Loan Documents; or (12) pursue any remedy available to Grantee
under the Guaranty or any other guaranty.
(b) If an Event of Default shall have occurred, Grantee, at
its option, may sell the Secured Property or any part of the Secured Property at
public sale or sales at the usual place for conducting sales in the county in
which the Secured Property or any part of the Secured Property is situated, to
the highest bidder for cash, in order to pay the Indebtedness secured hereby and
accrued interest thereon and insurance premiums, liens, assessments, taxes and
charges, including utility charges, if any, with accrued interest thereon and
all expenses of the sale and of all proceedings in connection therewith,
including reasonable attorneys' fees, actually incurred, after advertising the
time, place and terms of sale once a week for four (4) weeks immediately
preceding such sale (but without regard to the number of days) in a newspaper in
which Sheriff's sales are advertised in said county, all other notice being
hereby waived by Grantor. At any such public sale, Grantee may execute and
deliver to the purchaser a conveyance of the Secured Property or any part of the
Secured Property in fee simple or leasehold estate, as applicable, with full
warranties of title (or without warranties of Grantee shall so elect) and to
this end, Grantor hereby constitutes and appoints Grantee the agent and
attorney-in-fact of Grantor to make such sale and conveyance, and thereby to
divest Grantor of all right, title, interest, equity and equity of redemption
that Grantor may have in and to the Secured Property and to vest the same in the
purchaser or purchasers at such sale or sales, and all the acts and doings of
said agent and attorney-in-fact are hereby ratified and confirmed and any
recitals in said conveyance or conveyances as to facts essential to a valid sale
shall be binding upon Grantor. The aforesaid power of sale and agency hereby
granted are coupled with an interest and are irrevocable by death or otherwise,
are granted as cumulative of the other remedies provided hereby or by law for
collection of the Indebtedness secured hereby and shall not be exhausted by one
exercise thereof but may be exercised until full payment of all Indebtedness
secured hereby. In the event of any such foreclosure sale by Grantee, Grantor
shall be deemed atenant holding over and shall forthwith deliver possession to
the purchaser or purchasers at such sale or be summarily dispossessed according
to provisions of law applicable to tenants holding over.
(c) The proceeds of any sale made under or by virtue of this
Article II, together with any other sums which then may be held by Grantee under
this Security Deed, whether
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under the provisions of this Article II or otherwise, shall be applied as
follows:
First: To the payment of the costs and expenses of any such sale,
including reasonable compensation to Grantee, its agents and counsel, and of any
judicial proceedings wherein the same may be made, and of all expenses,
liabilities and advances made or incurred by Grantee under this Security Deed,
together with interest as provided herein on all advances made by Grantee and
all taxes or assessments, except any taxes, assessments or other charges subject
to which the Secured Property shall have been sold.
Second: To the payment of the whole amount then due, owing or unpaid upon
the indebtedness evidenced by the Loan Agreement for principal, together with
any and all applicable interest and late charges.
Third:To the payment of any other sums required to be paid by Grantor
pursuant to any provision of this Security Deed, or any of the other Loan
Documents.
Fourth: To the payment of the surplus, if any after the payment of all the
Indebtedness, to whomsoever may be lawfully entitled to receive the same.
Grantee and any receiver of the Secured Property, or any part thereof, shall be
liable to account for only those rents, issues and profits actually received by
it.
(d) Grantee may adjourn from time to time any sale by it to be
made under or by virtue of this Security Deed by announcement at the time and
place appointed for such sale or for such adjourned sale or sales; and, except
as otherwise provided by any applicable provision of law, Grantee, without
further notice or publication, may make such sale at the time and place to which
the same shall be so adjourned.
(e) Upon the completion of any sale or sales made by Grantee
under or by virtue of this Article II, Grantee, or an officer of any court
empowered to do so, shall execute and deliver to the accepted purchaser or
purchases 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. Grantee is hereby irrevocably appointed the
true and lawful attorney of Grantor, in its name and stead, to make all
necessary conveyances, assignments, transfers and deliveries of the Secured
Property and rights so sold and for that purpose Grantee may execute all
necessary instruments of conveyance, assignment and transfer, and may substitute
one or more persons with like power, Grantor hereby ratifying and confirming all
that is said attorney or such substitute or substitutes hall lawfully do by
virtue hereof. Any such sale or sales as to the portion of the Security Property
sold and made under or by virtue of this Article II, whether made under the
power of sale herein granted or under or by virtue of judicial proceedings or of
a judgment or degree of foreclosure and sale, shall operate to divest all the
estate, right, title, interest, claim and demand whatsoever, whether at law or
in equity, of Grantor in and to the properties and rights so sold, and shall be
a perpetual bar both at law and in equity against Grantor and against any and
all persons claiming or who may claim the same, or any part thereof from,
through or under Grantor.
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<PAGE>
(f) In the event of any sale made under or by virtue of this
paragraph (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 entire Indebtedness, if not previously due and payable, immediately
thereupon shall, anything in the Loan Documents or in this Security Deed to the
contrary notwithstanding, become due and payable.
(g) Upon any sale made under or by virtue of this paragraph
(whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or degree of foreclosure and sale),
Grantee may bid for and acquire the Secured Property or any part thereof and in
lieu of paying cash therefor may make settlement for the purchase price be
crediting upon the Indebtedness the net sales price after deducting therefrom
the expenses of the sale and the costs of the action and any other sums which
Grantee is authorized to deduct under this Security Deed.
(h) No recovery of any judgment by Grantee and no levy of an
execution under any judgment upon the Secured Property or upon any other
property of Grantor shall affect in any manner or to any extent, the lien and
title of this Security Deed upon the Secured Property or any part thereof, or
any liens, titles, rights, powers or remedies of Grantee hereunder, but such
liens titles, rights, powers and remedies of Grantee shall continue unimpaired
as before.
(i) Grantor agrees, to the fullest extent permitted by law,
that upon the occurrence of an Event of Default, neither Grantor nor anyone
claiming through or under it shall or will set up, claim or seek to take
advantage of any appraisement, valuation, stay, extension, homestead, exemption
or redemption laws now or hereafter in force, in order to prevent or hinder the
enforcement or foreclosure of this Security Deed, or the absolute sale of the
Secured Property, or the final and absolute putting into possession thereof,
immediately after such sale, of the purchasers thereat, and Grantor, for itself
and all who may at any time claim through or under it, hereby waives to the full
extent that it may lawfully so do, the benefit of all such laws, and any and all
right to have the assets comprised in the security intended to be created hereby
marshalled upon any foreclosure of the lien or title hereof.
Grantee, at is option, is authorized to foreclose this Security Deed
subject to the rights of any subtenants of the Premises, and the failure to make
any such subtenants parties to any such foreclosure proceedings and to foreclose
their rights will not be, nor be asserted to be by Grantor, a, defense to any
proceedings instituted by Grantee to collect the sums secured hereby.
9. Grantee's Remedies against Multiple Parcels. If more than one
property, lot or parcel is covered by this Leasehold Deed, and if this Leasehold
Deed is foreclosed upon, or judgment is entered upon any Obligations secured
hereby, or if Grantee exercises its power of sale, execution may be made upon or
Grantee may exercise its power of sale against any one or more of the
properties, lots or parcels and not upon the others, or upon all of such
properties or parcels, either together or separately, and at different times or
at the same time, and execution sales or sales by
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advertisement may likewise be conducted separately or concurrently, in each case
at Grantee's election.
10. No Merger. In the event of a foreclosure of this Leasehold Deed
or any other mortgage or Leasehold Deed securing the Obligations, the
Obligations then due the Grantee shall not be merged into any decree of
foreclosure entered by the court, and Grantee may concurrently or subsequently
seek to foreclose one or more mortgages or deeds of trust which also secure said
Obligations.
11. Notices. Except as otherwise provided herein, any notices,
demands, consents, requests, approvals, undertakings or other instruments
required or permitted to be given in connection with this Leasehold Deed (and
all copies of such notices or other instruments as set forth below) shall be in
writing, and shall be deemed to have been validly served, given or delivered if
hand-delivered or if sent by a nationally recognized overnight delivery service,
charges prepaid (effective two (2) business days following deposit with such
delivery service), or if mailed (effective three (3) business days following
deposit thereof at any main or branch United States Post Office) by United
States registered or certified mail, postage prepaid, return receipt requested,
addressed to the party so notified as follows:
if to Grantor:
Country Star Restaurants, Inc.
11150 Santa Monica Blvd.
Los Angeles, California
Attention: Chief Operating Officer
Telecopy No. 310.268.2208
with copies to:
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022
Attention: Clifford Brandeis
Telecopy No. 212.223.6433
if to Trustee or Grantee:
Cameron Capital Ltd.
10 Cavendish Road
Hamilton, HM 19
Bermuda
Attention: Nic Snelling
Telecopy No. 441.295.9022
with a copy to:
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Freeborn & Peters
950 Seventeenth Street
Denver, Colorado
Attention: Kenneth S. Witt
Telecopy No. 303.628.4240
Grantor or Grantee shall, from time to time, have the right to specify as the
proper addressee and/or address for the purposes of this Leasehold Deed any
other party or address in the United States upon giving five (5) days' written
notice thereof.
12. Extension of Payments. Grantor agrees that, without affecting
the liability of any person for payment of the Obligations secured hereby or
affecting the lien of this Leasehold Deed upon the Mortgaged Property or any
part thereof (other than persons or property explicitly released as a result of
the exercise by Trustee or Grantee of its rights and privileges hereunder),
Grantee may at any time and from time to time, on request of the Grantor,
without notice to any person liable for payment of any Obligations secured
hereby, but otherwise subject to the provisions of the Loan Agreement, extend
the time, or agree to alter or amend the terms of payment of such Obligations.
Grantor further agrees that any part of the security herein described may be
released with or without consideration without affecting the remainder of the
Obligations or the remainder of the security.
13. Governing Law. Grantor and Grantee have agreed that the Loan is
to be secured by collateral security located in different states. In addition,
Grantor and Grantee have agreed that the law of the State of Georgia will govern
the Loan and that the laws of the individual states in which such collateral
security for the Loan is located will govern all matters with regard to such
collateral security accordingly. Wherever possible, each provision of this
Leasehold Deed shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Leasehold Deed shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Leasehold Deed.
14. Satisfaction of Leasehold Deed. Upon full payment of all the
Obligations, at the time and in the manner provided in the Loan Agreement, upon
expiration of the Lease by passage of time, this conveyance or lien shall be
null and void and, upon demand therefor following such payment, or expiration of
the Lease by passage of time, as the case may be, a satisfaction of this
Leasehold Deed or reconveyance of the Mortgaged Property shall promptly be
provided by Grantee to Grantor.
15. Successors and Assigns Included in Parties. This Leasehold Deed
shall be binding upon the Grantor and upon the successors and assigns of the
Grantor and shall inure to the benefit of the Trustee's and Grantee's respective
successors and assigns; all references herein to the Grantor and to the Grantee
shall be deemed to include their respective successors and assigns. Grantor's
successors and assigns shall include, without limitation, a receiver, trustee or
debtor in
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possession of or for the Grantor. Wherever used, the singular number shall
include the plural, the plural shall include the singular, and the use of any
gender shall be applicable to all genders.
16. Interpretation with Other Documents. Notwithstanding anything in
this Leasehold Deed to the contrary, in the event of a conflict or inconsistency
between the Leasehold Deed and the Loan Agreement, the provisions of the Loan
Agreement shall govern.
17. Future Advances. The parties hereto intend that, in addition to
any other debt or obligation secured hereby, this Leasehold Deed shall secure
unpaid balances of the Obligations and other such extensions of credit made by
Grantee to Grantor after this Leasehold Deed is filed for recordation in the
official records of the county in which the Mortgaged Property is located,
whether made pursuant to an obligation of Grantee or otherwise. Such Obligations
and other extensions of credit may or may not be evidenced by notes executed
pursuant to the Loan Agree ment. All future advances will have the same priority
as the original advance.
18. Invalid Provisions to Affect No Others. In the event that any of
the covenants, agreements, terms or provisions contained in this Leasehold Deed
shall be invalid, illegal or unenforceable in any respect, the validity of the
remaining covenants, agreements, terms or provisions contained herein or in the
Loan Agreement shall not be in any way affected, prejudiced or disturbed
thereby. In the event that the application of any of the covenants, agreements,
terms or provisions of this Leasehold Deed is held to be invalid, illegal or
unenforceable, those covenants, agreements, terms and provisions shall not be in
any way affected, prejudiced or disturbed when otherwise applied.
19. Changes. Neither this Leasehold Deed nor any term hereof may be
changed, waived, discharged or terminated orally, or by any action or inaction,
but only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. To the
extent permitted by law, any agreement hereafter made by Grantor and Grantee
relating to this Leasehold Deed shall be superior to the rights of the holder of
any inter vening lien or encumbrance.
20. Time of Essence. Time is of the essence with respect to the
provisions of this Leasehold Deed.
21. Required Notices. Grantor shall notify Grantee promptly of the
receipt of any notice of default from the landlord under the Lease.
22. Acquisition of Fee Interest. In the event Grantor acquires the
fee interest in the Mortgaged Property, either pursuant to the terms of the
Lease or otherwise, this Leasehold Deed shall continue in full force and effect
against the Mortgaged Property until its release of record, and this Leasehold
Deed shall become and remain a valid fee mortgage lien on the Mortgaged
Property.
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23. General Covenants; Representations and Warranties. Grantor
hereby covenants, represents and warrants that: (a) the Lease is a valid and
subsisting demise of the premises which it demises for the full term thereof;
(b) there are no known existing defaults under the Lease on the part of Grantor
and there are no existing defaults under the Lease on the part of any other
person or persons obligated to act or refrain from acting by reason thereof; (c)
Grantor has not assigned the Lease and there are no other assignments of the
Lease; (d) the lessor under the Lease had good right to demise the premises
therein demised; (e) the Lease is in full force and effect without any condition
pending which would by the passage of time ripen into a default; and (f) there
have been no amendments to the Lease.
24. Lease and Subleases affecting the Mortgaged Property. Grantor
agrees faithfully to perform all of its obligations under the Lease, all future
subleases, or other agreements relative to the occupancy of the Mortgaged
Property at any time assigned to Grantee as additional security, and to refrain
from any action or inaction which would result in termination of the Lease, or
of any such other subleases, or agreements, or in the diminution of the value
thereof or of the rents or revenues due thereunder. Grantor further agrees that
any future sublease of the Mortgaged Property made after the date of recording
of this Leasehold Deed shall contain a covenant to the effect that such
sublessee shall, at Grantee's option, agree to attorn to Grantee as sublessor
and, upon demand, to pay rent to Grantee. Grantor shall not, without the prior
written approval of Grantee in each instance, (i) make or enter into any
sublease of all or any part of the Mortgaged Property; (ii) change, amend,
modify, or assign in any manner whatsoever the Lease or any sublease thereof;
(iii) terminate or cancel, surrender or accept a surrender of, suffer or permit
any cancellation, termination or surrender of, the Lease, any sublease, or any
leasehold estate in any manner whatsoever; or (iv) receive, collect or accept or
permit the receipt, collection or acceptance of any prepayment of rent or other
charges under any sublease for more than one (1) month except that the Grantor
may, at the execution of a sublease, accept any rent security deposits.
25. Excess Interest. In no event shall any interest rate hereunder
exceed the maximum rate permissible for corporate Grantors under applicable law
(the "Maximum Rate"). If, in any month, any interest rate, absent such
limitation, would have exceeded the Maximum Rate, then the interest rate for
that month shall be the Maximum Rate, and, if in further months, that interest
rate would otherwise be less than the Maximum Rate, then that interest rate
shall remain at the Maximum Rate until such time as the amount of interest paid
hereunder equals the amount of interest which would have been paid if the same
had not been limited by the Maximum Rate. In the event that, upon payment in
full of the Obligations under the Loan Agreement, the total amount of interest
paid or accrued under the terms of the Loan Agreement is less than the total
amount of interest which would, but for this paragraph, have been paid or
accrued if the interest rates otherwise set forth in the Loan Agreement had at
all times been in effect, then Grantor shall, to the extent permitted by
applicable law, pay Lenders an amount equal to the difference between (a) the
lesser of (i) the amount of interest which would have been charged if the
Maximum Rate had, at all times, been in effect or (ii) the amount of interest
which would have accrued had the interest rates otherwise set forth in the Loan
Agreement, at all times, been in effect and (b) the amount of interest actually
paid or accrued under the Loan Agreement. In the event that a court determines
that any Lender has
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received interest and other charges hereunder in excess of the Maximum Rate,
such excess shall be deemed received on account of, and shall automatically be
applied to reduce, the Obligations other than interest, in the inverse order of
maturity, and if there are no Obligations outstanding, such Lender shall refund
to Borrower such excess.
26. Payment of Rent and Performance Under Ground Lease and Other
Agreements.
(a) Borrower shall pay or cause to be paid, not later than the date upon
which same becomes due and payable pursuant to the provisions of the Ground
Lease, all rent, additional rent and other payments required to be paid by
Borrower under the Ground Lease according to the terms, conditions and
provisions of the Ground Lease. Borrower shall forward to Lender, simultaneously
with the transmittal of such payment, a photostatic copy of such transmittal of
payment, which copy shall be certified by Borrower as being true, correct and
complete and as being delivered by Borrower to the party designated on such
date. Within ten (10) days after the date of each such payment, Borrower shall
deliver to Lender the original or photostatic copy of the official receipt
evidencing such payment or other proof of payment satisfactory to lender.
(b) At the sole cost and expense of Borrower, Borrower shall duly and
punctually observe and perform all of the covenants, duties, obligations and
agreements of the lessee or tenant under the Ground Lease in strict accordance
with the terms, conditions and provisions thereof, shall not do or permit to be
done anything to impair the Lender's security, shall enforce the performance and
observance of each and every covenant and condition of the Ground Lease to be
performed or observed by any other party to the Ground Lease and shall otherwise
maintain the Ground Lease as a valid and subsisting estate for years and
leasehold estate in full force and effect in accordance with the terms,
conditions and provisions thereof without threat of termination of the Ground
Lease or diminishment of the leasehold estate demised thereby.
(c) In the event Borrower defaults under the terms, conditions or
provisions of the Ground Lease, or Borrower receives any notice from any Lessor
under the Ground Lease or otherwise of the occurrence of a default or event of
default on the part of the Borrower or any other party under the Ground Lease,
or Borrower receives any notice from any Lessor under the Ground Lease or
otherwise of the occurrence of, or failure of, any condition under the Ground
Lease or any other circumstance pursuant to which the Ground Lease may be
terminated or canceled or the leasehold estate may otherwise be diminished,
Borrower shall within three (3) days of the commission of such default or of the
receipt of such notice of default or other occurrence, notify Lender of the
occurrence of such default or event of default or occurrence and provide Lender
in such notification with a copy of such notice of default. Without diminishing
in any respect Lender's rights hereunder or otherwise, Borrower shall in such
notification and at all times thereafter provide Lender with such information as
Lender may require with respect to the nature of such default, the steps
Borrower is taking (or proposes to take) with respect thereto and any other
information which Lender may require. Borrower shall take any and all actions as
are necessary to avoid termination of the Ground Lease, including the
institution of legal proceedings to enforce the Ground Lease, and Borrower shall
appear in and defend any action or proceeding arising under or in any manner
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<PAGE>
connected with the Ground Lease, or the obligations or liabilities of Borrower
as the lessee thereunder.
(d) Borrower warrants, represents and certifies that:
(i) The Borrower is the sole owner and holder of the entire lessee's
interest in the Ground Lease and of the leasehold estate created thereby,
free and clear of any and all liens, security interests and encumbrances,
but subject only to those title exceptions listed on Exhibit B attached
hereto and made a part hereof. Borrower has made no assignment other than
this Mortgage of any of the rights of Borrower under the Ground Lease.
(ii) The Ground Lease is a valid and subsisting estate for years of,
in and to the Land and of the other property described therein and
purported to be demised thereunder for the term therein set forth. The
Ground Lease is valid and enforceable and in full force and effect in
accordance with the terms, conditions and provisions thereof and has not
been altered, modified or amended in any manner whatsoever except as
expressly set forth herein.
(iii) Neither the Borrower nor the lessor under the Ground Lease is
in default under any of the terms, covenants or conditions thereof nor
does there exist any event of default or any state of facts or condition
which would with the passage of time or the giving of notice, or both,
constitute a default or event of default on the part of said lessor or
Borrower under any of said terms, covenants or conditions or otherwise
impair, reduce or otherwise alter the leasehold estate conveyed
thereunder.
(iv) Borrower is not prohibited under any judgment, court decree,
administrative regulation, administrative ruling, ordinance, law or other
ruling applicable to Borrower, from the execution and delivery of this
Mortgage and of the assignment of Borrower's interest in the Ground Lease,
the performance of each and every obligation of Borrower hereunder and
under the Ground Lease and the meeting of each and every condition herein
or in the Ground Lease contained.
(v) That no action has been brought or threatened which would in any
manner interfere with the right of Borrower to execute this Assignment and
to perform all of Borrower's obligations contained in this Assignment or
under the Leases.
(vi) The copy of the Ground Lease provided by Borrower to Lender is
a true, correct and complete copy thereof and that the records related
thereto which have been furnished by the Borrower to the Lender are true,
correct, accurate and complete in all material respects.
(vii) Borrower has neither done any act nor failed to do any act
which might prevent Lender from, or limit Lender in, acting under any of
the provisions of this Mortgage or which might cause Borrower to be
estopped from exercising any of its rights under the
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Ground Lease.
(viii)Borrower has full power and authority to execute and deliver
this Mortgage and said execution and delivery has been duly authorized and
does not conflict with or constitute a default under the Ground Lease or
any other agreement, indenture or other instrument binding upon the
Borrower or the Premises.
(e) Borrower shall not, without in each such event the prior written
consent of Lender, enter into any agreements, whether written or oral, which
purport to amend, modify, or vary the terms, conditions and provisions of the
Ground Lease or which directly or indirectly waives or releases any lessor from
the performance or observance by the lessor of any obligation or condition of
the Ground Lease. The prior written consent of Lender shall be evidenced in the
following manner: Lender must either (i) join in the execution of such
amendment, modification of variance shall be thereupon recorded in the real
estate records in the state and county in which the Land is located, or (ii)
Lender's written consent shall be executed in recordable form, attaching thereto
a true, correct and complete copy of such amendment, modification or variance,
and which document indicating such consent of Lender shall be thereupon recorded
in the real estate records in the state and county in which the Land is located.
Any such purported amendment, modification or variance entered into by Borrower
and such lessor under the Ground Lease without the prior written consent of
Lender evidenced in such manner shall be null and void ab initio and shall be of
no force and effect.
(f) Borrower shall duly and punctually perform all covenants, duties,
obligations and agreements of Borrower under that certain Escrow Agreement of
even date herewith between Borrower, ___________ and ______________, as Escrow
Agent, and under any replacement escrow agreements or other agreements or
obligations related to the payment of rental under the Ground Lease hereafter
entered into or agreed to by Borrower and any other parties interested in the
Ground Lease. Provided further, however, that should Borrower fail to perform
any of the covenants, duties, obligations or agreements of Borrower under such
Escrow Agreement or such other agreements in strict accordance with the terms,
conditions and provisions thereof, said failure shall constitute an Event of
Death hereunder.
(g) In addition to the foregoing and not in limitation thereof, in the
event of a failure or default by Borrower in the observance or performance of
any one or more of the covenants and obligations of the lessee under the Ground
Lease or in the event that the Ground Lease otherwise becomes subject to, or
threatened with, termination or cancellation, such default or condition or
occurrence shall constitute a default hereunder and under the Note and Secured
Indebtedness secured hereby and, in any such event, Lender, at Lender's sole
option, may, in addition to the other remedies provided herein in the event of a
default hereunder, do any one or more of the following: (a) declare immediately
due and payable the Note secured hereby and proceed to exercise any and all
rights and remedies available to Lender hereunder and under said Note, at law or
in equity; (b) and to enter in and upon the Premises or any part thereof to such
extent and as often as Lender, in its sole discretion, deems necessary or
desirable in order to prevent or cure any default or event of
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<PAGE>
default by Borrower. Lender may pay and expend such sums of money as Lender, in
its sole discretion, deems necessary for any such purpose, including, but not
limited to the payment of any rental amounts or other sums due under the Ground
Lease, and Lender may proceed to perform any and all obligations of the Borrower
contained in the Ground Lese and exercise any and all rights of Borrower therein
contained as fully as the Borrower itself could, and upon so doing shall be
subrogated to any and all rights of Borrower as Lessee under the Ground Lease,
and Borrower hereby agrees to pay to Lender immediately and without demand, all
such sums so paid and expended by Lender, together with interest thereon from
the date of such payment at the default rate set forth in the Note, which sums
shall be secured by this Mortgage. Borrower hereby appoints and constitutes
Lender as Borrower's duly authorized attorney in fact to make advances under
this Mortgage for any purpose described in this paragraph and to take any other
action referenced in this Mortgage, and such power is coupled with an interest
and is irrevocable by death or otherwise.
(h) New Ground Lease with Lender. If the Ground Lease shall be terminated
prior to the natural expiration of its term due to an event of default
thereunder, and if, pursuant to any provision of the Ground Lease, the Lender or
its designee shall acquire from the Lessor under the Ground Lease a new lease of
the Premises and the Improvements, the Borrower shall have no right, title or
interest in or to such new lease or the leasehold estate created thereby, or
renewal privileges therein contained.
(i) No Merger of Fee and Leasehold Estates. So long as any portion of the
Secured Indebtedness shall remain unpaid, and unless the Lender shall otherwise
consent, the fee title to the Premises and the Improvements and the leasehold
estate therein created pursuant to the provisions of the Ground Lease shall not
merge, but shall always be kept separate and distinct, notwithstanding the union
of such estates in the Borrower or in any other person, by purchase, operation
of law or otherwise. If the Lender shall acquire the fee title to the Premises
and the Improvements and the leasehold estate therein created pursuant to the
provisions of the Ground Lease, by foreclosure of this Mortgage or otherwise,
such estates shall not merge as a result of such acquisition and shall remain
separate and distinct for all purposes after such acquisition unless and until
the Lender shall elect to merge such estates.
IN WITNESS WHEREOF, this instrument is executed as of the day and
year first above written by the person or persons identified below on behalf of
Grantor (and said person or persons hereby represent that they possesses full
power and authority to execute this instrument).
THE GRANTOR HEREBY DECLARES AND ACKNOWLEDGES THAT THE
GRANTOR HAS RECEIVED, WITHOUT CHARGE, A TRUE COPY OF THIS LEASEHOLD
DEED.
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Signed, sealed and delivered Borrower:
in the presence of: COUNTRY STAR RESTAURANTS, INC.,
a Delaware corporation.
/s/ Pauline Probst By /s/ Peter Feinstein
- - ----------------------------- -----------------------------
Witness
Its ______ President
Attest: /s/ Robert Schuster
-------------------------
Its: /s/ Secretary
-------------------------
AFFIX CORPORATE SEAL
[SIGNATURE PAGE OF GEORGIA OPEN END LEASEHOLD DEED]
<PAGE>
STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
I, a Notary Public in and for said County, in the State aforesaid, do
hereby certify that Robert Schuster , and Peter Feinstein personally known to me
to be Secretary and President of Country Star Restaurant, Inc., a Delaware
corporation, and personally known to me to be the same persons whose name are
subscribed to the foregoing instrument, appeared before me this day in person
and acknowledged that they signed and delivered the said instrument as such, as
a free and voluntary act and as the free and voluntary act and deed of said
corporation, for the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal this 30 day of January , 1997.
/s/ Pauline Probst
------------------------------
Notary Public
My Commission Expires:
8 - 8 - 2000
- - ------------------------
Pauline Probst
Commission #1108108
Notary Public--California
Los Angeles County
My Comm. Expires Aug 8, 2000
<PAGE>
EXHIBIT A
Legal Description of Land:
23
<PAGE>
EXHIBIT B
Permitted Exceptions to Title:
Those title exceptions numbered _______ and listed on title
commitment dated February ___, 1997, issued by Ticor Title Insurance Corporation
for the property described on Exhibit A hereof.
24
[Nevada]
Recording requested by and when recorded mail to:
Kenneth S. Witt
Freeborn & Peters
950 Seventeenth Street
Denver, Colorado 80202
FIRST OPEN END LEASEHOLD DEED OF TRUST,
SECURITY AGREEMENT, FINANCING STATEMENT
AND ASSIGNMENT OF RENTS
THIS DEED OF TRUST ("Deed of Trust") dated as of the 12th day of
February 1997, made by COUNTRY STAR RESTAURANTS, INC., a Delaware corporation,
having its chief executive office at 11150 Santa Monica Blvd., Los Angeles,
California 90025 ("Grantor"), in favor of CHICAGO TITLE COMPANY, a California
corporation ("Trustee"), and CAMERON CAPITAL LTD., a Bermuda corporation, having
an office at 10 Cavendish Road, Hamilton HM 19, Bermuda ("Beneficiary"), as
Agent for the Lenders who are parties to the Loan Agreement referred to below
(the "Lenders").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Loan and Security Agreement dated
as of the date hereof among Grantor, the Beneficiary and the Lenders (as such
Loan and Security Agreement may be extended, supplemented, modified, restated or
otherwise changed, the "Loan Agreement"), the Lenders may from time to time make
loans and extend financial accommodations to Borrower, which loans shall consist
of line of credit loans in the maximum principal amount of Three Million Five
Hundred Thousand and No/100 Dollars ($3,500,000.00) (the "Line of Credit Loan")
and a term loan in the principal amount of Four Million and No/100 Dollars
($4,000,000.00) ("Term Loan") (the Line of Credit Loan and Term Loan being
collectively referred to herein as the "Loan") (the Loan Agreement and all other
documents, instruments and agreements entered into in connection therewith are
hereinafter sometimes jointly referred to as the "Loan Documents"); and
WHEREAS, the Loan shall mature on the dates and shall bear interest
at the rates
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<PAGE>
specified in the Loan Agreement; and
WHEREAS, Beneficiary has required as a condition, among others, to
its execution and delivery of the Loan Agreement that Grantor enter into this
Deed of Trust and grant Beneficiary the liens and security interests referred to
herein to secure the prompt and complete payment, observance and performance of
all of the "Obligations" (as defined in the Loan Agreement) and to secure the
Notes (the "Obligations" as defined in the Loan Agreement and the obligations of
Borrower under the Notes are hereinafter collectively referred to as the
"Obligations"), that Grantor execute and deliver this Deed of Trust to
Beneficiary; and
WHEREAS, the Obligations secured hereby shall not exceed an
aggregate principal amount, at any one time outstanding of Fifteen Million
Dollars and 00/100 ($15,000,000.00), provided, that the foregoing limitation
shall apply only to the lien upon the leasehold estate created by this Deed of
Trust, and it shall not in any manner limit, affect or impair any grant of a
security interest or other right in favor of the Beneficiary under the
provisions of the Loan Agreement, Guaranty or under any other security agreement
at any time executed by Grantor;
NOW, THEREFORE, in consideration of the premises contained herein
and to secure payment of the Obligations and in consideration of Ten Dollars
($10.00) in hand paid, receipt whereof is hereby acknowledged, Grantor does
hereby irrevocably grant, bargain, remise, release, alien, convey, mortgage and
warrant to Trustee IN TRUST, WITH POWER OF SALE, its successors and assigns, all
of Grantor's interest as lessee or tenant under that certain lease, as the same
may be or have been amended (the "Lease"), of the real estate (the "Land") in
_______ County, Nevada, all as described on Exhibit A attached hereto and by
this reference made a part hereof, which interest in the Lease, together with
all right, title and interest, if any, which Grantor may now have or hereafter
acquire in and to all improvements, buildings and structures thereon of every
nature whatsoever, is herein called the "Premises."
TOGETHER WITH all right, title and interest, if any, including any
after-acquired right, title and interest, and including any right of use or
occupancy, which Grantor may now have or hereafter acquire in and to (a) all
easements, rights of way, gores of land or any lands occupied by streets, ways,
alleys, passages, sewer rights, water courses, water rights and powers, and
public places adjoining said Land, and any other interests in property
constituting appurtenances to the Premises, or which hereafter shall in any way
belong, relate or be appurtenant thereto and, (b) all hereditaments, gas, oil,
minerals, and easements, of every nature whatsoever, located in or on the
Premises and all other rights and privileges thereunto belonging or appertaining
and all extensions, additions, improvements, betterments, renewals,
substitutions and replacements to or of any of the rights and interests
described in subparagraphs (a) and (b) above (hereinafter the "Property
Rights"); and
TOGETHER WITH all right, title and interest, if any, including any
after-acquired right, title and interest, and including any right of use or
occupancy, which Grantor may now have or hereafter acquire in and to all
fixtures and appurtenances of every nature whatsoever now or
2
<PAGE>
hereafter located in, on or attached to, and used or intended to be used in
connection with, or with the operation of, the Premises, including, but not
limited to (a) all apparatus, machinery and equipment of Grantor to the extent
deemed fixtures under law; and (b) all extensions, additions, improvements,
betterments, renewals, substitutions and replacements to or of any of the
foregoing (all of the foregoing items in this paragraph being referred to as the
"Fixtures"); as well as all personal property and equipment of every nature
whatsoever now or hereafter located in or on the Premises, including but not
limited to (c) all screens, window shades, blinds, wainscoting, storm doors and
windows, floor coverings, and awnings of Grantor; (d) all apparatus, machinery,
equipment and appliances of Grantor not included as Fixtures; (e) all items of
furniture, furnishings and personal property of Grantor; and (f) all extensions,
additions, improvements, betterments, renewals, substitutions and replacements
to or of any of the foregoing (c)-(e) (the items described in the foregoing
(c)-(f) and any other personal property referred to in this paragraph being the
"Personal Property") and in and to the proceeds of the Personal Property. It is
mutually agreed, intended and declared that the Premises and all of the Property
Rights and Fixtures owned by Grantor (referred to collectively herein as the
"Real Property") shall, so far as determined by law, be part and parcel of the
Land and for the purpose of this Deed of Trust to be real estate and covered by
this Deed of Trust. It is mutually agreed, intended and declared that the
premises and all of the Property Rights and Fixtures owned by Grantor (referred
to collectively herein as the "Real Property") shall, so far as permitted by
law, be deemed to form a part and parcel of the Land and for the purpose of this
Deed of Trust to be real estate and covered by this Deed of Trust. Subject to
the terms and conditions of the Loan Agreement, the remedies for any violation
of the covenants, terms and conditions of the agreements herein contained shall
be as prescribed herein or by general law, or, as to that part of the security
in which a security interest may be perfected under the Uniform Commercial Code,
by the specific statutory consequences now or hereafter enacted and specified in
the Uniform Commercial Code, all at the Beneficiary's sole election; and
TOGETHER WITH all the estate, right, title and interest of the
Grantor in and to (i) all judgments, insurance proceeds, awards of damages and
settlements resulting from condemnation proceedings or the taking of the Real
Property, or any part thereof, under the power of eminent domain or for any
damage (whether caused by such taking or otherwise) to the Real Property, or any
part thereof, or to any rights appurtenant thereto, and all proceeds of any
sales or other dispositions of the Real Property or any part thereof; and
(except as otherwise provided herein or in the Loan Agreement) the Beneficiary
is hereby authorized to collect and receive said awards and proceeds and to give
proper receipts and acceptances therefor, and to apply the same as provided in
the Loan Agreement for application of payments; and (ii) all contract rights,
general intangibles, actions and rights in action relating to the Real Property
including, without limitation, all rights to insurance proceeds and unearned
premiums arising from or relating to damage to the Real Property; and (iii) all
proceeds, products, replacements, additions, substitutions, renewals and
accessions of and to the Real Property. (The rights and interests described in
this paragraph shall hereinafter be called the "Intangibles").
As additional security for the Obligations secured hereby, Grantor
does (i) hereby pledge and assign to Beneficiary from and after the date hereof
(including any period of redemption),
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<PAGE>
primarily and on a parity with the Real Property, and not secondarily, all the
rents, issues and profits of the Real Property and all rents, issues, profits,
revenues, royalties, bonuses, rights and benefits due, payable or accruing
(including all deposits of money as advance rent, for security or as earnest
money or as down payment for the purchase of all or any part of the Real
Property) (the "Rents") under any and all present and future subleases,
contracts or other agreements relative to the ownership or occupancy of all or
any portion of the Real Property, and (ii) except to the extent such a transfer
or assignment is not permitted by the terms thereof, does hereby transfer and
assign to Beneficiary all such subleases and agreements (including all Grantor's
rights under any contracts for the sale of any portion of the Real Property and
all revenues and royalties under any oil, gas and mineral leases relating to the
Real Property) (the "Subleases"). Beneficiary hereby grants to Grantor the right
to collect and use the Rents as they become due and payable under the Subleases,
but not more than one (1) month in advance thereof, unless an "Event of Default"
(as defined in the Loan Agreement) shall have occurred provided that the
existence of such right shall not operate to subordinate this assignment to any
subsequent assignment, in whole or in part, by Grantor, and any such subsequent
assignment shall be subject to the rights of the Beneficiary under this Deed of
Trust. Grantor further agrees to execute and deliver such assignments of
subleases or assignments of land sale contracts as Beneficiary may from time to
time request. In the event of an Event of Default (1) the Grantor agrees, upon
demand, to deliver to the Beneficiary all of the Subleases with such additional
assignments thereof as the Beneficiary may request and agrees that the
Beneficiary may assume the management of the Real Property and collect the
Rents, applying the same upon the Obligations in the manner provided in the Loan
Agreement, and (2) the Grantor hereby authorizes and directs all tenants,
purchasers or other persons occupying or otherwise acquiring any interest in any
part of the Real Property to pay the Rents due under the Subleases to the
Beneficiary upon request of the Beneficiary. Grantor hereby appoints Beneficiary
as its true and lawful attorney in fact to manage said property and collect the
Rents, with full power to bring suit for collection of the Rents and possession
of the Real Property, giving and granting unto said Beneficiary and unto its
agent or attorney full power and authority to do and perform all and every act
and thing whatsoever requisite and necessary to be done in the protection of the
security hereby conveyed; provided, however, that (i) this power of attorney and
assignment of rents shall not be construed as an obligation upon said
Beneficiary to make or cause to be made any repairs that may be needful or
necessary and (ii) Beneficiary agrees that until such Event of Default as
aforesaid, Beneficiary shall permit Grantor to perform the aforementioned
management responsibilities. Upon Beneficiary's receipt of the Rents, at
Beneficiary's option, it may pay: (1) reasonable charges for collection thereof,
costs of necessary repairs and other costs requisite and necessary during the
continuance of this power of attorney and assignment of rents, (2) general and
special taxes, insurance premiums, and (3) the balance of the Rents pursuant to
the provisions of the Loan Agreement. This power of attorney and assignment of
rents shall be irrevocable until this Deed of Trust shall have been satisfied
and released of record and the releasing of this Deed of Trust shall act as a
revocation of this power of attorney and assignment of rents. Beneficiary shall
have and hereby expressly reserves the right and privilege (but assumes no
obligation) to demand, collect, sue for, receive and recover the Rents, or any
part thereof, now existing or hereafter made, and apply the same in accordance
with the provisions of the Loan Agreement.
4
<PAGE>
All of the property described above, and each item of property
therein described, not limited to but including the Lease, the Land, the
Premises, the Property Rights, the Fixtures, the Personal Property, the Real
Property, the Intangibles, the Rents and the Subleases, is herein referred to as
the "Mortgaged Property." Notwithstanding the foregoing, the term "Mortgaged
Property" shall include all right, title and interest of Grantor in and to the
present or future use of wastewater, wastewater capacity, drainage, water or
other utility facilities to the extent such use benefits the Mortgaged Property,
including without limitation, all reservations, commitments or receipts covering
any such use, whether now or hereafter acquired.
Nothing herein contained shall be construed as constituting the
Beneficiary a beneficiary-in-possession in the absence of the taking of actual
possession of the Mortgaged Property by the Beneficiary. Nothing contained in
this Deed of Trust shall be construed as imposing on Beneficiary any of the
obligations of the sublessor under any sublease of the Mortgaged Property in the
absence of an explicit assumption thereof by Beneficiary. In the exercise of the
powers herein granted to the Beneficiary, no liability shall be asserted or
enforced against the Beneficiary, all such liability being expressly waived and
released by Grantor.
TO HAVE AND TO HOLD the Mortgaged Property, properties, rights and
privileges hereby conveyed or assigned, or intended so to be, unto Trustee, its
successors and assigns, forever for the uses and purposes herein set forth.
Grantor hereby releases and waives all rights under and by virtue of the
Homestead Exemption Laws, if any, of the State of Nevada (the "State") and
Grantor hereby covenants, represents and warrants that, at the time of the
ensealing and delivery of these presents, Grantor is lawfully possessed of the
Mortgaged Property by virtue of the Lease as a valid and subsisting leasehold
estate for the full term thereof, subject only to the full fee simple interest
of the fee owner thereof, to the extent set forth in the Lease and with lawful
authority to sell, assign, and convey the Mortgaged Property, and that the title
to the Mortgaged Property is free and clear of all encumbrances except as set
forth on Exhibit B attached hereto and made a part hereof, and that, except for
the encumbrances set forth on Exhibit B, Grantor will forever defend the same
against all lawful claims.
The following provisions shall also constitute an integral part of
this Deed of Trust:
1. Payment of Taxes on the Deed of Trust. Grantor agrees that, if
the United States or any department, agency or bureau thereof or if the State or
any of its subdivisions having jurisdiction shall at any time require
documentary stamps to be affixed to this Deed of Trust or shall levy, assess, or
charge any tax, assessment or imposition upon this Deed of Trust or the credit
or indebtedness secured hereby or the interest of Trustee or Beneficiary in the
Premises or upon Trustee or Beneficiary by reason of or as holder of any of the
foregoing, then Grantor shall pay for such documentary stamps in the required
amount and deliver them to Beneficiary or pay (or reimburse Beneficiary for)
such taxes, assessments or impositions and, unless all such documentary stamps,
taxes, assessments and impositions are paid or reimbursed by Grantor when and as
they become due and payable, all sums hereby secured shall become immediately
due and payable, at the option of Beneficiary, notwithstanding anything
contained herein or in any law heretofore or hereafter enacted.
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<PAGE>
Grantor agrees to exhibit to Beneficiary, at any time upon request, official
receipts showing payment of all taxes, assessments and charges which Grantor is
required or elects to pay under this paragraph. Grantor agrees to indemnify
Trustee and Beneficiary against liability on account of such documentary stamps,
taxes, assessments or impositions, whether such liability arises before or after
payment of the Obligations and regardless of whether this Deed of Trust shall
have been released.
2. Subleases Affecting the Real Property. Grantor agrees faithfully
to perform all of its obligations under all present and future subleases or
other agreements relative to the occu pancy of the Real Property at any time
assigned to Beneficiary as additional security, and to refrain from any action
or inaction which would result in termination of any such subleases or
agreements or in the diminution of the value thereof or of the rents or revenues
due thereunder. All future sublessees under any sublease of the Real Property,
or any part thereof, made after the date of recording of this Deed of Trust
shall, at Beneficiary's option and without any further documentation, attorn to
Beneficiary as sublessor if for any reason Beneficiary becomes sublessor
thereunder, and, upon demand, pay rent to Beneficiary, and Beneficiary shall not
be responsible under such sublease for matters arising prior to Beneficiary
becoming sublessor thereunder.
3. Use of the Real Property. Grantor agrees that it shall not permit
the public to use the Real Property in any manner that might tend, in
Beneficiary's reasonable judgment, to impair Grantor's leasehold interest in
such property or any portion thereof, or to make possible any claim or claims of
easement by prescription or of implied dedication to public use.
4. Indemnification. Grantor shall not use or permit the use of any
part of the Real Property for any illegal purpose, including, without
limitation, the violation of any environmental laws, statutes, codes,
regulations or practices. Without limiting any indemnification Borrower has
granted in the Loan Agreement, Grantor agrees to indemnify and hold harmless
Trustee and Beneficiary from and against any and all losses, suits, obligations,
fines, damages, judgments, penalties, claims, charges, costs and expenses
(including reasonable attorneys' and para legals' fees, court costs and
disbursements) which may be imposed on, incurred or paid by or asserted against
the Real Property by reason or on account of or in connection with the (i)
construc tion, reconstruction or alteration of the Real Property, (ii) any
negligence or misconduct of Grantor, any sublessee of the Real Property, or any
of their respective agents, contractors, subcontractors, servants, employees,
licensees or invitees, (iii) any accident, injury, death or damage to any person
or property occurring in, on or about the Real Property or any street, drive,
sidewalk, curb or passageway adjacent thereto, or (iv) any other transaction
arising out of or in any way connected with the Mortgaged Property.
5. Insurance. Grantor shall, at its sole expense, obtain for,
deliver to, assign and maintain for the benefit of Trustee and Beneficiary,
until the Obligations are paid in full, insurance policies as specified in the
Loan Agreement. In the event of a casualty loss, the net insurance proceeds from
such insurance policies shall be paid and applied as specified in the Loan
Agreement.
6. Condemnation Awards. Grantor hereby assigns to Beneficiary, as
additional
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security, all awards of damage resulting from condemnation proceedings or the
taking of or injury to the Real Property for public use, and Grantor agrees that
the proceeds of all such awards shall be paid and applied as specified in the
Loan Agreement.
7. Remedies. Upon the occurrence of an Event of Default under the
terms of the Loan Agreement, in addition to any rights and remedies provided for
in the Loan Agreement, and to the extent permitted by applicable law, the
following provisions shall apply:
(a) Beneficiary's Power of Enforcement. It shall be lawful for
Beneficiary, by or through Trustee or otherwise, to (i) immediately sell the
Mortgaged Property either in whole or in separate parcels, as prescribed by the
State law, under power of sale, which power is hereby granted to Beneficiary
and/or Trustee to the full extent permitted by the State law, and thereupon, to
make and execute to any purchaser(s) thereof deeds of conveyance pursuant to
applicable law or (ii) immediately foreclose this Deed of Trust by judicial
action. The court in which any proceeding is pending for the purpose of
foreclosure of this Deed of Trust may, at once or at any time thereafter, either
before or after sale, without notice and without requiring bond, and without
regard to the solvency or insolvency of any person liable for payment of the
Obligations secured hereby, and without regard to the then value of the
Mortgaged Property or the occupancy thereof as a homestead, appoint a receiver
(the provisions for the appointment of a receiver and assignment of rents being
an express condition upon which the Loan hereby secured is made) for the benefit
of Beneficiary, with power to collect the Rents, due and to become due, during
such foreclosure suit and the full statutory period of redemption, if any,
notwithstanding any redemption. The receiver, out of the Rents, when collected,
may pay costs incurred in the management and operation of the Real Property,
prior and subordinate liens, if any, and taxes, assessments, water and other
utilities and insurance, then due or thereafter accruing, and may make and pay
for any necessary repairs to the Real Property, and may pay all or any part of
the Obligations or other sums secured hereby or any deficiency decree entered in
such foreclosure proceedings. Upon or at any time after the filing of a suit to
foreclose this Deed of Trust, the court in which such suit is filed shall have
full power to enter an order placing Trustee or Beneficiary in possession of the
Real Property with the same power granted to a receiver pursuant to this
subparagraph and with all other rights and privileges of a
mortgagee-in-possession under applicable law.
(b) Beneficiary's Right to Enter and Take Possession, Operate and
Apply Income. Beneficiary shall, at its option, have the right, acting through
Trustee and/or its agents or attorneys, either with or without process of law,
forcibly or otherwise, to enter upon and take possession of the Real Property,
expel and remove any persons, goods, or chattels occupying or upon the same, to
collect or receive all the Rents and to manage and control the same, and to
sublease the same or any part thereof, from time to time, and, after deducting
all reasonable attorneys' fees and expenses, and all reasonable expenses
incurred in the protection, care, maintenance, management and operation of the
Real Property, distribute and apply the remaining net income in accordance with
the terms of the Loan Agreement or upon any deficiency decree entered in any
foreclosure proceedings.
(c) Sale of Mortgaged Property. Beneficiary may, at its option, and
in addition
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<PAGE>
to any and every other remedy, request Trustee to proceed with foreclosure
(which request shall be presumed), and in such event Trustee is hereby
authorized and empowered and it shall be his special duty, upon such request of
Beneficiary, to (a) sell the Mortgaged Property, or any part thereof, at public
vendue to the highest bidder, for cash, at the county courthouse of the county
of the State in which the Mortgaged Property is situated in the area in such
courthouse designated for real property foreclosure sales in accordance with
applicable law (or in the absence of any such designation, in the area set forth
in the notice of sale hereinafter described) between the hours of 10:00 a.m. and
4:00 p.m. (commencing no earlier than such time as may be designated in the
hereinafter described notice of sale) on the first Tuesday of any month, after
giving legally adequate notice of the time, place and terms of said sale, and
the property to be sold, by posting (or by having some person or persons acting
for him post) for at least twenty-one (21) days preceding the date of the sale,
written or printed notice of the proposed sale at the courthouse door of the
appropriate county, or (b) sell the Mortgaged Property at such other time, place
and in accordance with such procedures and require ments as may hereafter be
provided by the laws of the State. In addition to such posting of notice the
holder of the indebtedness hereby secured shall at least twenty-one (21) days
preceding the date of sale serve or cause to be served written notice of the
proposed sale by certified mail on Grantor and on each other debtor, if any,
obligated to pay the indebtedness hereby secured according to the records of
such holder, and shall at least twenty-one (21) days preceding the date of sale
file written notice of the proposed sale in the county clerk's Office of the
county of the State in which the Mortgaged Property is located. Service of such
notice shall be completed upon deposit of the notice, enclosed in a postpaid
wrapper, properly addressed to Grantor, and such other debtors at their last
known address or addresses as shown by the records of the holder of the
indebtedness hereby secured in a post office or official depository under the
care and custody of the United States Postal Service. The affidavit of any
person having knowledge of the facts to the effect that such a service was
completed shall be prima facie evidence of the fact of service. Grantor agrees
that no notice of any sale other than as set out in this paragraph need be given
by Trustee, Beneficiary or any other person. Grantor hereby designates as his
address for the purpose of such notice, the address set out herein and agrees
that such address shall be changed only by depositing notice of such change,
enclosed in a postpaid wrapper, in post office or official depository under the
care and custody of the United States Postal Service, certified mail, postage
prepaid, return receipt requested, addressed to the Beneficiary at the address
for the Beneficiary set out herein (or to such other address as the Beneficiary
may have designated by notice given as above provided to Grantor). Any sale made
by the Trustee hereunder may be as an entirety or in such parcels as
announcement at the time and place appointed for such sale without further
notice except as may be required by law. The sale by the Trustee of less than
the whole of the Mortgaged Property shall not exhaust the power of sale herein
granted, and the Trustee is specifically empowered to make successive sale or
sales under such power until the whole of the Mortgaged Property shall be sold;
and, if the proceeds of such sale of less than the whole of the Mortgaged
Property shall be less than the aggregate of the indebtedness secured hereby and
the expense of executing this trust as provided herein, this Deed of Trust and
the lien hereof shall remain in full force and effect as to the unsold portion
of the Mortgaged Property just as though no sale had been made; provided,
however, that Grantor shall never have any right to require the sale of less
than the whole of the Mortgaged Property, but the Beneficiary shall have the
right, at its sole election, to request the Trustee to sell less than the whole
of the Mortgaged
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Property. After each sale, the Trustee shall make to the purchaser or purchasers
at such sale good and sufficient conveyances in the name of Grantor, conveying
the property so sold to the purchasers or purchasers in fee simple with general
warranty of title and shall receive the proceeds of said sale or sales and apply
the same as herein provided. The power of sale granted herein shall not be
exhausted by any sale held hereunder by the Trustee or his substitute or
successor, and such power of sale may be exercised from time to time and as many
times as the Beneficiary may deem necessary until all of the Mortgaged Property
has been duly sold and all of the indebtedness has been fully paid. In the event
any sale hereunder is not completed or is defective in the opinion of the
Beneficiary, such sale shall not exhaust the power of sale hereunder and the
Beneficiary shall have the right to cause a subsequent sale or sales to be made
hereunder. In case of any sale hereunder, all prerequisites to the sale shall be
presumed to have been performed. Any and all statements of fact or other
recitals made in any deed or deeds given by the Trustee or any successor or
substitute appointed hereunder as to nonpayment of the indebtedness secured
hereby or as to the occurrence of any Event of Default, or as to the Beneficiary
having declared all of such indebtedness to be due and payable, or as to the
request to sell, or as to notice of time, place and terms of sale and of the
properties to be sold having been duly given, or as to the refusal, failure or
inability to act of the Trustee or any substitute or successor, or as to the
appointment of any substitute or successor trustee, or as to any other act or
thing having been duly done by the Beneficiary or by such Trustee, substitute or
successor, shall be taken as prima facie evidence of the truth of the facts so
stated and recited. The Trustee, his successor or substitute, may appoint or
delegate any one or more person as agent to perform any ministerial act or acts
necessary or incident to notices but in the name and on behalf of the Trustee,
his successor or substitute.
(d) Holder's Right to Purchase. The Beneficiary shall have the right
to become the purchaser at any sale held by any Trustee or substitute or
successor or by any receiver or public officer, and any Beneficiary purchasing
at any such sale shall have the right to credit upon the amount of the bid made
therefore, to the extent necessary to satisfy such bid, the Obligations.
(e) Foreclosure Without Maturing All Obligations. If any Event of
Default occurs as the result of Grantor's failure to make payment of any part of
the Obligations, the Beneficiary shall have the option to proceed with
foreclosure of the liens and security interests evidenced hereby in satisfaction
of such item either through the courts or by proceeding or by directing the
Trustee to proceed as if under a full foreclosure, conducting the sale as herein
provided, all without declaring all of the Obligations due, and provided that if
sale of the Mortgaged Property is made because of an Event of Default, such sale
may be made subject to the unmatured part of the Obligations; and such sale, if
so made, shall not in any manner affect the unmatured part of the Obligations,
but as to such unmatured part this Deed of Trust shall remain in full force and
effect just as though no sale had been made. The proceeds of any sale shall be
applied as provided herein. Several sales may be made hereunder without
exhausting the right of sale for any unmatured part of the Obligations. It is
the purpose hereof to provide for a foreclosure and sale of the Mortgaged
Property for any matured portion of the Obligations without exhausting the power
to foreclose and to sell the Mortgaged Property for any other part of the
Obligations whether matured at the time or subsequently maturing.
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<PAGE>
(f) Judicial Foreclosure. This instrument shall be effective as a
mortgage as well as a Deed of Trust and upon the occurrence of an Event of
Default may be foreclosed as to any of the Mortgaged Property in any manner
permitted by the laws of the State or any other state in which any part of the
Mortgaged Property is situated, and any foreclosure suit may be brought by the
Trustee or by the Beneficiary. In the event a foreclosure hereunder shall be
commenced by the Trustee, or his substitute or successor, the Beneficiary may at
any time before the sale of the Mortgaged Property direct the said Trustee to
abandon the sale, and may then institute suit for the collection of the
Obligations and any other secured indebtedness, and for the foreclosure of this
Deed of Trust. It is agreed that if the Beneficiary should institute a suit for
the collection of the indebted ness or any other secured indebtedness (whether
before, simultaneously with, or after the commencement of any foreclosure by
Trustee) and/or for the foreclosure of this Deed of Trust, the Beneficiary may
at any time before the entry of a final judgment in said suit dismiss the same,
and require the Trustee, his substitute or successor to sell the Mortgaged
Property in accordance with the provisions of this Deed of Trust.
8. Application of the Rents or Proceeds from Foreclosure or Sale.
The proceeds of any sale (whether through a foreclosure proceeding or
Beneficiary's exercise of the power of sale) shall be distributed and applied in
accordance with the terms of the Loan Agreement. In any foreclosure of this Deed
of Trust by judicial action, or any sale of the Mortgaged Property by adver
tisement, in addition to any of the terms and provisions of the Loan Agreement,
there shall be allowed (and included in the decree for sale in the event of a
foreclosure by judicial action) to be paid out of the Rents or the proceeds of
such foreclosure proceeding and/or sale:
(a) Obligations. All of the Obligations and other sums secured
hereby which then remain unpaid; and
(b) Other Advances. All other items advanced or paid by Beneficiary
pursuant to this Deed of Trust; and
(c) Costs, Fees and Other Expenses. All court costs, Trustee's fees,
reasonable attorneys' and paralegals' fees and expenses actually incurred,
reasonable appraiser's fees, reasonable advertising costs, reasonable notice
expenses, reasonable expenditures for documentary and expert evidence,
reasonable stenographer's charges, reasonable publication costs, and reasonable
costs (which may be estimated as to items to be expended after entry of the
decree) of procuring all abstracts of title, title searches and examinations,
title guarantees, title insurance policies, Torrens certificates and similar
data with respect to title which Beneficiary in the reasonable exercise of its
judgment may deem necessary. All such expenses shall become additional
Obligations secured hereby when paid or incurred by Beneficiary in connection
with any proceedings, including but not limited to probate and bankruptcy
proceedings, to which Beneficiary shall be a party, either as plaintiff,
claimant or defendant, by reason of this Deed of Trust or any indebtedness
hereby secured or in connection with the preparations for the commencement of
any suit for the foreclosure, whether or not actually commenced, or sale by
advertisement.
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9. Cumulative Remedies; Delay or Omission Not a Waiver. Each remedy
or right of Beneficiary shall not be exclusive of but shall be in addition to
every other remedy or right now or hereafter existing at law or in equity. No
delay in the exercise or omission to exercise any remedy or right accruing on
the occurrence or existence of any Event of Default shall impair any such remedy
or right or be construed to be a waiver of any such Event of Default or
acquiescence therein, nor shall it affect any subsequent Event of Default of the
same or different nature. Every such remedy or right may be exercised
concurrently or independently and when and as often as may be deemed expedient
by Beneficiary.
10. Beneficiary's Remedies against Multiple Parcels. If more than
one property, lot or parcel is covered by this Deed of Trust, and if this Deed
of Trust is foreclosed upon, or judgment is entered upon any Obligations secured
hereby, or if Beneficiary exercises its power of sale, execution may be made
upon or Beneficiary may exercise its power of sale against any one or more of
the properties, lots or parcels and not upon the others, or upon all of such
properties or parcels, either together or separately, and at different times or
at the same time, and execution sales or sales by advertisement may likewise be
conducted separately or concurrently, in each case at Beneficiary's election.
11. No Merger. In the event of a foreclosure of this Deed of Trust
or any other mortgage or deed of trust securing the Obligations, the Obligations
then due the Beneficiary shall not be merged into any decree of foreclosure
entered by the court, and Beneficiary may concurrently or subsequently seek to
foreclose one or more mortgages or deeds of trust which also secure said
Obligations.
12. Notices. Except as otherwise provided herein, any notices,
demands, consents, requests, approvals, undertakings or other instruments
required or permitted to be given in connection with this Deed of Trust (and all
copies of such notices or other instruments as set forth below) shall be in
writing, and shall be deemed to have been validly served, given or delivered if
hand-delivered or if sent by a nationally recognized overnight delivery service,
charges prepaid (effective two (2) business days following deposit with such
delivery service), or if mailed (effective three (3) business days following
deposit thereof at any main or branch United States Post Office) by United
States registered or certified mail, postage prepaid, return receipt requested,
addressed to the party so notified as follows:
if to Grantor:
Country Star Restaurants, Inc.
11150 Santa Monica Blvd.
Los Angeles, California
Attention: Chief Operating Officer
Telecopy No. 310.268.2208
with copies to:
Zukerman Gore & Brandeis, LLP
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900 Third Avenue
New York, New York 10022
Attention: Clifford Brandeis
Telecopy No. 212.223.6433
if to Trustee or Beneficiary:
Cameron Capital Ltd.
10 Cavendish Road
Hamilton, HM 19
Bermuda
Attention: Nic Snelling
Telecopy No. 441.295.9022
with a copy to:
Freeborn & Peters
950 Seventeenth Street
Denver, Colorado
Attention: Kenneth S. Witt
Telecopy No. 303.628.4240
Grantor or Beneficiary shall, from time to time, have the right to specify as
the proper addressee and/or address for the purposes of this Deed of Trust any
other party or address in the United States upon giving five (5) days' written
notice thereof.
13. Extension of Payments. Grantor agrees that, without affecting
the liability of any person for payment of the Obligations secured hereby or
affecting the lien of this Deed of Trust upon the Mortgaged Property or any part
thereof (other than persons or property explicitly released as a result of the
exercise by Trustee or Beneficiary of its rights and privileges hereunder),
Beneficiary may at any time and from time to time, on request of the Borrower,
without notice to any person liable for payment of any Obligations secured
hereby, but otherwise subject to the provisions of the Loan Agreement, extend
the time, or agree to alter or amend the terms of payment of such Obligations.
Grantor further agrees that any part of the security herein described may be
released with or without consideration without affecting the remainder of the
Obligations or the remainder of the security.
14. Governing Law. Grantor and Beneficiary have agreed that the Loan
is to be secured by collateral security located in different states. In
addition, Grantor and Beneficiary have agreed that the law of the State of
Illinois will govern the Loan and that the laws of the individual states in
which such collateral security for the Loan is located will govern all matters
with regard to such collateral security accordingly. Wherever possible, each
provision of this Deed of Trust shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Deed of
Trust shall be prohibited by or invalid under applicable law, such provision
shall be
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<PAGE>
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Deed of Trust.
15. Satisfaction of Deed of Trust. Upon full payment of all the
Obligations, at the time and in the manner provided in the Loan Agreement, upon
expiration of the Lease by passage of time, this conveyance or lien shall be
null and void and, upon demand therefor following such payment, or expiration of
the Lease by passage of time, as the case may be, a satisfaction of this Deed of
Trust or reconveyance of the Mortgaged Property shall promptly be provided by
Beneficiary to Grantor.
16. Successors and Assigns Included in Parties. This Deed of Trust
shall be binding upon the Grantor and upon the successors and assigns of the
Grantor and shall inure to the benefit of the Trustee's and Beneficiary's
respective successors and assigns; all references herein to the Grantor and to
the Beneficiary shall be deemed to include their respective successors and
assigns. Grantor's successors and assigns shall include, without limitation, a
receiver, trustee or debtor in possession of or for the Grantor. Wherever used,
the singular number shall include the plural, the plural shall include the
singular, and the use of any gender shall be applicable to all genders.
17. Waiver of Appraisement, Valuation, Stay, Extension and
Redemption Laws. Grantor agrees, to the full extent permitted by law, that at
all times following an Event of Default, neither Grantor nor anyone claiming
through or under it shall or will set up, claim or seek to take advantage of any
appraisement, valuation, stay, or extension laws now or hereafter in force, in
order to prevent or hinder the enforcement or foreclosure of this Deed of Trust
or the absolute sale of the Mortgaged Property or the final and absolute putting
into possession thereof, immediately after such sale, of the purchaser thereat;
and Grantor, for itself and all who may at any time claim through or under it,
hereby waives, to the full extent that it may lawfully so do, the benefit of all
such laws and any and all right to have the assets comprising the Mortgaged
Property marshaled upon any foreclosure of the lien hereof and agrees that
Beneficiary or any court having jurisdiction to foreclose such lien may sell the
Mortgaged Property in part or as an entirety. To the full extent permitted by
law, Grantor hereby waives any and all statutory or other rights of redemption
from sale under any order or decree of foreclosure of this Deed of Trust, on its
own behalf and on behalf of each and every person acquiring any interest in or
title to the Mortgaged Property subsequent to the date hereof.
18. Interpretation with Other Documents. Notwithstanding anything in
this Deed of Trust to the contrary, in the event of a conflict or inconsistency
between the Deed of Trust and the Loan Agreement, the provisions of the Loan
Agreement shall govern.
19. Future Advances. The parties hereto intend that, in addition to
any other debt or obligation secured hereby, this Deed of Trust shall secure
unpaid balances of the Obligations and other such extensions of credit made by
Beneficiary to Borrower after this Deed of Trust is filed for recordation in the
official records of the county in which the Mortgaged Property is located,
whether made pursuant to an obligation of Beneficiary or otherwise. Such
Obligations and other extensions
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<PAGE>
of credit may or may not be evidenced by notes executed pursuant to the Loan
Agreement. All future advances will have the same priority as the original
advance.
20. Invalid Provisions to Affect No Others. In the event that any of
the covenants, agreements, terms or provisions contained in this Deed of Trust
shall be invalid, illegal or unenforceable in any respect, the validity of the
remaining covenants, agreements, terms or provisions contained herein or in the
Loan Agreement shall not be in any way affected, prejudiced or disturbed
thereby. In the event that the application of any of the covenants, agreements,
terms or provisions of this Deed of Trust is held to be invalid, illegal or
unenforceable, those covenants, agreements, terms and provisions shall not be in
any way affected, prejudiced or disturbed when otherwise applied.
21. Changes. Neither this Deed of Trust nor any term hereof may be
changed, waived, discharged or terminated orally, or by any action or inaction,
but only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. To the
extent permitted by law, any agreement hereafter made by Grantor and Beneficiary
relating to this Deed of Trust shall be superior to the rights of the holder of
any inter vening lien or encumbrance.
22. Time of Essence. Time is of the essence with respect to the
provisions of this Deed of Trust.
23. Successor Trustee. Beneficiary, or any successor in ownership of
any indebtedness secured hereby, may from time to time, without other formality
than the execution of an instrument in writing, substitute a successor or
successors to any Trustee named herein or acting hereunder, which instrument,
shall be conclusive proof of proper substitution of such successor Trustee or
Trustees, who shall, without conveyance from the Trustee predecessor, succeed to
all its title, estate, rights, powers and duties. Said instrument must contain
the name of the original Grantor, Trustee and Beneficiary hereunder, the
recording information where this Deed is recorded and the name and address of
the new Trustee.
24. Trustee's Covenants and Acceptance. Trustee covenants faithfully
to perform the trust herein created, being liable, however, only for gross
negligence or willful misconduct. Trustee accepts this Trust, when this Deed of
Trust, duly executed and acknowledged, is made a public record as provided by
law. Trustee is not obligated to notify any party hereto or any action or
proceeding in which Grantor, Beneficiary or Trustee shall be a party unless
brought by Trustee.
25. Required Notices. Grantor shall notify Beneficiary promptly of
the receipt of any notice of default from the landlord under the Lease.
26. Acquisition of Fee Interest. In the event Grantor acquires the
fee interest in the Mortgaged Property, either pursuant to the terms of the
Lease or otherwise, this Deed of Trust shall continue in full force and effect
against the Mortgaged Property until its release of record, and
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<PAGE>
this Deed of Trust shall become and remain a valid fee mortgage lien on the
Mortgaged Property.
27. General Covenants; Representations and Warranties. Grantor
hereby covenants, represents and warrants that: (a) the Lease is a valid and
subsisting demise of the premises which it demises for the full term thereof;
(b) there are no known existing defaults under the Lease on the part of Grantor
and there are no existing defaults under the Lease on the part of any other
person or persons obligated to act or refrain from acting by reason thereof; (c)
Grantor has not assigned the Lease and there are no other assignments of the
Lease; (d) the lessor under the Lease had good right to demise the premises
therein demised; (e) the Lease is in full force and effect without any condition
pending which would by the passage of time ripen into a default; and (f) there
have been no amendments to the Lease.
28. Lease and Subleases affecting the Mortgaged Property. Grantor
agrees faithfully to perform all of its obligations under the Lease, all future
subleases, or other agreements relative to the occupancy of the Mortgaged
Property at any time assigned to Beneficiary as additional security, and to
refrain from any action or inaction which would result in termination of the
Lease, or of any such other subleases, or agreements, or in the diminution of
the value thereof or of the rents or revenues due thereunder. Grantor further
agrees that any future sublease of the Mortgaged Property made after the date of
recording of this Deed of Trust shall contain a covenant to the effect that such
sublessee shall, at Beneficiary's option, agree to attorn to Beneficiary as
sublessor and, upon demand, to pay rent to Beneficiary. Grantor shall not,
without the prior written approval of Beneficiary in each instance, (i) make or
enter into any sublease of all or any part of the Mortgaged Property; (ii)
change, amend, modify, or assign in any manner whatsoever the Lease or any
sublease thereof; (iii) terminate or cancel, surrender or accept a surrender of,
suffer or permit any cancellation, termination or surrender of, the Lease, any
sublease, or any leasehold estate in any manner whatsoever; or (iv) receive,
collect or accept or permit the receipt, collection or acceptance of any
prepayment of rent or other charges under any sublease for more than one (1)
month except that the Grantor may, at the execution of a sublease, accept any
rent security deposits.
29. Excess Interest. In no event shall any interest rate hereunder
exceed the maximum rate permissible for corporate borrowers under applicable law
(the "Maximum Rate"). If, in any month, any interest rate, absent such
limitation, would have exceeded the Maximum Rate, then the interest rate for
that month shall be the Maximum Rate, and, if in further months, that interest
rate would otherwise be less than the Maximum Rate, then that interest rate
shall remain at the Maximum Rate until such time as the amlunt of interest paid
hereunder wquals the amount of interest which would have been paid if the same
had not been limited by the Maximum Rate. In the event that, upon payment in
full of the Obligations under the Loan Agreement, the total amount of interest
paid or accrued under the terms of the Loan Agreement is less than the total
amount of interest which would, but for this Section, have been paid or accrued
if the interest rates otherwise set forth in the Loan Agreement had at all times
been in effect, then Borrower shall, to the extent permitted by applicable law,
pay Lenders an amount equal to the difference between (a) the lesser of (i) the
amount of interest which would have been charged if the Maximum Rate had, at all
times, been in effect or (ii) the amount of interest which would have accrued
had the interest rates otherwise
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<PAGE>
set forth in the Loan Agreement, at all times, been in effect and (b) the amount
of interest actually paid or accrued under the Loan Agreement. In the event that
a court determines that any Lender has received interest and other charges
hereunder in excess of the Maximum Rate, such excess shall be deemed received on
account of, and shall automatically be applied to reduce, the Obligations other
than interest, in the inverse order of maturity, and if there are no Obligations
outstanding, such Lender shall refund to Borrower such excess.
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<PAGE>
IN WITNESS WHEREOF, this instrument is executed as of the day and
year first above written by the person or persons identified below on behalf of
Grantor (and said person or persons hereby represent that they possesses full
power and authority to execute this instrument).
THE GRANTOR HEREBY DECLARES AND ACKNOWLEDGES THAT THE GRANTOR HAS
RECEIVED, WITHOUT CHARGE, A TRUE COPY OF THIS DEED OF TRUST.
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GRANTOR:
COUNTRY STAR RESTAURANTS, INC.,
a Delaware corporation
By Peter Feinstein
---------------------
Its _____ President
ATTEST:
By Robert Schuster
---------------------
Its Secretary
---------------------
AFFIX CORPORATE SEAL
[SIGNATURE PAGE OF NEVADA OPEN END LEASEHOLD DEED OF TRUST]
<PAGE>
STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
I, a Notary Public in and for said County, in the State aforesaid, do
hereby certify that Robert Schuster and Peter Feinstein, personally known to me
to be the Secretary and President of Country Star Restaurants, Inc., a Delaware
corporation, and personally known to me to be the same persons whose names are
subscribed to the foregoing instrument, appeared before me this day in person
and acknowledged that they signed and delivered the said instrument as such, as
a free and voluntary act and as the free and voluntary act and deed of said
corporation, for the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal this 30th day of January 1997.
/s/ Pauline Probst
---------------------
Notary Public
My Commission Expires:
8 - 8 - 2000
------------
-----------------------------------
PAULINE PROBST
Commission # 1108108
[SEAL] Notary Public -- California
Los Angeles County
My Comm. Expires Aug 8, 2000
-----------------------------------
<PAGE>
EXHIBIT A
Legal Description of the Land:
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EXHIBIT B
Permitted Exceptions to Title:
Those title exceptions numbered _______ and listed on title
commitment dated February ___, 1997, issued by Ticor Title Insurance Corporation
for the property described on Exhibit A hereof.
21
[California]
Recording requested by and when recorded mail to:
Kenneth S. Witt
Freeborn & Peters
950 Seventeenth Street
Denver, Colorado 80202
FIRST OPEN END LEASEHOLD DEED OF TRUST,
SECURITY AGREEMENT, FINANCING STATEMENT
AND ASSIGNMENT OF RENTS
THIS DEED OF TRUST ("Deed of Trust") dated as of the 12th day of
February 1997, made by COUNTRY STAR RESTAURANTS, INC., a Delaware corporation,
having its chief executive office at 11150 Santa Monica Blvd., Los Angeles,
California 90025 ("Grantor"), in favor of CHICAGO TITLE COMPANY, a California
corporation ("Trustee"), and CAMERON CAPITAL LTD., a Bermuda corporation, having
an office at 10 Cavendish Road, Hamilton HM 19, Bermuda ("Beneficiary"), as
Agent for the Lenders who are parties to the Loan Agreement referred to below
(the "Lenders").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Loan and Security Agreement dated
as of the date hereof among Grantor, the Beneficiary and the Lenders (as such
Loan and Security Agreement may be extended, supplemented, modified, restated or
otherwise changed, the "Loan Agreement"), the Lenders may from time to time make
loans and extend financial accommodations to Borrower, which loans shall consist
of line of credit loans in the maximum principal amount of Three Million Five
Hundred Thousand and No/100 Dollars ($3,500,000.00) (the "Line of Credit Loan")
and a term loan in the principal amount of Four Million and No/100 Dollars
($4,000,000.00) ("Term Loan") (the Line of Credit Loan and Term Loan being
collectively referred to herein as the "Loan") (the Loan Agreement and all other
documents, instruments and agreements entered into in connection therewith are
hereinafter sometimes jointly referred to as the "Loan Documents"); and
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WHEREAS, the Loan shall mature on the dates and shall bear interest
at the rates specified in the Loan Agreement; and
WHEREAS, Beneficiary has required as a condition, among others, to
its execution and delivery of the Loan Agreement that Grantor enter into this
Deed of Trust and grant Beneficiary the liens and security interests referred to
herein to secure the prompt and complete payment, observance and performance of
all of the "Obligations" (as defined in the Loan Agreement) and to secure all
notes, if any (the "Obligations" as defined in the Loan Agreement and the
obligations of Borrower under all notes, if any, are hereinafter collectively
referred to as the "Obligations"), that Grantor execute and deliver this Deed of
Trust to Beneficiary; and
WHEREAS, the Obligations secured hereby shall not exceed an
aggregate principal amount, at any one time outstanding of Fifteen Million
Dollars and 00/100 ($15,000,000.00), provided, that the foregoing limitation
shall apply only to the lien upon the leasehold estate created by this Deed of
Trust, and it shall not in any manner limit, affect or impair any grant of a
security interest or other right in favor of the Beneficiary under the
provisions of the Loan Agreement, Guaranty or under any other security agreement
at any time executed by Grantor;
NOW, THEREFORE, in consideration of the premises contained herein
and to secure payment of the Obligations and in consideration of Ten Dollars
($10.00) in hand paid, receipt whereof is hereby acknowledged, Grantor does
hereby irrevocably grant, bargain, remise, release, alien, convey, mortgage and
warrant to Trustee IN TRUST, WITH POWER OF SALE, its successors and assigns, all
of Grantor's interest as lessee or tenant under that certain lease, as the same
may be or have been amended (the "Lease"), of the real estate (the "Land") in
_______ County, California, all as described on Exhibit A attached hereto and by
this reference made a part hereof, which interest in the Lease, together with
all right, title and interest, if any, which Grantor may now have or hereafter
acquire in and to all improvements, buildings and structures thereon of every
nature whatsoever, is herein called the "Premises."
TOGETHER WITH all right, title and interest, if any, including any
after-acquired right, title and interest, and including any right of use or
occupancy, which Grantor may now have or hereafter acquire in and to (a) all
easements, rights of way, gores of land or any lands occupied by streets, ways,
alleys, passages, sewer rights, water courses, water rights and powers, and
public places adjoining said Land, and any other interests in property
constituting appurtenances to the Premises, or which hereafter shall in any way
belong, relate or be appurtenant thereto and, (b) all hereditaments, gas, oil,
minerals, and easements, of every nature whatsoever, located in or on the
Premises and all other rights and privileges thereunto belonging or appertaining
and all extensions, additions, improvements, betterments, renewals,
substitutions and replacements to or of any of the rights and interests
described in subparagraphs (a) and (b) above (hereinafter the "Property
Rights"); and
TOGETHER WITH all right, title and interest, if any, including any
after-acquired right, title and interest, and including any right of use or
occupancy, which Grantor may now have
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or hereafter acquire in and to all fixtures and appurtenances of every nature
whatsoever now or hereafter located in, on or attached to, and used or intended
to be used in connection with, or with the operation of, the Premises,
including, but not limited to (a) all apparatus, machinery and equipment of
Grantor to the extent deemed fixtures under law; and (b) all extensions,
additions, improvements, betterments, renewals, substitutions and replacements
to or of any of the foregoing (all of the foregoing items in this paragraph
being referred to as the "Fixtures"); as well as all personal property and
equipment of every nature whatsoever now or hereafter located in or on the
Premises, including but not limited to (c) all screens, window shades, blinds,
wainscoting, storm doors and windows, floor coverings, and awnings of Grantor;
(d) all apparatus, machinery, equipment and appliances of Grantor not included
as Fixtures; (e) all items of furniture, furnishings and personal property of
Grantor; and (f) all extensions, additions, improvements, betterments, renewals,
substitutions and replacements to or of any of the foregoing (c)-(e) (the items
described in the foregoing (c)-(f) and any other personal property referred to
in this paragraph being the "Personal Property") and in and to the proceeds of
the Personal Property. It is mutually agreed, intended and declared that the
Premises and all of the Property Rights and Fixtures owned by Grantor (referred
to collectively herein as the "Real Property") shall, so far as determined by
law, be part and parcel of the Land and for the purpose of this Deed of Trust to
be real estate and covered by this Deed of Trust. It is mutually agreed,
intended and declared that the premises and all of the Property Rights and
Fixtures owned by Grantor (referred to collectively herein as the "Real
Property") shall, so far as permitted by law, be deemed to form a part and
parcel of the Land and for the purpose of this Deed of Trust to be real estate
and covered by this Deed of Trust. Subject to the terms and conditions of the
Loan Agreement, the remedies for any violation of the covenants, terms and
conditions of the agreements herein contained shall be as prescribed herein or
by general law, or, as to that part of the security in which a security interest
may be perfected under the Uniform Commercial Code, by the specific statutory
consequences now or hereafter enacted and specified in the Uniform Commercial
Code, all at the Beneficiary's sole election; and
TOGETHER WITH all the estate, right, title and interest of the
Grantor in and to (i) all judgments, insurance proceeds, awards of damages and
settlements resulting from condemnation proceedings or the taking of the Real
Property, or any part thereof, under the power of eminent domain or for any
damage (whether caused by such taking or otherwise) to the Real Property, or any
part thereof, or to any rights appurtenant thereto, and all proceeds of any
sales or other dispositions of the Real Property or any part thereof; and
(except as otherwise provided herein or in the Loan Agreement) the Beneficiary
is hereby authorized to collect and receive said awards and proceeds and to give
proper receipts and acceptances therefor, and to apply the same as provided in
the Loan Agreement for application of payments; and (ii) all contract rights,
general intangibles, actions and rights in action relating to the Real Property
including, without limitation, all rights to insurance proceeds and unearned
premiums arising from or relating to damage to the Real Property; and (iii) all
proceeds, products, replacements, additions, substitutions, renewals and
accessions of and to the Real Property. (The rights and interests described in
this paragraph shall hereinafter be called the "Intangibles").
As additional security for the Obligations secured hereby, Grantor
does (i) hereby
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pledge and assign to Beneficiary from and after the date hereof (including any
period of redemption), primarily and on a parity with the Real Property, and not
secondarily, all the rents, issues and profits of the Real Property and all
rents, issues, profits, revenues, royalties, bonuses, rights and benefits due,
payable or accruing (including all deposits of money as advance rent, for
security or as earnest money or as down payment for the purchase of all or any
part of the Real Property) (the "Rents") under any and all present and future
subleases, contracts or other agreements relative to the ownership or occupancy
of all or any portion of the Real Property, and (ii) except to the extent such a
transfer or assignment is not permitted by the terms thereof, does hereby
transfer and assign to Beneficiary all such subleases and agreements (including
all Grantor's rights under any contracts for the sale of any portion of the Real
Property and all revenues and royalties under any oil, gas and mineral leases
relating to the Real Property) (the "Subleases"). Beneficiary hereby grants to
Grantor the right to collect and use the Rents as they become due and payable
under the Subleases, but not more than one (1) month in advance thereof, unless
an "Event of Default" (as defined in the Loan Agreement) shall have occurred
provided that the existence of such right shall not operate to subordinate this
assignment to any subsequent assignment, in whole or in part, by Grantor, and
any such subsequent assignment shall be subject to the rights of the Beneficiary
under this Deed of Trust. Grantor further agrees to execute and deliver such
assignments of subleases or assignments of land sale contracts as Beneficiary
may from time to time request. In the event of an Event of Default (1) the
Grantor agrees, upon demand, to deliver to the Beneficiary all of the Subleases
with such additional assignments thereof as the Beneficiary may request and
agrees that the Beneficiary may assume the management of the Real Property and
collect the Rents, applying the same upon the Obligations in the manner provided
in the Loan Agreement, and (2) the Grantor hereby authorizes and directs all
tenants, purchasers or other persons occupying or otherwise acquiring any
interest in any part of the Real Property to pay the Rents due under the
Subleases to the Beneficiary upon request of the Beneficiary. Grantor hereby
appoints Beneficiary as its true and lawful attorney in fact to manage said
property and collect the Rents, with full power to bring suit for collection of
the Rents and possession of the Real Property, giving and granting unto said
Beneficiary and unto its agent or attorney full power and authority to do and
perform all and every act and thing whatsoever requisite and necessary to be
done in the protection of the security hereby conveyed; provided, however, that
(i) this power of attorney and assignment of rents shall not be construed as an
obligation upon said Beneficiary to make or cause to be made any repairs that
may be needful or necessary and (ii) Beneficiary agrees that until such Event of
Default as aforesaid, Beneficiary shall permit Grantor to perform the
aforementioned management responsibilities. Upon Beneficiary's receipt of the
Rents, at Beneficiary's option, it may pay: (1) reasonable charges for
collection thereof, costs of necessary repairs and other costs requisite and
necessary during the continuance of this power of attorney and assignment of
rents, (2) general and special taxes, insurance premiums, and (3) the balance of
the Rents pursuant to the provisions of the Loan Agreement. This power of
attorney and assignment of rents shall be irrevocable until this Deed of Trust
shall have been satisfied and released of record and the releasing of this Deed
of Trust shall act as a revocation of this power of attorney and assignment of
rents. Beneficiary shall have and hereby expressly reserves the right and
privilege (but assumes no obligation) to demand, collect, sue for, receive and
recover the Rents, or any part thereof, now existing or hereafter made, and
apply the same in accordance with the provisions of the Loan Agreement.
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All of the property described above, and each item of property
therein described, not limited to but including the Lease, the Land, the
Premises, the Property Rights, the Fixtures, the Personal Property, the Real
Property, the Intangibles, the Rents and the Subleases, is herein referred to as
the "Mortgaged Property." Notwithstanding the foregoing, the term "Mortgaged
Property" shall include all right, title and interest of Grantor in and to the
present or future use of wastewater, wastewater capacity, drainage, water or
other utility facilities to the extent such use benefits the Mortgaged Property,
including without limitation, all reservations, commitments or receipts covering
any such use, whether now or hereafter acquired.
Nothing herein contained shall be construed as constituting the
Beneficiary a beneficiary-in-possession in the absence of the taking of actual
possession of the Mortgaged Property by the Beneficiary. Nothing contained in
this Deed of Trust shall be construed as imposing on Beneficiary any of the
obligations of the sublessor under any sublease of the Mortgaged Property in the
absence of an explicit assumption thereof by Beneficiary. In the exercise of the
powers herein granted to the Beneficiary, no liability shall be asserted or
enforced against the Beneficiary, all such liability being expressly waived and
released by Grantor.
TO HAVE AND TO HOLD the Mortgaged Property, properties, rights and
privileges hereby conveyed or assigned, or intended so to be, unto Trustee, its
successors and assigns, forever for the uses and purposes herein set forth.
Grantor hereby releases and waives all rights under and by virtue of the
Homestead Exemption Laws, if any, of the State of California (the "State") and
Grantor hereby covenants, represents and warrants that, at the time of the
ensealing and delivery of these presents, Grantor is lawfully possessed of the
Mortgaged Property by virtue of the Lease as a valid and subsisting leasehold
estate for the full term thereof, subject only to the full fee simple interest
of the fee owner thereof, to the extent set forth in the Lease and with lawful
authority to sell, assign, and convey the Mortgaged Property, and that the title
to the Mortgaged Property is free and clear of all encumbrances except as set
forth on Exhibit B attached hereto and made a part hereof, and that, except for
the encumbrances set forth on Exhibit B, Grantor will forever defend the same
against all lawful claims.
The following provisions shall also constitute an integral part of
this Deed of Trust:
1. Payment of Taxes on the Deed of Trust. Grantor agrees that, if
the United States or any department, agency or bureau thereof or if the State or
any of its subdivisions having jurisdiction shall at any time require
documentary stamps to be affixed to this Deed of Trust or shall levy, assess, or
charge any tax, assessment or imposition upon this Deed of Trust or the credit
or indebtedness secured hereby or the interest of Trustee or Beneficiary in the
Premises or upon Trustee or Beneficiary by reason of or as holder of any of the
foregoing, then Grantor shall pay for such documentary stamps in the required
amount and deliver them to Beneficiary or pay (or reimburse Beneficiary for)
such taxes, assessments or impositions and, unless all such documentary stamps,
taxes, assessments and impositions are paid or reimbursed by Grantor when and as
they become due and payable, all sums hereby secured shall become immediately
due and payable, at the option of Beneficiary, notwithstanding anything
contained herein or in any law heretofore or hereafter enacted.
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Grantor agrees to exhibit to Beneficiary, at any time upon request, official
receipts showing payment of all taxes, assessments and charges which Grantor is
required or elects to pay under this paragraph. Grantor agrees to indemnify
Trustee and Beneficiary against liability on account of such documentary stamps,
taxes, assessments or impositions, whether such liability arises before or after
payment of the Obligations and regardless of whether this Deed of Trust shall
have been released.
2. Subleases Affecting the Real Property. Grantor agrees faithfully
to perform all of its obligations under all present and future subleases or
other agreements relative to the occu pancy of the Real Property at any time
assigned to Beneficiary as additional security, and to refrain from any action
or inaction which would result in termination of any such subleases or
agreements or in the diminution of the value thereof or of the rents or revenues
due thereunder. All future sublessees under any sublease of the Real Property,
or any part thereof, made after the date of recording of this Deed of Trust
shall, at Beneficiary's option and without any further documentation, attorn to
Beneficiary as sublessor if for any reason Beneficiary becomes sublessor
thereunder, and, upon demand, pay rent to Beneficiary, and Beneficiary shall not
be responsible under such sublease for matters arising prior to Beneficiary
becoming sublessor thereunder.
3. Use of the Real Property. Grantor agrees that it shall not permit
the public to use the Real Property in any manner that might tend, in
Beneficiary's reasonable judgment, to impair Grantor's leasehold interest in
such property or any portion thereof, or to make possible any claim or claims of
easement by prescription or of implied dedication to public use.
4. Indemnification. Grantor shall not use or permit the use of any
part of the Real Property for any illegal purpose, including, without
limitation, the violation of any environmental laws, statutes, codes,
regulations or practices. Without limiting any indemnification Borrower has
granted in the Loan Agreement, Grantor agrees to indemnify and hold harmless
Trustee and Beneficiary from and against any and all losses, suits, obligations,
fines, damages, judgments, penalties, claims, charges, costs and expenses
(including reasonable attorneys' and para legals' fees, court costs and
disbursements) which may be imposed on, incurred or paid by or asserted against
the Real Property by reason or on account of or in connection with the (i)
construc tion, reconstruction or alteration of the Real Property, (ii) any
negligence or misconduct of Grantor, any sublessee of the Real Property, or any
of their respective agents, contractors, subcontractors, servants, employees,
licensees or invitees, (iii) any accident, injury, death or damage to any person
or property occurring in, on or about the Real Property or any street, drive,
sidewalk, curb or passageway adjacent thereto, or (iv) any other transaction
arising out of or in any way connected with the Mortgaged Property.
5. Insurance. Grantor shall, at its sole expense, obtain for,
deliver to, assign and maintain for the benefit of Trustee and Beneficiary,
until the Obligations are paid in full, insurance policies as specified in the
Loan Agreement. In the event of a casualty loss, the net insurance proceeds from
such insurance policies shall be paid and applied as specified in the Loan
Agreement.
6. Condemnation Awards. Grantor hereby assigns to Beneficiary, as
additional
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security, all awards of damage resulting from condemnation proceedings or the
taking of or injury to the Real Property for public use, and Grantor agrees that
the proceeds of all such awards shall be paid and applied as specified in the
Loan Agreement.
7. Remedies. Upon the occurrence of an Event of Default under the
terms of the Loan Agreement, in addition to any rights and remedies provided for
in the Loan Agreement, and to the extent permitted by applicable law, the
following provisions shall apply:
(a) Beneficiary's Power of Enforcement. It shall be lawful for
Beneficiary, by or through Trustee or otherwise, to (i) immediately sell the
Mortgaged Property either in whole or in separate parcels, as prescribed by the
State law, under power of sale, which power is hereby granted to Beneficiary
and/or Trustee to the full extent permitted by the State law, and thereupon, to
make and execute to any purchaser(s) thereof deeds of conveyance pursuant to
applicable law or (ii) immediately foreclose this Deed of Trust by judicial
action. The court in which any proceeding is pending for the purpose of
foreclosure of this Deed of Trust may, at once or at any time thereafter, either
before or after sale, without notice and without requiring bond, and without
regard to the solvency or insolvency of any person liable for payment of the
Obligations secured hereby, and without regard to the then value of the
Mortgaged Property or the occupancy thereof as a homestead, appoint a receiver
(the provisions for the appointment of a receiver and assignment of rents being
an express condition upon which the Loan hereby secured is made) for the benefit
of Beneficiary, with power to collect the Rents, due and to become due, during
such foreclosure suit and the full statutory period of redemption, if any,
notwithstanding any redemption. The receiver, out of the Rents, when collected,
may pay costs incurred in the management and operation of the Real Property,
prior and subordinate liens, if any, and taxes, assessments, water and other
utilities and insurance, then due or thereafter accruing, and may make and pay
for any necessary repairs to the Real Property, and may pay all or any part of
the Obligations or other sums secured hereby or any deficiency decree entered in
such foreclosure proceedings. Upon or at any time after the filing of a suit to
foreclose this Deed of Trust, the court in which such suit is filed shall have
full power to enter an order placing Trustee or Beneficiary in possession of the
Real Property with the same power granted to a receiver pursuant to this
subparagraph and with all other rights and privileges of a
mortgagee-in-possession under applicable law.
(b) Beneficiary's Right to Enter and Take Possession, Operate and
Apply Income. Beneficiary shall, at its option, have the right, acting through
Trustee and/or its agents or attorneys, either with or without process of law,
forcibly or otherwise, to enter upon and take possession of the Real Property,
expel and remove any persons, goods, or chattels occupying or upon the same, to
collect or receive all the Rents and to manage and control the same, and to
sublease the same or any part thereof, from time to time, and, after deducting
all reasonable attorneys' fees and expenses, and all reasonable expenses
incurred in the protection, care, maintenance, management and operation of the
Real Property, distribute and apply the remaining net income in accordance with
the terms of the Loan Agreement or upon any deficiency decree entered in any
foreclosure proceedings.
(c) Sale of Mortgaged Property. Beneficiary may, at its option, and
in addition
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to any and every other remedy, request Trustee to proceed with foreclosure
(which request shall be presumed), and in such event Trustee is hereby
authorized and empowered and it shall be his special duty, upon such request of
Beneficiary, to (a) sell the Mortgaged Property, or any part thereof, at public
vendue to the highest bidder, for cash, at the county courthouse of the county
of the State in which the Mortgaged Property is situated in the area in such
courthouse designated for real property foreclosure sales in accordance with
applicable law (or in the absence of any such designation, in the area set forth
in the notice of sale hereinafter described) between the hours of 10:00 a.m. and
4:00 p.m. (commencing no earlier than such time as may be designated in the
hereinafter described notice of sale) on the first Tuesday of any month, after
giving legally adequate notice of the time, place and terms of said sale, and
the property to be sold, by posting (or by having some person or persons acting
for him post) for at least twenty-one (21) days preceding the date of the sale,
written or printed notice of the proposed sale at the courthouse door of the
appropriate county, or (b) sell the Mortgaged Property at such other time, place
and in accordance with such procedures and require ments as may hereafter be
provided by the laws of the State. In addition to such posting of notice the
holder of the indebtedness hereby secured shall at least twenty-one (21) days
preceding the date of sale serve or cause to be served written notice of the
proposed sale by certified mail on Grantor and on each other debtor, if any,
obligated to pay the indebtedness hereby secured according to the records of
such holder, and shall at least twenty-one (21) days preceding the date of sale
file written notice of the proposed sale in the county clerk's Office of the
county of the State in which the Mortgaged Property is located. Service of such
notice shall be completed upon deposit of the notice, enclosed in a postpaid
wrapper, properly addressed to Grantor, and such other debtors at their last
known address or addresses as shown by the records of the holder of the
indebtedness hereby secured in a post office or official depository under the
care and custody of the United States Postal Service. The affidavit of any
person having knowledge of the facts to the effect that such a service was
completed shall be prima facie evidence of the fact of service. Grantor agrees
that no notice of any sale other than as set out in this paragraph need be given
by Trustee, Beneficiary or any other person. Grantor hereby designates as his
address for the purpose of such notice, the address set out herein and agrees
that such address shall be changed only by depositing notice of such change,
enclosed in a postpaid wrapper, in post office or official depository under the
care and custody of the United States Postal Service, certified mail, postage
prepaid, return receipt requested, addressed to the Beneficiary at the address
for the Beneficiary set out herein (or to such other address as the Beneficiary
may have designated by notice given as above provided to Grantor). Any sale made
by the Trustee hereunder may be as an entirety or in such parcels as
announcement at the time and place appointed for such sale without further
notice except as may be required by law. The sale by the Trustee of less than
the whole of the Mortgaged Property shall not exhaust the power of sale herein
granted, and the Trustee is specifically empowered to make successive sale or
sales under such power until the whole of the Mortgaged Property shall be sold;
and, if the proceeds of such sale of less than the whole of the Mortgaged
Property shall be less than the aggregate of the indebtedness secured hereby and
the expense of executing this trust as provided herein, this Deed of Trust and
the lien hereof shall remain in full force and effect as to the unsold portion
of the Mortgaged Property just as though no sale had been made; provided,
however, that Grantor shall never have any right to require the sale of less
than the whole of the Mortgaged Property, but the Beneficiary shall have the
right, at its sole election, to request the Trustee to sell less than the whole
of the Mortgaged
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Property. After each sale, the Trustee shall make to the purchaser or purchasers
at such sale good and sufficient conveyances in the name of Grantor, conveying
the property so sold to the purchasers or purchasers in fee simple with general
warranty of title and shall receive the proceeds of said sale or sales and apply
the same as herein provided. The power of sale granted herein shall not be
exhausted by any sale held hereunder by the Trustee or his substitute or
successor, and such power of sale may be exercised from time to time and as many
times as the Beneficiary may deem necessary until all of the Mortgaged Property
has been duly sold and all of the indebtedness has been fully paid. In the event
any sale hereunder is not completed or is defective in the opinion of the
Beneficiary, such sale shall not exhaust the power of sale hereunder and the
Beneficiary shall have the right to cause a subsequent sale or sales to be made
hereunder. In case of any sale hereunder, all prerequisites to the sale shall be
presumed to have been performed. Any and all statements of fact or other
recitals made in any deed or deeds given by the Trustee or any successor or
substitute appointed hereunder as to nonpayment of the indebtedness secured
hereby or as to the occurrence of any Event of Default, or as to the Beneficiary
having declared all of such indebtedness to be due and payable, or as to the
request to sell, or as to notice of time, place and terms of sale and of the
properties to be sold having been duly given, or as to the refusal, failure or
inability to act of the Trustee or any substitute or successor, or as to the
appointment of any substitute or successor trustee, or as to any other act or
thing having been duly done by the Beneficiary or by such Trustee, substitute or
successor, shall be taken as prima facie evidence of the truth of the facts so
stated and recited. The Trustee, his successor or substitute, may appoint or
delegate any one or more person as agent to perform any ministerial act or acts
necessary or incident to notices but in the name and on behalf of the Trustee,
his successor or substitute.
(d) Holder's Right to Purchase. The Beneficiary shall have the right
to become the purchaser at any sale held by any Trustee or substitute or
successor or by any receiver or public officer, and any Beneficiary purchasing
at any such sale shall have the right to credit upon the amount of the bid made
therefore, to the extent necessary to satisfy such bid, the Obligations.
(e) Foreclosure Without Maturing All Obligations. If any Event of
Default occurs as the result of Grantor's failure to make payment of any part of
the Obligations, the Beneficiary shall have the option to proceed with
foreclosure of the liens and security interests evidenced hereby in satisfaction
of such item either through the courts or by proceeding or by directing the
Trustee to proceed as if under a full foreclosure, conducting the sale as herein
provided, all without declaring all of the Obligations due, and provided that if
sale of the Mortgaged Property is made because of an Event of Default, such sale
may be made subject to the unmatured part of the Obligations; and such sale, if
so made, shall not in any manner affect the unmatured part of the Obligations,
but as to such unmatured part this Deed of Trust shall remain in full force and
effect just as though no sale had been made. The proceeds of any sale shall be
applied as provided herein. Several sales may be made hereunder without
exhausting the right of sale for any unmatured part of the Obligations. It is
the purpose hereof to provide for a foreclosure and sale of the Mortgaged
Property for any matured portion of the Obligations without exhausting the power
to foreclose and to sell the Mortgaged Property for any other part of the
Obligations whether matured at the time or subsequently maturing.
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<PAGE>
(f) Judicial Foreclosure. This instrument shall be effective as a
mortgage as well as a Deed of Trust and upon the occurrence of an Event of
Default may be foreclosed as to any of the Mortgaged Property in any manner
permitted by the laws of the State or any other state in which any part of the
Mortgaged Property is situated, and any foreclosure suit may be brought by the
Trustee or by the Beneficiary. In the event a foreclosure hereunder shall be
commenced by the Trustee, or his substitute or successor, the Beneficiary may at
any time before the sale of the Mortgaged Property direct the said Trustee to
abandon the sale, and may then institute suit for the collection of the
Obligations and any other secured indebtedness, and for the foreclosure of this
Deed of Trust. It is agreed that if the Beneficiary should institute a suit for
the collection of the indebted ness or any other secured indebtedness (whether
before, simultaneously with, or after the commencement of any foreclosure by
Trustee) and/or for the foreclosure of this Deed of Trust, the Beneficiary may
at any time before the entry of a final judgment in said suit dismiss the same,
and require the Trustee, his substitute or successor to sell the Mortgaged
Property in accordance with the provisions of this Deed of Trust.
8. Application of the Rents or Proceeds from Foreclosure or Sale.
The proceeds of any sale (whether through a foreclosure proceeding or
Beneficiary's exercise of the power of sale) shall be distributed and applied in
accordance with the terms of the Loan Agreement. In any foreclosure of this Deed
of Trust by judicial action, or any sale of the Mortgaged Property by adver
tisement, in addition to any of the terms and provisions of the Loan Agreement,
there shall be allowed (and included in the decree for sale in the event of a
foreclosure by judicial action) to be paid out of the Rents or the proceeds of
such foreclosure proceeding and/or sale:
(a) Obligations. All of the Obligations and other sums secured
hereby which then remain unpaid; and
(b) Other Advances. All other items advanced or paid by Beneficiary
pursuant to this Deed of Trust; and
(c) Costs, Fees and Other Expenses. All court costs, Trustee's fees,
reasonable attorneys' and paralegals' fees and expenses actually incurred,
reasonable appraiser's fees, reasonable advertising costs, reasonable notice
expenses, reasonable expenditures for documentary and expert evidence,
reasonable stenographer's charges, reasonable publication costs, and reasonable
costs (which may be estimated as to items to be expended after entry of the
decree) of procuring all abstracts of title, title searches and examinations,
title guarantees, title insurance policies, Torrens certificates and similar
data with respect to title which Beneficiary in the reasonable exercise of its
judgment may deem necessary. All such expenses shall become additional
Obligations secured hereby when paid or incurred by Beneficiary in connection
with any proceedings, including but not limited to probate and bankruptcy
proceedings, to which Beneficiary shall be a party, either as plaintiff,
claimant or defendant, by reason of this Deed of Trust or any indebtedness
hereby secured or in connection with the preparations for the commencement of
any suit for the foreclosure, whether or not actually commenced, or sale by
advertisement.
10
<PAGE>
9. Cumulative Remedies; Delay or Omission Not a Waiver. Each remedy
or right of Beneficiary shall not be exclusive of but shall be in addition to
every other remedy or right now or hereafter existing at law or in equity. No
delay in the exercise or omission to exercise any remedy or right accruing on
the occurrence or existence of any Event of Default shall impair any such remedy
or right or be construed to be a waiver of any such Event of Default or
acquiescence therein, nor shall it affect any subsequent Event of Default of the
same or different nature. Every such remedy or right may be exercised
concurrently or independently and when and as often as may be deemed expedient
by Beneficiary.
10. Beneficiary's Remedies against Multiple Parcels. If more than
one property, lot or parcel is covered by this Deed of Trust, and if this Deed
of Trust is foreclosed upon, or judgment is entered upon any Obligations secured
hereby, or if Beneficiary exercises its power of sale, execution may be made
upon or Beneficiary may exercise its power of sale against any one or more of
the properties, lots or parcels and not upon the others, or upon all of such
properties or parcels, either together or separately, and at different times or
at the same time, and execution sales or sales by advertisement may likewise be
conducted separately or concurrently, in each case at Beneficiary's election.
11. No Merger. In the event of a foreclosure of this Deed of Trust
or any other mortgage or deed of trust securing the Obligations, the Obligations
then due the Beneficiary shall not be merged into any decree of foreclosure
entered by the court, and Beneficiary may concurrently or subsequently seek to
foreclose one or more mortgages or deeds of trust which also secure said
Obligations.
12. Notices. Except as otherwise provided herein, any notices,
demands, consents, requests, approvals, undertakings or other instruments
required or permitted to be given in connection with this Deed of Trust (and all
copies of such notices or other instruments as set forth below) shall be in
writing, and shall be deemed to have been validly served, given or delivered if
hand-delivered or if sent by a nationally recognized overnight delivery service,
charges prepaid (effective two (2) business days following deposit with such
delivery service), or if mailed (effective three (3) business days following
deposit thereof at any main or branch United States Post Office) by United
States registered or certified mail, postage prepaid, return receipt requested,
addressed to the party so notified as follows:
if to Grantor:
Country Star Restaurants, Inc.
11150 Santa Monica Blvd.
Los Angeles, California
Attention: Chief Operating Officer
Telecopy No. 310.268.2208
with copies to:
Zukerman Gore & Brandeis, LLP
11
<PAGE>
900 Third Avenue
New York, New York 10022
Attention: Clifford Brandeis
Telecopy No. 212.223.6433
if to Trustee or Beneficiary:
Cameron Capital Ltd.
10 Cavendish Road
Hamilton, HM 19
Bermuda
Attention: Nic Snelling
Telecopy No. 441.295.9022
with a copy to:
Freeborn & Peters
950 Seventeenth Street
Denver, Colorado
Attention: Kenneth S. Witt
Telecopy No. 303.628.4240
Grantor or Beneficiary shall, from time to time, have the right to specify as
the proper addressee and/or address for the purposes of this Deed of Trust any
other party or address in the United States upon giving five (5) days' written
notice thereof.
13. Extension of Payments. Grantor agrees that, without affecting
the liability of any person for payment of the Obligations secured hereby or
affecting the lien of this Deed of Trust upon the Mortgaged Property or any part
thereof (other than persons or property explicitly released as a result of the
exercise by Trustee or Beneficiary of its rights and privileges hereunder),
Beneficiary may at any time and from time to time, on request of the Borrower,
without notice to any person liable for payment of any Obligations secured
hereby, but otherwise subject to the provisions of the Loan Agreement, extend
the time, or agree to alter or amend the terms of payment of such Obligations.
Grantor further agrees that any part of the security herein described may be
released with or without consideration without affecting the remainder of the
Obligations or the remainder of the security.
14. Governing Law. Grantor and Beneficiary have agreed that the Loan
is to be secured by collateral security located in different states. In
addition, Grantor and Beneficiary have agreed that the law of the State of
Illinois will govern the Loan and that the laws of the individual states in
which such collateral security for the Loan is located will govern all matters
with regard to such collateral security accordingly. Wherever possible, each
provision of this Deed of Trust shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Deed of
Trust shall be prohibited by or invalid under applicable law, such provision
shall be
12
<PAGE>
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Deed of Trust.
15. Satisfaction of Deed of Trust. Upon full payment of all the
Obligations, at the time and in the manner provided in the Loan Agreement, upon
expiration of the Lease by passage of time, this conveyance or lien shall be
null and void and, upon demand therefor following such payment, or expiration of
the Lease by passage of time, as the case may be, a satisfaction of this Deed of
Trust or reconveyance of the Mortgaged Property shall promptly be provided by
Beneficiary to Grantor.
16. Successors and Assigns Included in Parties. This Deed of Trust
shall be binding upon the Grantor and upon the successors and assigns of the
Grantor and shall inure to the benefit of the Trustee's and Beneficiary's
respective successors and assigns; all references herein to the Grantor and to
the Beneficiary shall be deemed to include their respective successors and
assigns. Grantor's successors and assigns shall include, without limitation, a
receiver, trustee or debtor in possession of or for the Grantor. Wherever used,
the singular number shall include the plural, the plural shall include the
singular, and the use of any gender shall be applicable to all genders.
17. Waiver of Appraisement, Valuation, Stay, Extension and
Redemption Laws. Grantor agrees, to the full extent permitted by law, that at
all times following an Event of Default, neither Grantor nor anyone claiming
through or under it shall or will set up, claim or seek to take advantage of any
appraisement, valuation, stay, or extension laws now or hereafter in force, in
order to prevent or hinder the enforcement or foreclosure of this Deed of Trust
or the absolute sale of the Mortgaged Property or the final and absolute putting
into possession thereof, immediately after such sale, of the purchaser thereat;
and Grantor, for itself and all who may at any time claim through or under it,
hereby waives, to the full extent that it may lawfully so do, the benefit of all
such laws and any and all right to have the assets comprising the Mortgaged
Property marshaled upon any foreclosure of the lien hereof and agrees that
Beneficiary or any court having jurisdiction to foreclose such lien may sell the
Mortgaged Property in part or as an entirety. To the full extent permitted by
law, Grantor hereby waives any and all statutory or other rights of redemption
from sale under any order or decree of foreclosure of this Deed of Trust, on its
own behalf and on behalf of each and every person acquiring any interest in or
title to the Mortgaged Property subsequent to the date hereof.
18. Interpretation with Other Documents. Notwithstanding anything in
this Deed of Trust to the contrary, in the event of a conflict or inconsistency
between the Deed of Trust and the Loan Agreement, the provisions of the Loan
Agreement shall govern.
19. Future Advances. The parties hereto intend that, in addition to
any other debt or obligation secured hereby, this Deed of Trust shall secure
unpaid balances of the Obligations and other such extensions of credit made by
Beneficiary to Borrower after this Deed of Trust is filed for recordation in the
official records of the county in which the Mortgaged Property is located,
whether made pursuant to an obligation of Beneficiary or otherwise. Such
Obligations and other extensions
13
<PAGE>
of credit may or may not be evidenced by notes executed pursuant to the Loan
Agreement. All future advances will have the same priority as the original
advance.
20. Invalid Provisions to Affect No Others. In the event that any of
the covenants, agreements, terms or provisions contained in this Deed of Trust
shall be invalid, illegal or unenforceable in any respect, the validity of the
remaining covenants, agreements, terms or provisions contained herein or in the
Loan Agreement shall not be in any way affected, prejudiced or disturbed
thereby. In the event that the application of any of the covenants, agreements,
terms or provisions of this Deed of Trust is held to be invalid, illegal or
unenforceable, those covenants, agreements, terms and provisions shall not be in
any way affected, prejudiced or disturbed when otherwise applied.
21. Changes. Neither this Deed of Trust nor any term hereof may be
changed, waived, discharged or terminated orally, or by any action or inaction,
but only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. To the
extent permitted by law, any agreement hereafter made by Grantor and Beneficiary
relating to this Deed of Trust shall be superior to the rights of the holder of
any inter vening lien or encumbrance.
22. Time of Essence. Time is of the essence with respect to the
provisions of this Deed of Trust.
23. Successor Trustee. Beneficiary, or any successor in ownership of
any indebtedness secured hereby, may from time to time, without other formality
than the execution of an instrument in writing, substitute a successor or
successors to any Trustee named herein or acting hereunder, which instrument,
shall be conclusive proof of proper substitution of such successor Trustee or
Trustees, who shall, without conveyance from the Trustee predecessor, succeed to
all its title, estate, rights, powers and duties. Said instrument must contain
the name of the original Grantor, Trustee and Beneficiary hereunder, the
recording information where this Deed is recorded and the name and address of
the new Trustee.
24. Trustee's Covenants and Acceptance. Trustee covenants faithfully
to perform the trust herein created, being liable, however, only for gross
negligence or willful misconduct. Trustee accepts this Trust, when this Deed of
Trust, duly executed and acknowledged, is made a public record as provided by
law. Trustee is not obligated to notify any party hereto or any action or
proceeding in which Grantor, Beneficiary or Trustee shall be a party unless
brought by Trustee.
25. Required Notices. Grantor shall notify Beneficiary promptly of
the receipt of any notice of default from the landlord under the Lease.
26. Acquisition of Fee Interest. In the event Grantor acquires the
fee interest in the Mortgaged Property, either pursuant to the terms of the
Lease or otherwise, this Deed of Trust shall continue in full force and effect
against the Mortgaged Property until its release of record, and
14
<PAGE>
this Deed of Trust shall become and remain a valid fee mortgage lien on the
Mortgaged Property.
27. General Covenants; Representations and Warranties. Grantor
hereby covenants, represents and warrants that: (a) the Lease is a valid and
subsisting demise of the premises which it demises for the full term thereof;
(b) there are no known existing defaults under the Lease on the part of Grantor
and there are no existing defaults under the Lease on the part of any other
person or persons obligated to act or refrain from acting by reason thereof; (c)
Grantor has not assigned the Lease and there are no other assignments of the
Lease; (d) the lessor under the Lease had good right to demise the premises
therein demised; (e) the Lease is in full force and effect without any condition
pending which would by the passage of time ripen into a default; and (f) there
have been no amendments to the Lease.
28. Lease and Subleases affecting the Mortgaged Property. Grantor
agrees faithfully to perform all of its obligations under the Lease, all future
subleases, or other agreements relative to the occupancy of the Mortgaged
Property at any time assigned to Beneficiary as additional security, and to
refrain from any action or inaction which would result in termination of the
Lease, or of any such other subleases, or agreements, or in the diminution of
the value thereof or of the rents or revenues due thereunder. Grantor further
agrees that any future sublease of the Mortgaged Property made after the date of
recording of this Deed of Trust shall contain a covenant to the effect that such
sublessee shall, at Beneficiary's option, agree to attorn to Beneficiary as
sublessor and, upon demand, to pay rent to Beneficiary. Grantor shall not,
without the prior written approval of Beneficiary in each instance, (i) make or
enter into any sublease of all or any part of the Mortgaged Property; (ii)
change, amend, modify, or assign in any manner whatsoever the Lease or any
sublease thereof; (iii) terminate or cancel, surrender or accept a surrender of,
suffer or permit any cancellation, termination or surrender of, the Lease, any
sublease, or any leasehold estate in any manner whatsoever; or (iv) receive,
collect or accept or permit the receipt, collection or acceptance of any
prepayment of rent or other charges under any sublease for more than one (1)
month except that the Grantor may, at the execution of a sublease, accept any
rent security deposits.
29. Excess Interest. In no event shall any interest rate hereunder
exceed the maximum rate permissible for corporate borrowers under applicable law
(the "Maximum Rate"). If, in any month, any interest rate, absent such
limitation, would have exceeded the Maximum Rate, then the interest rate for
that month shall be the Maximum Rate, and, if in further months, that interest
rate would otherwise be less than the Maximum Rate, then that interest rate
shall remain at the Maximum Rate until such time as the amount of interest paid
hereunder equals the amount of interest which would have been paid if the same
had not been limited by the Maximum Rate. In the event that, upon payment in
full of the Obligations under the Loan Agreement, the total amount of interest
paid or accrued under the terms of the Loan Agreement is less than the total
amount of interest which would, but for this Section, have been paid or accrued
if the interest rates otherwise set forth in the Loan Agreement had at all times
been in effect, then Borrower shall, to the extent permitted by applicable law,
pay Lenders an amount equal to the difference between (a) the lesser of (i) the
amount of interest which would have been charged if the Maximum Rate had, at all
times, been in effect or (ii) the amount of interest which would have accrued
had the interest rates otherwise
15
<PAGE>
set forth in the Loan Agreement, at all times, been in effect and (b) the amount
of interest actually paid or accrued under the Loan Agreement. In the event that
a court determines that any Lender has received interest and other charges
hereunder in excess of the Maximum Rate, such excess shall be deemed received on
account of, and shall automatically be applied to reduce, the Obligations other
than interest, in the inverse order of maturity, and if there are no Obligations
outstanding, such Lender shall refund to Borrower such excess.
IN WITNESS WHEREOF, this instrument is executed as of the day and
year first above written by the person or persons identified below on behalf of
Grantor (and said person or persons hereby represent that they possesses full
power and authority to execute this instrument).
THE GRANTOR HEREBY DECLARES AND ACKNOWLEDGES THAT THE GRANTOR HAS
RECEIVED, WITHOUT CHARGE, A TRUE COPY OF THIS DEED OF TRUST.
16
<PAGE>
GRANTOR:
COUNTRY STAR RESTAURANTS, INC.,
a Delaware corporation
By /s/ Peter Feinstein
---------------------
Its _____ President
ATTEST:
By /s/ Robert Schuster
---------------------
Its Secretary
---------------------
AFFIX CORPORATE SEAL
[SIGNATURE PAGE OF CALIFORNIA OPEN END LEASEHOLD DEED OF TRUST]
16
<PAGE>
STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
I, a Notary Public in and for said County, in the State aforesaid, do
hereby certify that Robert Schuster and Peter Feinstein, personally known to me
to be the Secretary and President of Country Star Restaurants, Inc., a Delaware
corporation, and personally known to me to be the same persons whose names are
subscribed to the foregoing instrument, appeared before me this day in person
and acknowledged that they signed and delivered the said instrument as such, as
a free and voluntary act and as the free and voluntary act and deed of said
corporation, for the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal this 30th day of January 1997.
/s/ Pauline Probst
---------------------
Notary Public
My Commission Expires:
8 - 8 - 2000
------------
-----------------------------------
PAULINE PROBST
Commission # 1108108
[SEAL] Notary Public -- California
Los Angeles County
My Comm. Expires Aug 8, 2000
-----------------------------------
<PAGE>
EXHIBIT A
Legal Description of the Land:
19
<PAGE>
EXHIBIT B
Permitted Exceptions to Title:
Those title exceptions numbered _______ and listed on title
commitment dated February ___, 1997, issued by Ticor Title Insurance Corporation
for the property described on Exhibit A hereof.
20
PURCHASE AND ASSIGNMENT AGREEMENT
This Purchase and Assignment Agreement is made this 12th day of February
1997 (this "Agreement") between CAMERON CAPITAL LTD. ("Assignor") and Dan Rubin
("Assignee"). Capitalized terms used herein shall have the meanings ascribed to
them in the Loan Agreement (as hereinafter defined).
Preliminary Statement:
A. Country Star Restaurants, Inc., a Delaware corporation ("Borrower"),
has executed and delivered to Assignor a certain Loan and Security Agreement of
even date herewith (the "Loan Agreement"), pursuant to which Assignor has agreed
to make certain loans to Borrower and Borrower has granted to Assignor, in its
capacity as Agent for Lenders, a security interest in the Collateral.
B. The Loan Agreement, the agreements, documents, and instruments
described on Exhibit A attached hereto, and the other Loan Documents (expressly
excepting, however, the Convertible Note of even date herewith made by Borrower
in favor of Cameron (the "Cameron Convertible Note")) are hereinafter referred
to collectively as the "Assignor Loan Documents."
C. Assignor wishes to sell and assign certain of its rights and
obligations in, to and under the Assignor Loan Documents to Assignee, and
Assignee wishes to purchase and accept such assignment in accordance with the
terms and conditions hereinafter described.
D. Notwithstanding the assignment and purchase evidenced by this
Agreement, Assignor shall retain the Cameron Convertible Note and all of its
rights and obligations as a Lender, under and as defined in the Loan Agreement
and the other Loan Documents, with respect to the Convertible Term Loan,
including, without limitation, all rights of such Lender in and to the
Collateral as security therefor (such rights and obligations sometimes
hereinafter referred to as the "Retained Cameron Rights and Obligations").
NOW THEREFORE, in consideration of the premises set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. The premises set forth above are incorporated into this Agreement by
this reference thereto and made a part hereof.
2. Assignor hereby sells, grants, assigns and conveys to Assignee, without
recourse, representation or warranty of any kind except as otherwise provided
herein, all of Assignor's right, title and interest in, to and under the
Assignor Loan Documents, expressly excepting, however, the Retained Cameron
Rights and Obligations.
<PAGE>
3. Assignee hereby accepts such grant, assignment and conveyance from
Assignor and agrees to be bound by, receive the benefits of, and assume the
obligations (including, without limitation, all obligations to make advances of
Line of Credit Loans under the Loan Agreement), under the terms of the Assignor
Loan Documents. Upon the effectiveness of this Agreement, Assignor hereby
appoints Assignee, and Assignee hereby assumes and accepts the rights and
obligations of, "Agent" under and as defined in the Loan Agreement and the other
Loan Documents.
4. Assignor represents and warrants to the Assignee as of the
effectiveness hereof that:
(a) (i) Assignor has disclosed on Exhibit A hereto all agreements,
instruments and documents, including, without limitation, UCC financing
statements, entered into or executed by Borrower and Assignor, or by
Borrower in favor of Assignor, in connection with the Loan Agreement, (ii)
Assignor has delivered to Assignee an original executed Loan Agreement and
copies of or originals of all of the other Assignor Loan Documents
described on Exhibit A hereto and (iii) there are no other agreements to
which Assignor is a party which vary the terms of or the priority of the
security interests granted under the Assignor Loan Agreements;
(b) (i) Assignor has full right, power and authority to enter into
this Agreement and (ii) Assignor owns the loans evidenced by the Assignor
Loan Documents for its own account and has not assigned or sold any
participations therein or encumbered any or all of its interest in the
Assignor Loan Documents or in such loans or its security interests and
liens evidenced by the Assignor Loan Documents.
5. Assignee hereby confirms to Assignor that Assignee has been furnished
with an original of the Loan Agreement and copies and/or originals of all of the
other Assignor Loan Documents described on Exhibit A hereto, and Assignee hereby
acknowledges receipt thereof. Assignee hereby confirms that, excepting only
Assignor's representations and warranties contained in paragraph 4 hereof,
Assignee has entered into this Agreement on the basis of its own independent
investigation and has not relied upon, and will not rely upon, any explicit or
implicit written or oral representation, warranty or other statement of Assignor
concerning (i) the authorization, execution, legality, validity, effectiveness,
genuineness, enforceability or sufficiency of the Assignor Loan Documents, (ii)
the status, business, operations, property, financial condition, or
creditworthiness of Borrower, (iii) the accuracy or completeness of any
statement of Assignor or of any other person, or (iv) the adequacy, perfection,
or priority of any Liens, held by Assignor for the benefit of Lenders as Agent,
as security for the Loans or any of Borrower's other payment and/or performance
obligations to Assignor.
6. Except for the Retained Cameron Rights and Obligations, Assignor and
Assignee hereby agree that: (i) Assignor shall have no responsibility or
liability for any acts or omissions
-2-
<PAGE>
which occur after the effectiveness hereof with respect to the Loan Agreement or
the other Assignor Loan Documents; and (ii) the rights and obligations of
Assignor with respect to the Assignor Loan Documents shall be assigned and
transferred to and assumed by Assignee upon the effectiveness hereof.
7. Assignor hereby conveys and assigns to Assignee (in Assignee's capacity
as Agent upon the effectiveness hereof), without recourse, representation or
warranty except as set forth in paragraph 4 hereof, the liens and security
interests in favor of Assignor (in Assignor's capacity as Agent immediately
prior to the effectiveness hereof) in the Collateral and other security for the
obligations of Borrower under the Assignor Loan Documents, which were granted to
Assignor pursuant to the Assignor Loan Documents. Assignor hereby delivers to
Assignee duly executed assignments of all UCC financing statements covering the
Collateral.
8. In accordance with Section 12.15 of the Loan Agreement, Assignor shall
notify Borrower of the appointment of Assignee as a successor Agent under the
Loan Agreement and the other Assignor Loan Documents. Assignor shall notify
Borrower to make all payments due under the terms of the Assignor Loan Documents
directly to Assignee in its capacity as Agent. If, nevertheless, Assignor
receives any such payments, Assignor hereby agrees to remit to Assignee all
payments hereafter received by Assignor with respect to the Assignor Loan
Documents other than payments received by Assignor in its continuing capacity as
a Lender under the Loan Agreement.
9. This Agreement may be executed in one or more counterparts, each of
which when so executed shall be deemed an original but all of which shall
constitute one and the same instrument.
10. This Agreement shall be construed in all respects in accordance with,
and governed by all of the provisions of the internal laws (as opposed to the
conflicts of law provisions) of the State of Illinois.
11. Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
12. This Agreement shall become effective upon the execution and delivery
hereof by the parties hereto. This Agreement shall inure to the benefit of, and
be binding upon, the successors and assigns of all of the parties hereto.
[SIGNATURE PAGE IMMEDIATELY FOLLOWS]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first written above.
CAMERON CAPITAL LTD.
By: /s/ N. Snelling
-----------------------------------
Title: CEO
--------------------------------
/s/ Dan J. Rubin
---------------------------------------
DAN RUBIN
-4-
<PAGE>
Exhibit A(1)
to
Purchase and Assignment Agreement
1. Loan and Security Agreement (the "Loan Agreement") among Country Star
Restaurants, Inc., a Delaware corporation ("Borrower"), and Cameron
Capital Ltd. ("Cameron"), as agent ("Agent") for the lenders from time to
time party thereto ("Lenders"), together with Exhibits and Schedules
thereto.
2. Convertible Note executed by Borrower and made payable to the order of
Cameron in the original principal amount of $4,000,000.
3. Trademark Security Agreement executed by Borrower granting Agent a
security interest in all of Borrower's trademarks, trade names and service
marks as security for the Obligations.
4. UCC-1 Financing Statements filed against Borrower as Debtor listing Agent
as Secured Party in the filing offices identified below:
a. Secretary of State of State of California;
b. Secretary of State of Florida;
c. Clerk of Superior Court of Fulton County, Georgia; and
d. Secretary of State of State of Nevada.
5. UCC Fixture Filings filed against Borrower as Debtor listing Agent as
Secured Party in the filing offices identified below:
a. Recorder of Los Angeles County, California;
b. Clerk of Superior Court of Fulton County, Georgia; and
c. Recorder of Clark County, Nevada.
- - ----------
(1) Capitalized terms used and not otherwise defined in this Exhibit A have
the meanings given such terms in the Loan Agreement described in item 1 of
this Exhibit A.
NOTICE OF
ASSIGNMENT AND
APPOINTMENT OF SUCCESSOR
February 12, 1997
VIA TELECOPY NO. 310.268-2208
Country Star Restaurants, Inc.
11150 Santa Monica Boulevard
Los Angeles, California
Attention: Chief Operating Officer
RE: Loan and Security Agreement Dated as of February 12, 1997 (the "Loan
Agreement") Between Country Star Restaurants, Inc. and Cameron Capital Ltd.
("Cameron")
Gentlemen:
Please refer to Section 12.16 of the Loan Agreement. Capitalized terms
used and not otherwise defined herein have the meanings given such terms in the
Loan Agreement.
Pursuant that certain Purchase and Assignment Agreement dated as of
February 12, 1997 between Cameron and Dan Rubin, and that certain Agency and
Intercreditor Agreement dated as of February 12, 1997 between Cameron and Dan
Rubin, respectively, Cameron, as Agent and as Lender under the Loan Agreement,
(1) has assigned the Loans and its rights and obligations as Lender with respect
thereto, except for the Convertible Term Loan, to Dan Rubin, and (2) has
appointed Dan Rubin as successor Agent under the Loan Agreement.
Pursuant to Section 4.5 of the Loan Agreement, you are hereby directed to
make all payments of principal, interest, premium and other sums due to Lenders
(other than amounts payable with respect to the Convertible Term Note) to:
Dan Rubin
171 East 84th Street
Apartment 11D
New York, New York 10028
Telecopy No. 212.396.2751
<PAGE>
Pursuant to Section 12.8 of the Loan Agreement, you are hereby notified
that the address of successor Agent for the purpose of all notices, demands,
requests, etc., is as follows:
Dan Rubin
171 East 84th Street
Apartment 11D
New York, New York 10028
Telecopy No. 212.396.2751
You are further directed to make all other appropriate changes to your
records and procedures to evidence and comply with the foregoing, including but
not limited to issuance of one or more appropriate certificates of insurance as
required by Section 8.5 of the Loan Agreement.
Very truly yours,
CAMERON CAPITAL LTD.
By: /s/ N. Snelling
---------------------------------
Its: CEO
---------------------------------
/s/ Dan Rubin
--------------------------------------
Dan Rubin
cc: (via telecopy no. 212.223.6433)
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022
Attention: Clifford A. Brandeis
AGENCY AND INTERCREDITOR AGREEMENT
This AGENCY AND INTERCREDITOR AGREEMENT is entered into as of this 12th
day of February, 1997 (this "Agreement") among CAMERON CAPITAL LTD., a limited
company organized under the laws of Bermuda with an office at 10 Cavendish Road,
Hamilton, HM 19, Bermuda ("Cameron"), as a "Lender" under and as defined in the
"Loan Agreement" referred to below, Dan Rubin ("Rubin"), as a Lender, the other
Lenders from time to time party hereto, and Rubin in its capacity as "Agent" for
Lenders under and as defined in the Loan Agreement. Capitalized terms used
herein not otherwise defined herein shall have the meanings ascribed to them in
the Loan Agreement.
Preliminary Statement:
A. Cameron, as a Lender and as predecessor Agent, and Country Star
Restaurants, Inc., a Delaware corporation ("Borrower"), have entered into
that certain Loan and Security Agreement of even date herewith (as
amended, restated, supplemented, or otherwise modified from time to time,
the "Loan Agreement").
B. Pursuant to a certain Purchase and Assignment Agreement of even
date herewith between Cameron and Rubin, Cameron has assigned to Rubin
certain rights, and Rubin has assumed certain obligations, under the Loan
Agreement and the other Loan Documents, and Rubin has become Agent under
the Loan Agreement, succeeding Cameron in such capacity.
C. Cameron, as a Lender, Rubin, as a Lender, and the other Lenders
which may from time to time become parties to the Loan Agreement desire to
enter into this Agreement to set forth the terms and conditions under
which Agent will act in such capacity under the Loan Agreement and the
other Loan Documents.
NOW THEREFORE, in consideration of the premises set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Appointment. Each Lender hereby designates and appoints Rubin as its
Agent under the Loan Agreement and the other Loan Documents, and each Lender
hereby irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the other Loan Documents and to exercise such
powers as are set forth herein or therein, together with such other powers as
are reasonably incidental thereto. Agent agrees to act as such on the express
terms and conditions contained in this Agreement. In performing its functions
and duties under this Agreement, Agent shall act solely as agent of Lenders and
does not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for Borrower. Agent may perform any of
its duties under this Agreement, or under the other Loan Documents, by or
through its agents or employees.
<PAGE>
2. Nature of Duties and Rights. Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement, the Loan
Agreement, or the other Loan Documents. Agent shall not exercise any of its or
Lenders rights and remedies arising after a Default or Event of Default under
the Loan Agreement or the other Loan Documents without the prior consent of all
Lenders, and Agent shall exercise those rights and remedies solely at the
unanimous direction of Lenders. Notwithstanding the foregoing, any Lender may,
at any time after a Default or Event of Default shall have occurred and be
continuing, terminate such Lender's commitment (if any) to make Loans and
declare all obligations owing by Borrower to such Lender under the Loan
Agreement to be immediately due and payable. Nothing in this Agreement or any of
the other Loan Documents, whether express or implied, is intended to or shall be
construed to impose upon Agent any obligations in respect of this Agreement or
any of the other Loan Documents, except as expressly set forth herein or
therein. Each Lender shall make its own independent investigation of the
financial condition and affairs of Borrower in connection with the making and
the continuance of the Loans hereunder, and shall make its own appraisal of the
creditworthiness of Borrower, and Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before the date of this Agreement or at any time or times thereafter, other than
written reports provided by Borrower to Agent pursuant to the Loan Agreement. If
Agent seeks the consent or approval of Lenders to the taking or refraining from
taking any action under the Loan Agreement or the other Loan Documents, Agent
shall send notice thereof to each Lender. Agent shall promptly notify each
Lender (a) any time that Agent becomes aware that a Default or an Event of
Default has occurred and is continuing and (b) any time that Lenders have
instructed Agent to act or refrain from acting pursuant hereto. Agent may employ
agents, co-agents and attorneys-in-fact and shall not be responsible to Lenders
or Borrower, except as to money or securities received by it or its authorized
agents, for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.
3. Rights, Exculpation, Etc. Neither Agent nor any of its officers,
directors, employees or agents shall be liable to any Lender for any action
taken or omitted by it or any of them under this Agreement, the Loan Agreement,
or under any of the other Loan Documents, or in connection herewith or
therewith, except that (a) Agent shall be obligated on the terms set forth
herein for performance of its express obligations under this Agreement and the
Loan Agreement; (b) Agent shall not be entitled to exercise any of the powers
granted to it under this Agreement, the Loan Agreement or the other Loan
Documents in any way inconsistent with its express obligations to Lenders under
this Agreement; and (c) no Person shall be relieved of any liability imposed by
law for willful misconduct or any other intentional tort. Agent shall not be
liable for any apportionment or distribution of payments made by it in good
faith pursuant to the Loan Agreement and, if any such apportionment or
distribution is subsequently determined to have been made in error, the sole
recourse of any Lender to whom payment was due but not made shall be to recover
from each other Lender any payment in excess of the amount to which it is
determined to have been entitled. Agent shall not be responsible to any Lender
for any recitals, statements, representations or warranties contained in this
Agreement or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, or sufficiency of the Loan Agreement or any of
the other Loan Documents or any of the transactions contemplated
2
<PAGE>
thereby, or for the financial condition of Borrower. Agent shall not be required
to make any inquiry concerning either the performance or observance of any of
the terms, provisions or conditions of the Loan Agreement or any of the other
Loan Documents or the financial condition of Borrower, or the existence or
possible existence of any Default or Event of Default. Agent may at any time
request instructions from Lenders with respect to any actions or approvals which
by the terms of this Agreement, the Loan Agreement or of any of the other Loan
Documents Agent is permitted or required to take or to grant, and if such
instructions are promptly requested, Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from any action or
withholding any approval under any of the Loan Documents until it shall have
received such instructions from Lenders. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against Agent as a result of
Agent acting or refraining from acting under this Agreement or any of the other
Loan Documents in accordance with the instructions of Lenders.
4. Reliance. Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents or any telephone message
believed by it in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person, and with respect to all matters pertaining to
this Agreement, the Loan Agreement, or any of the other Loan Documents and its
duties hereunder or thereunder, upon advice of counsel selected by it.
5. Agent in Individual Capacity. Rubin and its affiliates may make loans
to, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with Borrower and any
of their respective Subsidiaries and Affiliates as though Rubin were not Agent
hereunder, and without notice to or the consent of the other Lenders. Lenders
acknowledge that, pursuant to such activities, Rubin or its affiliates may
receive information regarding Borrower or its Subsidiaries or Affiliates
(including information that may be subject to confidentiality obligations in
favor of Borrower or any such Subsidiary or Affiliate), and acknowledge that
Agent shall be under no obligation to provide such information to them;
provided, that in the event that Rubin receives any such information which is
not subject to such confidentiality obligations, and while Rubin is Agent
hereunder, and Lenders are not otherwise provided with such information, then
Agent shall provide such information to Lenders. With respect to the Loans made
by it, Rubin shall have the same rights and powers under this Agreement as any
other Lender and may exercise the same as though it were not Agent.
6. Successor Agent.
(a) Agent may resign from the performance of all of its functions
and duties under this Agreement at any time solely by giving at least
sixty (60) days' prior written notice to Lenders. Such resignation shall
take effect upon the acceptance by a successor Agent of appointment
pursuant to clause (b) or (c) below.
(b) Upon any such notice of resignation, Lenders by unanimous
consent may appoint a successor Agent.
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<PAGE>
(c) If a successor Agent shall not have been so appointed within
such sixty (60) day period because Lenders have not agreed on such
successor, the retiring Agent shall then appoint a successor Agent who
shall serve as Agent until such time, if any, as Lenders by unanimous
consent shall appoint a successor Agent as provided above.
7. Collateral Matters.
(a) The grant of Liens in favor of Agent in the Collateral are held
by Agent for the ratable benefit of all Lenders, and Agent shall act as
agent for Lenders for the purpose of, among other things, attachment and
perfection of Lenders' Liens in the Collateral.
(b) Further, each Lender hereby appoints each other Lender as agent
for the purpose of attaching and perfecting Lenders' security interest in
assets which, in accordance with Article 9 of the UCC, can be attached and
perfected only by possession. Should any Lender (other than Rubin for so
long as it shall also act as Agent) obtain possession of any such
Collateral, such Lender shall notify Agent thereof, and promptly upon
Agent's request therefor shall deliver such Collateral to Agent or in
accordance with Agent's instructions.
(c) Agent shall not release any Agent's Lien upon any Collateral
without the unanimous written consent of all Lenders. So long as no Event
of Default has occurred and is then continuing, upon receipt by Agent of
written consent of all Lenders to Agent's authority to release any Agent's
Liens upon particular types or items of Collateral, and upon at least five
(5) days' prior written request by Borrower, Agent shall (and is hereby
irre vocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of Agent's Liens upon such Collateral.
8. Restrictions on Actions by Lenders; Sharing of Payments and Proceeds of
Collateral.
(a) Each Lender agrees that it shall not, unless specifically
requested to do so by Agent at the direction of all Lenders, take or cause
to be taken any action, including, without limitation, the commencement of
any legal or equitable proceedings, to foreclose any Lien on, or otherwise
enforce any security interest in, any of the Collateral, the purpose of
which is, or could be, to give such Lender any preference or priority
against the other Lenders with respect to any or all of the Collateral.
Notwithstanding the date, manner or order of perfection of the Liens
granted to Agent or any Lender under the Loan Documents and
notwithstanding any provisions of the UCC, or any applicable law or
decision, or whether Agent or any Lender holds possession of all or any
part of the Collateral, Lenders shall have Liens on all Collateral in
accordance with each Lender's pro rata share of the Obligations. All
proceeds of Collateral shall be shared by Lenders in accordance with their
respective pro rata shares of the Obligations existing on the date the
event giving rise to such proceeds shall occur.
4
<PAGE>
(b) If at any time or times any Lender shall receive (i) by payment,
foreclosure, set-off or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations of Borrower to such Lender
arising under, or relating to, this Agreement, the Loan Agreement or the
other Loan Documents, except for any such proceeds or payments received by
such Lender from Agent pursuant to the terms of this Agreement or the Loan
Agreement, or (ii) payments from Agent in excess of such Lender's ratable
portion of all such distributions by Agent, such Lender shall promptly
turn over the same to Agent, in kind, and with such endorsements as may be
required to negotiate the same to Agent, or in same day funds, as
applicable, for the account of all Lenders and for application to the
Obligations in accordance with the applicable provisions of this Agreement
and the Loan Agreement.
9. Payments by Agent to Lenders. All payments to be made by Agent to
Lenders under the Loan Agreement shall be made by bank wire transfer or internal
transfer of immediately available funds to the accounts listed on the signature
pages hereto or pursuant to such other wire transfer instructions as each party
may designate for itself by written notice to Agent. Concurrently with each such
payment, Agent shall identify whether such payment (or any portion thereof)
represents principal, premium or interest on the Loans or otherwise. Agent shall
maintain at its address set forth on the signature pages hereto a register of
the names and addresses of Lenders and the commitment of, and principal amount
of the Loans owing to, each Lender from time to time (the "Register"). The
entries in the Register shall constitute rebuttably presumptive evidence, absent
manifest error, of the accuracy of the information contained therein. Agent and
Lenders may treat each Person the name of which is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by any Lender at any reasonable time and from time to
time upon reasonable prior notice.
10. Amendments and Waivers. No amendment, modification or waiver of this
Agreement, the Loan Agreement, or any of the other Loan Documents shall be
effective unless evidenced by a writing agreed to and signed by all Lenders. No
amendment, modification, termination, or waiver of any provision referring to
Agent shall be effective without the written concurrence of Agent and all
Lenders. With the written concurrence of any Lender, Agent may, but shall have
no obligation to, execute amendments, modifications, waivers or consents on
behalf of such Lender. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given.
11. Binding Effect; Assignment; Disclosure. The provisions of this
Agreement shall be binding upon and inure to the benefit of the respective
representatives, successors and assigns of the parties hereto. The rights and
benefits of any Lender under this Agreement, the Loan Agreement and the other
Loan Documents shall, if such Lender so agrees, inure to any party acquiring any
interest in the Obligations or any part thereof, subject to the provisions
hereof. No assignment of any Lender's interest to any new Lender under the Loan
Agreement or the other Loan Documents shall become effective unless such new
Lender becomes a party to this Agreement.
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<PAGE>
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed an original but all
such counterparts shall constitute one and the same instrument.
13. Governing Law. This Agreement shall be construed in all respects in
accordance with, and governed by all of the provisions of the internal laws (as
opposed to the conflicts of law provisions) of the State of Illinois.
14. Partial Invalidity. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first above written.
Address: Dan Rubin,
as Agent and as a Lender
Account Information: /s/ Dan J. Rubin
Address: CAMERON CAPITAL LTD.,
as a Lender
Account Information:
By: /s/ N. Snelling
---------------------------------
Title: CEO
---------------------------------
6
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
February 12, 1997, is between Country Star Restaurants, Inc., a Delaware
corporation (the "Company"); and Cameron Capital Ltd. ("Cameron") and the other
parties who may execute and deliver counterpart signature pages to this
Agreement from time to time (who are referred to collectively with Cameron as
the "Investors").
RECITALS
A. The Investors have agreed to lend certain monies to the Company
pursuant to that certain Loan and Security Agreement dated as of February 12,
1997 (the "Loan Agreement") provided that, among other things, certain
registration rights are granted to the Investors.
B. Pursuant to the Loan Agreement, the Company: (i) has issued to Cameron
a Common Stock purchase warrant (the "Cameron Warrant") and a Term Loan Note
that is convertible into Common Stock (the "Convertible Note"); and (ii) is
obligated to issue additional Common Stock purchase warrants to Investors making
additional advances under the Loan Agreement (together with the Cameron Warrant,
the "Warrants").
C. The Company deems it desirable to grant certain securities registration
rights to the Investors in order to induce the Investors to lend it certain
monies pursuant to the Loan Agreement.
AGREEMENT
In consideration of the premises and the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. In addition to the capitalized terms defined elsewhere in
this Agreement, the following capitalized terms shall have the following
meanings when used in this Agreement:
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock of the Company.
"Holders" means the holders of Registrable Shares who are parties to
this Agreement or successors or assigns or subsequent holders of the Registrable
Shares.
"Person" means a natural person, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated
<PAGE>
organization or other entity, or a governmental entity or any department, agency
or political subdivision thereof.
"Registrable Shares" means, at any time, any shares of Common Stock
issued or issuable upon conversion of the Convertible Note or exercise of the
Warrants, and any shares of Common Stock issued as, or issued or issuable
directly or indirectly upon the conversion or exercise of other securities
issued as, a dividend or other distribution with respect to or in replacement of
the Convertible Note, Warrants or other Registrable Shares; provided, however,
that Registrable Shares shall not include any shares the sale of which has been
registered pursuant to the Securities Act or which have been sold to the public
pursuant to Rule 144, promulgated under the Securities Act. For purposes of this
Agreement, a Person will be deemed to be a holder of Registrable Shares whenever
such Person has the right to acquire such Registrable Shares (by conversion,
exercise or otherwise), whether or not such acquisition has actually been
effected.
"Registration Expenses" has the meaning ascribed to it in Section
2.6 of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
2. Securities Act Registration.
2.1. Registration of Registrable Shares. The Company shall register under
the Securities Act, at the Company's expense, all of the shares of Common Stock
issuable upon the conversion in full of the Convertible Note and upon exercise
of all of the Warrants (the "Registrable Shares") and in connection therewith
shall file a registration statement with respect to the Registrable Shares (the
"Registration Statement") with the Commission on or before the earlier of (i) 15
days after the Company files its annual report on Form 10-K or 10-KSB, and (ii)
May 1, 1997. The Company shall cause the Registration Statement to become
effective by no later than June 30, 1997. Notice of effectiveness of the
Registration Statement shall be furnished promptly to the Investors. The Company
shall maintain the effectiveness of the Registration Statement and from time to
time will amend or supplement such Registration Statement and the prospectus
contained therein as and to the extent necessary to comply with the Securities
Act. The effectiveness of the Registration Statement shall be maintained with
respect to the Registrable Shares until the later to occur of the second
anniversary of the date of the respective Warrants and Convertible Note or such
date as all of the Registrable Shares may be sold during any one period of three
(3) consecutive months pursuant to Rule 144 under the Securities Act or
otherwise without registration.
2.2. Amendments. The Company shall prepare and file with the Commission
such amendments and supplements to the Registration Statement and the prospectus
used in connection with such Registration Statement necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement.
2
<PAGE>
2.3. Notice. The Company shall notify each seller of Registrable Shares
covered by the Registration Statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include
any untrue statement of a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in light
of the circumstances then existing.
2.4. Prospectus. The Company shall furnish to the Investors such number of
copies of a prospectus in conformity with the requirements of the Securities
Act, and such other documents as may reasonably be requested in order to
facilitate the disposition of the Registrable Shares owned by the Investors.
2.5. Blue Sky. The Company shall register and qualify the securities
covered by such Registration Statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Investors;
provided, however, that the Company shall not be required in connection
therewith, or as a condition thereto, to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act.
2.6. Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Agreement, including, but not limited to,
all registration and filing fees, fees and expenses and compliance with federal,
state and foreign securities laws, printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Company and its
independent certified public accountants, underwriters (excluding discounts and
commissions attributable to the Registrable Shares included in such
registration) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), will be borne by the Company. In
addition, the Company will pay its internal expenses (including, but not limited
to, all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance obtained by the Company and the expenses and
fees for listing the securities to be registered on each securities exchange or
quotation system.
2.7. Other Matters. (a) The Company shall provide a transfer agent and
registrar for all Registrable Shares to be registered hereunder and a CUSIP
number of all Registrable Shares, in each case not later than the effective date
of such registration.
(b) The Company will use its best efforts to cause the Registrable Shares
to be duly approved for listing on The Nasdaq Stock Market on or prior to the
effectiveness of the Registration Statement.
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<PAGE>
(c) The Company will use its best efforts to maintain the listing of its
Common Stock on The Nasdaq Stock Market, for at least a sixty (60) month period
commencing on the Effective Date.
(d) The Company will make and keep public information regarding the
Company available as those terms are understood and defined in Rule 144 under
the Securities Act, at all times from and after the Effective Date;
(e) The Company will file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Securities Exchange Act.
3. Indemnification.
3.1. Indemnification by the Company. In the event that the Company
registers under the Securities Act any of the Registrable Shares held by the
Investors, the Company shall indemnify and hold harmless the Investors and each
underwriter (if any) of such shares (including any broker or dealer through whom
any of the shares may be sold) and each person, if any, who controls any of the
Investors or any such underwriter within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Securities Exchange Act from and against
any and all losses, claims, damages, expenses or liabilities, joint or several,
to which they or any of them become subject under the Securities Act or the
Securities Exchange Act or otherwise, and, except as hereinafter provided, shall
reimburse the Investors and each of the underwriters and each such controlling
person, if any, for any legal or other expenses reasonably incurred by them or
any of them in connection with investigating or defending any actions whether or
not resulting in any liability, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or in the prospectus (or the Registration Statement or
prospectus as from time to time amended or supplemented by the Company) or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such untrue statement or omission was
made in such Registration Statement or prospectus in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by that specific Investor (insofar as indemnification of that specific
Investor is concerned) or any underwriter (insofar as indemnification of any
such underwriter is concerned) relating thereto expressly for use therein.
Promptly after receipt by the Investors or any underwriter or any person
controlling any of them, as the case may be, of notice of a claim to which the
foregoing indemnification applies, the Investors or such other persons shall
notify the Company in writing of the commencement thereof, and, subject to the
provisions hereinafter stated, the Company shall assume the defense of such
action (including the employment of counsel, who shall be counsel satisfactory
to the Investors or such underwriter or controlling person, as the case may be,
and the payment of expenses) insofar as such action shall relate to any alleged
liability in respect of which indemnity may be sought against the Company. The
Investors or any underwriter or any such controlling persons shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof but the fees and expenses of such counsel shall not be at the
expense of the Company unless: (i) the employment of such counsel has been
specifically authorized by the Company, (ii) the Company has failed to assume
the defense and employ counsel, or (iii) the named
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<PAGE>
parties of any such action, suit or proceeding (including any impleaded parties)
include both the person or persons seeking indemnification (the "indemnified
person") and the Company and such indemnified person shall have been advised by
its counsel that representation of the indemnified person and the Company by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the Company shall not have the right to assume the defense of such action,
suit or proceeding on behalf of such indemnified person). The Company shall not
be liable to indemnify any person for any settlement by such person of any such
action effected without the Company's consent.
3.2. Indemnification by the Investors. Each Investor, severally and not
jointly, shall indemnify the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Securities Exchange Act, against all
losses, claims, damages, expenses or liabilities or actions to which they or any
of them become subject under the Securities Act or the Securities Exchange Act
or otherwise, and shall reimburse the Company, its officers and directors and
each such controlling person, if any, for any legal or other expenses reasonably
incurred by them or any of them in connection with investigating or defending
any actions whether or not resulting in any liability, insofar as such losses,
claims damages, expenses, liabilities or actions arise out of or are based upon
any information relating to that specific Investor furnished by or on behalf of
that specific Investor in writing specifically for inclusion in such
Registration Statement. Notwithstanding the above, the liability of each
Investor under this Section 3.2 shall not exceed the proceeds (net of
underwriting discounts or commissions) received by that Investor upon the sale
of the Registrable Shares.
3.3 Payment. Any losses, claims, damages, liabilities and reasonable
expenses for which an indemnified party is entitled to indemnification under
Sections 3.1 and 3.2 of this Agreement shall be paid by the indemnifying party
to the indemnified party as such losses, claims, damages, liabilities and
expenses are incurred.
4. Representations, Warranties and Covenants of the Company. The Company
hereby incorporates by reference all of its representations, warranties and
covenants as set forth in the Loan Agreement.
5. Representations and Warranties of the Investors. Each of the Investors
hereby incorporates by reference all of its respective representations,
warranties and covenants as set forth in the Loan Agreement.
6. Brokers. The Company hereby agrees to indemnify each Investor and holds
each Investor harmless from any liability for any brokers' or finders' fee with
respect to this Agreement or the transactions contemplated hereby for which the
Company is responsible.
7. Waiver, Amendment. Neither this Agreement nor any provisions hereof
shall be modified, changed, discharged or terminated except by an instrument in
writing, signed by the party against whom any waiver, change, discharge or
termination is sought.
5
<PAGE>
8. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, their respective successors and assigns,
and no other person shall have any right or obligation hereunder. Neither this
Agreement nor any right, remedy, obligation or liability arising hereunder or by
reason hereof shall be assignable by the Company without the prior written
consent of the other party and any assignment in violation hereof shall be void.
This Agreement, and all of each Investor's rights, remedies, obligations or
liabilities arising hereunder or by reason hereof, may be assigned by that
specific Investor.
9. Governing Law; Choice of Forum. This Agreement shall be interpreted and
the rights and liabilities of the parties hereto determined in accordance with
the internal laws (as opposed to the conflict of laws provisions) of the state
of Illinois. The parties hereto hereby agree to the exclusive jurisdiction of
the United States District Court of the Northern District of Illinois and the
State Courts of Illinois located in Cook County, Illinois and waive any
objection based on venue or forum non conveniens with respect to any action
instituted therein, and agree that any dispute concerning the relationship
between the Investors on the one hand and the Company on the other hand or the
conduct of any party in connection with this Agreement or otherwise shall be
heard only in the courts described above.
10. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
11. Multiple Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
will constitute one and the same instrument. However, in enforcing any party's
rights under this Agreement it will be necessary to produce only one copy of
this Agreement signed by the party to be charged.
12. Notices. All notices, consents, waivers, and other communications
under this Agreement must made in accordance with the terms of Section 12 of the
Loan Agreement.
13. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns.
14. Effect of Company's Noncompliance. Failure by the Company to comply
with any of the above provisions shall constitute a default under the Loan
Agreement.
[Signature Page Immediately Follows]
6
<PAGE>
This Agreement has been executed by the parties below to be effective as
of the date set forth on the first page of this Agreement.
COUNTRY STAR
RESTAURANTS, INC.
By: /s/ Robrt J. Schuster
------------------------------
Name: Robert J. Schuster
----------------------------
Title: CEO
---------------------------
INVESTORS:
CAMERON CAPITAL LTD.
By: /s/ N. Snelling
------------------------------
Name: N. Snelling
----------------------------
Title: CEO
---------------------------
/s/ Dan J. Rubin
----------------------------------
Name of Investor
By: /s/ Dan Rubin
------------------------------
Name: ____________________________
Title: ___________________________
[Signature Page to Registration Rights Agreement]
1
CONVERTIBLE NOTE
$4,000,000 February 12, 1997
FOR VALUE RECEIVED, the undersigned, COUNTRY STAR RESTAURANTS, INC., a
Delaware corporation ("Borrower" or the "Corporation"), HEREBY IRREVOCABLY
PROMISES TO PAY to the order of CAMERON CAPITAL LTD., a Bermuda corporation
(together with its successors and assigns, "Holder"), the principal sum of FOUR
MILLION AND 00/100 DOLLARS ($4,000,000) together with interest on the principal
balance hereof at the rates provided below from the date such principal is
advanced until payment in full thereof.
This Convertible Note is the Convertible Note referred to in, and is
entitled to the benefit of, the Loan and Security Agreement dated as of February
12, 1997 between Borrower and Holder (as amended, restated, supplemented, or
otherwise modified from time to time, the "Loan Agreement"), which Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof and to which reference is hereby made for a more complete
statement of the terms and conditions under which the loan evidenced hereby was
made and is to be repaid. Any capitalized terms used herein, unless otherwise
defined herein, shall have the meanings given to such terms in the Loan
Agreement.
1. Payment of Principal. The entire principal balance of this Convertible
Note shall be payable in immediately available funds on October 9, 1999;
provided, however, that notwithstanding the foregoing, the principal balance
hereof shall be payable in full upon acceleration as provided in the Loan
Agreement. Such principal payment shall be accompanied by a premium calculated
in the same manner as the prepayment premium as set forth in Section 4.
2. Interest. Borrower further promises to pay Holder interest on the
average daily outstanding principal amount hereof, on June 30 and December 31 of
each year, commencing on December 31, 1997, in arrears, at a rate of seven
percent (7%) per annum. Effective immediately upon the occurrence of an Event of
Default, the principal balance hereof and, to the extent permitted by applicable
law, any interest thereon not paid when due, shall bear interest payable upon
Holder's demand therefor at a rate which is ten percent (10.0%) in excess of the
rate otherwise payable under this Convertible Note.
3. Interest Payments After Default; Premium Payable if Registration Not
Effected.
a. Interest After Default. Following the occurrence of an Event of
Default and in addition to any other remedies Holder may have hereunder or under
the Loan Agreement, Borrower shall pay interest on the principal balance hereof
and, to the extent permitted by applicable law, any interest thereon not paid
when due, upon Holder's demand therefor from time to time at any time or, if no
such demand has been made, in accordance with the schedule set forth in Section
2 above.
b. Premium if Registration Not Effected. In the event the
Registration Statement required to be filed by the Company pursuant to the
Registration Rights Agreement of even date
<PAGE>
between the Borrower and the Holder is not filed with the Securities and
Exchange Commission (the "Commission") on or before May 1, 1997, or declared
effective by the Commission on or before June 30, 1997, the Borrower shall, for
each month or portion thereof that said Registration Statement is not filed or
declared effective, as the case may be, in addition to the interest payable on
the Convertible Note, pay the Holder a premium equal to three percent (3%) of
the face amount of the Convertible Note, payable monthly in advance, commencing
May 2, 1997 or July 1, 1997 as the case may be. The premium to be paid, if any,
shall constitute liquidated damages for the Borrower's failure to cause the
Registration Statement to be filed or to become effective. The parties agree
that the foregoing damages are reasonable and that the anticipated damages for
the failure of the Borrower to effect such registration are uncertain in amount
and difficult to be proved. The premium shall be payable by wire transfer of
immediately available funds unless the Holder agrees to accept part or all of
the payment of the premium in Common Stock. In such event, the Borrower shall
issue to the Holder such number of fully paid and non-assessable shares of
Common Stock as shall have an aggregate average closing bid price (as reported
by The Nasdaq Stock Market) for the five (5) consecutive trading days prior to
the date such premium is payable equal in amount to the cash payment of the
premium which the Borrower and the Holder have elected to pay in kind.
4. Prepayments. Borrower may prepay the principal balance hereof in
immediately available funds in whole or in part at any time upon ten (10)
business days' prior written notice. During such ten (10) day period, Holder
may, in its sole discretion, in lieu of receiving such prepayment, convert this
Convertible Note in accordance with the terms hereof. Each prepayment of
principal shall be accompanied by payment of all accrued but unpaid interest on
the principal balance hereof to the date of prepayment. Any prepayment of less
than all of the outstanding principal hereunder shall be applied to the
installments of principal hereunder in the inverse order of maturity. Each
prepayment shall also be accompanied by a substitute Convertible Note duly
executed by Borrower in the same form as this Convertible Note, except that the
principal amount of such substitute Convertible Note shall reflect the reduced
principal amount under this Convertible Note. Upon receipt of such prepayment
from Borrower and such substitute Convertible Note, Holder will surrender this
Convertible Note to Borrower.
5. Computation of Interest; Method of Payments. Accrued interest charges
hereunder shall be computed on the basis of a year of 360 days for the actual
number of days elapsed. If any payment of principal or interest hereunder shall
become due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in connection with
such payment.
Both principal and interest hereunder are payable in lawful money of the
United States of America to Holder at The Bank of Bermuda International, New
York, New York for credit to The Bank of Bermuda Limited, Hamilton Bermuda (or
to such other accounts as Holder may direct Borrower) by wire transfer in
immediately available funds prior to noon Atlantic standard time (AST) on the
date such payments are due, or as otherwise provided herein or in the Loan
Agreement; provided, however, that Holder may elect, in its sole discretion, to
receive payment for part or all of any accrued interest hereunder in shares of
Common Stock, in lieu of immediately available funds, in such number of shares
to be determined based upon the average closing bid price (as reported by
2
<PAGE>
the Nasdaq Stock Market) of the Common Stock for the five (5) consecutive
trading days immediately prior to the date that such interest is payable.
6. Other Charges. In addition to the interest charges described herein,
the Loan Agreement provides for the payment by Borrower of various other charges
and fees as set forth more fully in the Loan Agreement.
7. Acceleration. Upon and after the occurrence of an Event of Default,
this Convertible Note may, in accordance with the terms of the Loan Agreement,
and without demand, notice or legal process of any kind, be declared and
immediately shall become due and payable.
8. Certain Waivers by Borrower. Demand, presentment, protest and notice of
nonpayment and protest, notice of intention to accelerate maturity, notice of
acceleration of maturity and notice of dishonor are hereby waived by Borrower.
9. Permissible Rates of Interest. In no contingency or event whatsoever
shall interest charged hereunder, however such interest may be characterized or
computed, exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that Holder has received interest
hereunder in excess of the highest rate applicable hereto, Holder shall apply
such amounts in accordance with Section 3.2 of the Loan Agreement.
10. Conversion Rights.
a. Right to Convert. Part or all of the principal amount of this
Convertible Note may be converted, at the option of the Holder, at any time
after ninety (90) days from the date hereof and before it is paid in full in
accordance herewith, and without the payment of any additional consideration
thereof, into the number of fully paid, nonassessable shares of common stock,
$.001 par value per share, of the Corporation (the "Common Stock"), as is
determined by dividing the principal amount of this Convertible Note requested
by the Holder to be converted into Common Stock (as adjusted for stock splits,
stock dividends, combinations and similar recapitalizations affecting this
Convertible Note) by the lesser of (i) $1.33 (the "Fixed Conversion Price"), or
(ii) Eighty Percent (80%) of the average closing bid price (as reported by The
Nasdaq Stock Market) of the Common Stock for the five (5) consecutive trading
days immediately prior to the Date of Conversion, as defined below in Section
10.b.(ii) (such value is hereinafter referred to as the "Formula Conversion
Price"). Notwithstanding the foregoing, in no event shall the Convertible Note
be convertible into a cumulative aggregate number of shares of Common Stock in
excess of 3,000,000 (as adjusted for stock splits, reverse splits and similar
recapitalizations affecting such shares, the "Maximum Number of Shares"). In the
event the Holder of the Convertible Note (i) subsequent to having converted the
Convertible Note into the Maximum Number of Shares or (ii) upon the conversion
of the Convertible Note such that the number of shares of Common Stock issuable
upon conversion of the Convertible Note (without giving effect to the preceding
sentence) would exceed the Maximum Number of Shares, submit a written notice to
the Corporation demanding redemption ("Notice of Redemption") of the principal
and accrued interest remaining after the conversion of the Convertible Note into
the Maximum Number of Shares, the Corporation shall redeem such remaining
3
<PAGE>
principal balance and accrued interest for a price equal to such principal and
accrued interest plus a premium calculated in the same manner as the prepayment
premium described in Section 4 (the "Redemption Amount"). The Corporation shall
pay such Redemption Amount to the Holder within fifteen (15) calendar days of
the date of the Notice of Redemption, against delivery of the Convertible Note.
b. Mechanics of Conversion.
(i) No fractional shares of Common Stock shall be issued upon
conversion of this Convertible Note. In lieu of any fractional share to which
the Holder would otherwise be entitled, the Corporation shall round up to the
nearest whole share. In order to convert the Convertible Note into shares of
Common Stock, the Holder shall surrender the Convertible Note, either by
overnight courier or 2-day courier, to the office of the Corporation or its
transfer agent for the Convertible Notes, if any, and shall give written notice
to the Corporation at such office that the Holder elects to convert the same,
the principal amount of the Convertible Note so converted and a calculation of
the Conversion Price (with an advance copy of the notice by facsimile);
provided, however, that the Corporation shall not be obligated to issue
certificates evidencing shares of Common Stock issuable upon such conversion
unless the Convertible Note is delivered to the Corporation or its transfer
agent as provided above, or the Holder notifies the Corporation or its transfer
agent that the Convertible Note has been lost, stolen or destroyed and executes
an agreement satisfactory to the Corporation to indemnify the Corporation from
any loss incurred by it in connection with the Convertible Note.
(ii) The Corporation shall use its best efforts to issue and
deliver, within three (3) business days after delivery to the Corporation or its
transfer agent of such Convertible Note or such agreement of indemnification, to
the Holder of this Convertible Note at the address of the Holder on the books of
the Corporation, a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled as aforesaid. The date on
which notice of conversion is received by the Corporation (the "Date of
Conversion") shall be deemed to be the date of conversion, provided this
Convertible Note which may be converted is received by the Corporation or its
transfer agent, as the case may be, within three (3) business days thereafter
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date. If the
Convertible Note to be converted is not received by the Corporation or its
transfer agent within three (3) business days after the Date of Conversion, the
notice of conversion shall become null and void. In addition, if the Convertible
Note should be converted in part only, the Corporation shall, upon surrender of
this Convertible Note, issue, execute and deliver a new Convertible Note
representing the balance of the Convertible Note not so converted.
c. Restriction on Conversion. In no event shall the Holder of this
Convertible Note be entitled to convert the Convertible Note to the extent such
conversion would result in such Holder's beneficially owning more than five
percent (5%) of the outstanding shares of the Corporation's Common Stock. For
these purposes, beneficial ownership shall be defined and calculated in
accordance with Rule 13d-3, promulgated under the Securities Exchange Act of
1934, as amended.
4
<PAGE>
11. Corporate Events.
a. Notices of Record Date. In the event of (i) any declaration by
the Corporation of a record date of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution (other than any record date declared in
connection with regularly scheduled dividend dates for the Corporation's 6%
Cumulative Convertible Series A Preferred Stock) or (ii) any capital
reorganization of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation, any merger or consolidation of the
Corporation and any other entity or person, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to the Holder of the Convertible Note at least ten (10) days prior to the
record date specified therein, a notice specifying (A) the date on which any
such record date is to be declared for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (C) the time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) become eligible to receive securities or
other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution or winding up.
b. Corporate Changes. The Fixed Conversion Price shall be
appropriately adjusted to reflect any stock dividend, stock split or share
combination of the Common Stock. If the Corporation shall, during the five (5)
consecutive trading-day period applicable in determining the Formula Conversion
Price for any shares of Common Stock, affect any stock dividend, stock split or
share combination, then for purposes of calculating the Formula Conversion Price
applicable to such conversion, the closing bid price for the Common Stock for
any trading day prior to such action which falls in such five (5) trading-day
period shall be adjusted to a price per share giving effect to such action. In
the event of a merger, reorganization, recapitalization or similar event of or
with respect to the Corporation (a "Corporate Change") (other than a Corporate
Change in which all or substantially all of the consideration received by the
holders of the Corporation's equity securities upon such Corporate Change
consists of cash or assets other than securities issued by the acquiring entity
or any affiliate thereof), the Convertible Note shall be assumed by the
acquiring entity and thereafter the Convertible Note shall be convertible into
such class and type of securities as the Holder would have received had the
Holder converted the Convertible Note immediately prior to such Corporate
Change, as appropriately adjusted to equitably reflect the Conversion Price and
any stock dividend, stock split or share combination of the Common Stock after
such corporate event, and in any such case appropriate provisions shall be made
with respect to the rights and interests of the Holder of the Convertible Note
to the end that the provisions hereof (including, without limitation, provisions
for the adjustment of the Conversion Price and of the number of shares issuable
upon conversion of the Convertible Note) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities thereafter
deliverable upon the exercise hereof.
12. Spin Offs, Liquidating Distributions. In the event that the
Corporation shall make any distribution of its assets upon or with respect to
its capital stock, as a liquidating or partial liquidating dividend, or other
than as a dividend payable out of earnings or any surplus legally available for
5
<PAGE>
dividends under the laws of the state of incorporation of the Corporation, the
Holder of the Convertible Note shall, upon the exercise of his right to convert
after the record date for such distribution or, in the absence of a record date,
after the date of such distribution, receive, in addition to the shares of
Common Stock so converted, the amount of such assets (or, at the option of the
Corporation, a sum equal to the value thereof at the time of distribution as
determined by the Board of Directors in its sole discretion) which would have
been distributed to the Holder if he had exercised his right to convert
immediately prior to the record date for such distribution or, in the absence of
a record date, immediately prior to the date of such distribution.
13. Reservation of Stock Issuable Upon Conversion. Subject to the
limitation on the number of shares issuable upon conversion of the Convertible
Note set forth in Section 10(a) above, the Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock solely for the purpose of effecting the conversion of the Convertible
Note, such number of its shares of Common Stock as shall from time to time be
sufficient to affect the conversion of the entire outstanding principal balance
of this Convertible Note; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to affect the conversion
of the entire outstanding principal balance of this Convertible Note, the
Corporation will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
14. Voting Rights. The Holder of this Convertible Note will not have any
voting rights, except as for the portions of this Convertible Note that have
been converted in accordance herein.
15. Notices. All notices, consents, waivers, and other communications
under this Convertible Note must made in accordance with the terms of Section 12
of the Loan Agreement.
16. Invalidity of Certain Provisions. Whenever possible, each provision of
this Convertible Note shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Convertible Note shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Convertible Note.
17. Incorporation by Reference of Certain Provisions of the Loan
Agreement. All of the representations, warranties, covenants, promises and other
agreements of the parties set forth in the Loan Agreement are incorporated by
reference herein. Any Event of Default under the Loan Agreement shall be an
event of default hereunder.
6
<PAGE>
THIS CONVERTIBLE NOTE SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS AND
DECISIONS AND NOT THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, the undersigned has executed this Convertible Note on
behalf of the Corporation on the day first written above.
COUNTRY STAR RESTAURANTS, INC.
By: /s/ Peter R. Feinstein
-----------------------------
Peter R. Feinstein, President
ATTEST:
/s/ Robert J. Schuster
- - -----------------------------
Robert J. Schuster, Secretary
7
CONVERTIBLE NOTE
$4,000,000 February 12, 1997
FOR VALUE RECEIVED, the undersigned, COUNTRY STAR RESTAURANTS, INC., a
Delaware corporation ("Borrower" or the "Corporation"), HEREBY IRREVOCABLY
PROMISES TO PAY to the order of CAMERON CAPITAL LTD., a Bermuda corporation
(together with its successors and assigns, "Holder"), the principal sum of FOUR
MILLION AND 00/100 DOLLARS ($4,000,000) together with interest on the principal
balance hereof at the rates provided below from the date such principal is
advanced until payment in full thereof.
This Convertible Note is the Convertible Note referred to in, and is
entitled to the benefit of, the Loan and Security Agreement dated as of February
12, 1997 between Borrower and Holder (as amended, restated, supplemented, or
otherwise modified from time to time, the "Loan Agreement"), which Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof and to which reference is hereby made for a more complete
statement of the terms and conditions under which the loan evidenced hereby was
made and is to be repaid. Any capitalized terms used herein, unless otherwise
defined herein, shall have the meanings given to such terms in the Loan
Agreement.
1. Payment of Principal. The entire principal balance of this Convertible
Note shall be payable in immediately available funds on October 9, 1999;
provided, however, that notwithstanding the foregoing, the principal balance
hereof shall be payable in full upon acceleration as provided in the Loan
Agreement. Such principal payment shall be accompanied by a premium calculated
in the same manner as the prepayment premium as set forth in Section 4.
2. Interest. Borrower further promises to pay Holder interest on the
average daily outstanding principal amount hereof, on June 30 and December 31 of
each year, commencing on December 31, 1997, in arrears, at a rate of seven
percent (7%) per annum. Effective immediately upon the occurrence of an Event of
Default, the principal balance hereof and, to the extent permitted by applicable
law, any interest thereon not paid when due, shall bear interest payable upon
Holder's demand therefor at a rate which is ten percent (10.0%) in excess of the
rate otherwise payable under this Convertible Note.
3. Interest Payments After Default; Premium Payable if Registration Not
Effected.
a. Interest After Default. Following the occurrence of an Event of
Default and in addition to any other remedies Holder may have hereunder or under
the Loan Agreement, Borrower shall pay interest on the principal balance hereof
and, to the extent permitted by applicable law, any interest thereon not paid
when due, upon Holder's demand therefor from time to time at any time or, if no
such demand has been made, in accordance with the schedule set forth in Section
2 above.
<PAGE>
b. Premium if Registration Not Effected. In the event the
Registration Statement required to be filed by the Company pursuant to the
Registration Rights Agreement of even date between the Borrower and the Holder
is not filed with the Securities and Exchange Commission (the "Commission") on
or before May 1, 1997, or declared effective by the Commission on or before June
30, 1997, the Borrower shall, for each month or portion thereof that said
Registration Statement is not filed or declared effective, as the case may be,
in addition to the interest payable on the Convertible Note, pay the Holder a
premium equal to three percent (3%) of the face amount of the Convertible Note,
payable monthly in advance, commencing May 2, 1997 or July 1, 1997 as the case
may be. The premium to be paid, if any, shall constitute liquidated damages for
the Borrower's failure to cause the Registration Statement to be filed or to
become effective. The parties agree that the foregoing damages are reasonable
and that the anticipated damages for the failure of the Borrower to effect such
registration are uncertain in amount and difficult to be proved. The premium
shall be payable by wire transfer of immediately available funds unless the
Holder agrees to accept part or all of the payment of the premium in Common
Stock. In such event, the Borrower shall issue to the Holder such number of
fully paid and non-assessable shares of Common Stock as shall have an aggregate
average closing bid price (as reported by The Nasdaq Stock Market) for the five
(5) consecutive trading days prior to the date such premium is payable equal in
amount to the cash payment of the premium which the Borrower and the Holder have
elected to pay in kind.
4. Prepayments. Borrower may prepay the principal balance hereof in
immediately available funds in whole or in part at any time upon ten (10)
business days' prior written notice. During such ten (10) day period, Holder
may, in its sole discretion, in lieu of receiving such prepayment, convert this
Convertible Note in accordance with the terms hereof. Each prepayment of
principal shall be accompanied by payment of all accrued but unpaid interest on
the principal balance hereof to the date of prepayment. Any prepayment of less
than all of the outstanding principal hereunder shall be applied to the
installments of principal hereunder in the inverse order of maturity. Each
prepayment shall also be accompanied by a substitute Convertible Note duly
executed by Borrower in the same form as this Convertible Note, except that the
principal amount of such substitute Convertible Note shall reflect the reduced
principal amount under this Convertible Note. Upon receipt of such prepayment
from Borrower and such substitute Convertible Note, Holder will surrender this
Convertible Note to Borrower.
5. Computation of Interest; Method of Payments. Accrued interest charges
hereunder shall be computed on the basis of a year of 360 days for the actual
number of days elapsed. If any payment of principal or interest hereunder shall
become due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in connection with
such payment.
Both principal and interest hereunder are payable in lawful money of the
United States of America to Holder at The Bank of Bermuda International, New
York, New York for credit to The Bank of Bermuda Limited, Hamilton Bermuda (or
to such other accounts as Holder may direct Borrower) by wire transfer in
immediately available funds prior to noon Atlantic standard time (AST) on the
date such payments are due, or as otherwise provided herein or in the Loan
Agreement; provided, however, that Holder may elect, in its sole discretion, to
receive payment for part or all of any accrued interest hereunder in shares of
Common Stock, in lieu of immediately available funds, in such number of shares
to be determined
2
<PAGE>
based upon the average closing bid price (as reported by the Nasdaq Stock
Market) of the Common Stock for the five (5) consecutive trading days
immediately prior to the date that such interest is payable.
6. Other Charges. In addition to the interest charges described herein,
the Loan Agreement provides for the payment by Borrower of various other charges
and fees as set forth more fully in the Loan Agreement.
7. Acceleration. Upon and after the occurrence of an Event of Default,
this Convertible Note may, in accordance with the terms of the Loan Agreement,
and without demand, notice or legal process of any kind, be declared and
immediately shall become due and payable.
8. Certain Waivers by Borrower. Demand, presentment, protest and notice of
nonpayment and protest, notice of intention to accelerate maturity, notice of
acceleration of maturity and notice of dishonor are hereby waived by Borrower.
9. Permissible Rates of Interest. In no contingency or event whatsoever
shall interest charged hereunder, however such interest may be characterized or
computed, exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that Holder has received interest
hereunder in excess of the highest rate applicable hereto, Holder shall apply
such amounts in accordance with Section 3.2 of the Loan Agreement.
10. Conversion Rights.
a. Right to Convert. Part or all of the principal amount of this
Convertible Note may be converted, at the option of the Holder, at any time
after ninety (90) days from the date hereof and before it is paid in full in
accordance herewith, and without the payment of any additional consideration
thereof, into the number of fully paid, nonassessable shares of common stock,
$.001 par value per share, of the Corporation (the "Common Stock"), as is
determined by dividing the principal amount of this Convertible Note requested
by the Holder to be converted into Common Stock (as adjusted for stock splits,
stock dividends, combinations and similar recapitalizations affecting this
Convertible Note) by the lesser of (i) $1.33 (the "Fixed Conversion Price"), or
(ii) Eighty Percent (80%) of the average closing bid price (as reported by The
Nasdaq Stock Market) of the Common Stock for the five (5) consecutive trading
days immediately prior to the Date of Conversion, as defined below in Section
10.b.(ii) (such value is hereinafter referred to as the "Formula Conversion
Price"). Notwithstanding the foregoing, in no event shall the Convertible Note
be convertible into a cumulative aggregate number of shares of Common Stock in
excess of 3,000,000 (as adjusted for stock splits, reverse splits and similar
recapitalizations affecting such shares, the "Maximum Number of Shares"). In the
event the Holder of the Convertible Note (i) subsequent to having converted the
Convertible Note into the Maximum Number of Shares or (ii) upon the conversion
of the Convertible Note such that the number of shares of Common Stock issuable
upon conversion of the Convertible Note (without giving effect to the preceding
sentence) would exceed the Maximum Number of Shares, submit a written notice to
the Corporation demanding redemption ("Notice of Redemption") of the principal
and accrued interest remaining after the conversion of the
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<PAGE>
Convertible Note into the Maximum Number of Shares, the Corporation shall redeem
such remaining principal balance and accrued interest for a price equal to such
principal and accrued interest plus a premium calculated in the same manner as
the prepayment premium described in Section 4 (the "Redemption Amount"). The
Corporation shall pay such Redemption Amount to the Holder within fifteen (15)
calendar days of the date of the Notice of Redemption, against delivery of the
Convertible Note.
b. Mechanics of Conversion.
(i) No fractional shares of Common Stock shall be issued upon
conversion of this Convertible Note. In lieu of any fractional share to which
the Holder would otherwise be entitled, the Corporation shall round up to the
nearest whole share. In order to convert the Convertible Note into shares of
Common Stock, the Holder shall surrender the Convertible Note, either by
overnight courier or 2-day courier, to the office of the Corporation or its
transfer agent for the Convertible Notes, if any, and shall give written notice
to the Corporation at such office that the Holder elects to convert the same,
the principal amount of the Convertible Note so converted and a calculation of
the Conversion Price (with an advance copy of the notice by facsimile);
provided, however, that the Corporation shall not be obligated to issue
certificates evidencing shares of Common Stock issuable upon such conversion
unless the Convertible Note is delivered to the Corporation or its transfer
agent as provided above, or the Holder notifies the Corporation or its transfer
agent that the Convertible Note has been lost, stolen or destroyed and executes
an agreement satisfactory to the Corporation to indemnify the Corporation from
any loss incurred by it in connection with the Convertible Note.
(ii) The Corporation shall use its best efforts to issue and
deliver, within three (3) business days after delivery to the Corporation or its
transfer agent of such Convertible Note or such agreement of indemnification, to
the Holder of this Convertible Note at the address of the Holder on the books of
the Corporation, a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled as aforesaid. The date on
which notice of conversion is received by the Corporation (the "Date of
Conversion") shall be deemed to be the date of conversion, provided this
Convertible Note which may be converted is received by the Corporation or its
transfer agent, as the case may be, within three (3) business days thereafter
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date. If the
Convertible Note to be converted is not received by the Corporation or its
transfer agent within three (3) business days after the Date of Conversion, the
notice of conversion shall become null and void. In addition, if the Convertible
Note should be converted in part only, the Corporation shall, upon surrender of
this Convertible Note, issue, execute and deliver a new Convertible Note
representing the balance of the Convertible Note not so converted.
c. Restriction on Conversion. In no event shall the Holder of this
Convertible Note be entitled to convert the Convertible Note to the extent such
conversion would result in such Holder's beneficially owning more than five
percent (5%) of the outstanding shares of the Corporation's Common Stock. For
these purposes, beneficial ownership shall be defined and
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<PAGE>
calculated in accordance with Rule 13d-3, promulgated under the Securities
Exchange Act of 1934, as amended.
11. Corporate Events.
a. Notices of Record Date. In the event of (i) any declaration by
the Corporation of a record date of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution (other than any record date declared in
connection with regularly scheduled dividend dates for the Corporation's 6%
Cumulative Convertible Series A Preferred Stock) or (ii) any capital
reorganization of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation, any merger or consolidation of the
Corporation and any other entity or person, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to the Holder of the Convertible Note at least ten (10) days prior to the
record date specified therein, a notice specifying (A) the date on which any
such record date is to be declared for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (C) the time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) become eligible to receive securities or
other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution or winding up.
b. Corporate Changes. The Fixed Conversion Price shall be
appropriately adjusted to reflect any stock dividend, stock split or share
combination of the Common Stock. If the Corporation shall, during the five (5)
consecutive trading-day period applicable in determining the Formula Conversion
Price for any shares of Common Stock, affect any stock dividend, stock split or
share combination, then for purposes of calculating the Formula Conversion Price
applicable to such conversion, the closing bid price for the Common Stock for
any trading day prior to such action which falls in such five (5) trading-day
period shall be adjusted to a price per share giving effect to such action. In
the event of a merger, reorganization, recapitalization or similar event of or
with respect to the Corporation (a "Corporate Change") (other than a Corporate
Change in which all or substantially all of the consideration received by the
holders of the Corporation's equity securities upon such Corporate Change
consists of cash or assets other than securities issued by the acquiring entity
or any affiliate thereof), the Convertible Note shall be assumed by the
acquiring entity and thereafter the Convertible Note shall be convertible into
such class and type of securities as the Holder would have received had the
Holder converted the Convertible Note immediately prior to such Corporate
Change, as appropriately adjusted to equitably reflect the Conversion Price and
any stock dividend, stock split or share combination of the Common Stock after
such corporate event, and in any such case appropriate provisions shall be made
with respect to the rights and interests of the Holder of the Convertible Note
to the end that the provisions hereof (including, without limitation, provisions
for the adjustment of the Conversion Price and of the number of shares issuable
upon conversion of the Convertible Note) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities thereafter
deliverable upon the exercise hereof.
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<PAGE>
12. Spin Offs, Liquidating Distributions. In the event that the
Corporation shall make any distribution of its assets upon or with respect to
its capital stock, as a liquidating or partial liquidating dividend, or other
than as a dividend payable out of earnings or any surplus legally available for
dividends under the laws of the state of incorporation of the Corporation, the
Holder of the Convertible Note shall, upon the exercise of his right to convert
after the record date for such distribution or, in the absence of a record date,
after the date of such distribution, receive, in addition to the shares of
Common Stock so converted, the amount of such assets (or, at the option of the
Corporation, a sum equal to the value thereof at the time of distribution as
determined by the Board of Directors in its sole discretion) which would have
been distributed to the Holder if he had exercised his right to convert
immediately prior to the record date for such distribution or, in the absence of
a record date, immediately prior to the date of such distribution.
13. Reservation of Stock Issuable Upon Conversion. Subject to the
limitation on the number of shares issuable upon conversion of the Convertible
Note set forth in Section 10(a) above, the Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock solely for the purpose of effecting the conversion of the Convertible
Note, such number of its shares of Common Stock as shall from time to time be
sufficient to affect the conversion of the entire outstanding principal balance
of this Convertible Note; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to affect the conversion
of the entire outstanding principal balance of this Convertible Note, the
Corporation will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
14. Voting Rights. The Holder of this Convertible Note will not have any
voting rights, except as for the portions of this Convertible Note that have
been converted in accordance herein.
15. Notices. All notices, consents, waivers, and other communications
under this Convertible Note must made in accordance with the terms of Section 12
of the Loan Agreement.
16. Invalidity of Certain Provisions. Whenever possible, each provision of
this Convertible Note shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Convertible Note shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Convertible Note.
17. Incorporation by Reference of Certain Provisions of the Loan
Agreement. All of the representations, warranties, covenants, promises and other
agreements of the parties set forth in the Loan Agreement are incorporated by
reference herein. Any Event of Default under the Loan Agreement shall be an
event of default hereunder.
6
<PAGE>
THIS CONVERTIBLE NOTE SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS AND
DECISIONS AND NOT THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, the undersigned has executed this Convertible Note on
behalf of the Corporation on the day first written above.
COUNTRY STAR RESTAURANTS, INC.
By: /s/ Peter R. Feinstein
----------------------------
Peter R. Feinstein, Chairman
ATTEST:
/s/ Robert J. Schuster
- - -----------------------------
Robert J. Schuster, Secretary
7
CONVERTIBLE NOTE
$257,302.50 February 12, 1997
FOR VALUE RECEIVED, the undersigned, COUNTRY STAR RESTAURANTS, INC., a
Delaware corporation ("Borrower" or the "Corporation"), HEREBY IRREVOCABLY
PROMISES TO PAY to the order of ROBERT LYSZCZARZ, an individual residing at 331
Sayre Drive, Princeton, New Jersey 08540 (together with his successors and
assigns, "Holder"), the principal sum of TWO HUNDRED FIFTY SEVEN THOUSAND, THREE
HUNDRED TWO AND 50/100 DOLLARS ($257,302.50) together with interest on the
principal balance hereof at the rates provided below from the date such
principal is advanced until payment in full thereof.
This Convertible Note is subject to, and is entitled to the benefit of,
the Loan and Security Agreement dated as of February 12, 1997 between Borrower
and Cameron Capital Ltd.("CC") (as amended, restated, supplemented, or otherwise
modified from time to time, the "Loan Agreement"), which Loan Agreement, among
other things, contains provisions for acceleration of the maturity of a certain
Convertible Note made to CC by Borrower and to which reference is hereby made
for a more complete statement of the terms and conditions under which the loan
evidenced hereby is made and is to be repaid. Any capitalized terms used herein,
unless otherwise defined herein, shall have the meanings given to such terms in
the Loan Agreement.
1. Payment of Principal. The entire principal balance of this Convertible
Note shall be payable in immediately available funds on October 9, 1999;
provided, however, that notwithstanding the foregoing, the principal balance
hereof shall be payable in full upon acceleration as provided in the Loan
Agreement. Such principal payment shall be accompanied by a premium calculated
in the same manner as the prepayment premium as set forth in Section 4.
2. Interest. Borrower further promises to pay Holder interest on the
average daily outstanding principal amount hereof, on June 30 and December 31 of
each year, commencing on December 31, 1997, in arrears, at a rate of seven
percent (7%) per annum. Effective immediately upon the occurrence of an Event of
Default, the principal balance hereof and, to the extent permitted by applicable
law, any interest thereon not paid when due, shall bear interest payable upon
Holder's demand therefor at a rate which is ten percent (10.0%) in excess of the
rate otherwise payable under this Convertible Note.
3. Interest Payments After Default; Premium Payable if Registration Not
Effected.
a. Interest After Default. Following the occurrence of an Event of
Default and in addition to any other remedies Holder may have hereunder or under
the Loan Agreement, Borrower shall pay interest on the principal balance hereof
and, to the extent permitted by applicable law, any interest thereon not paid
when due, upon Holder's demand therefor from time to time at any time or, if no
such demand has been made, in accordance with the schedule set forth in Section
2 above.
<PAGE>
b. Premium if Registration Not Effected. In the event the
Registration Statement required to be filed by the Company pursuant to the
Registration Rights Agreement of even date between the Borrower and CC is not
filed with the Securities and Exchange Commission (the "Commission") on or
before May 1, 1997, or declared effective by the Commission on or before June
30, 1997, the Borrower shall, for each month or portion thereof that said
Registration Statement is not filed or declared effective, as the case may be,
in addition to the interest payable on the Convertible Note, pay the Holder a
premium equal to three percent (3%) of the face amount of the Convertible Note,
payable monthly in advance, commencing May 2, 1997 or July 1, 1997 as the case
may be. The premium to be paid, if any, shall constitute liquidated damages for
the Borrower's failure to cause the Registration Statement to be filed or to
become effective. The parties agree that the foregoing damages are reasonable
and that the anticipated damages for the failure of the Borrower to effect such
registration are uncertain in amount and difficult to be proved. The premium
shall be payable by wire transfer of immediately available funds unless the
Holder agrees to accept part or all of the payment of the premium in Common
Stock. In such event, the Borrower shall issue to the Holder such number of
fully paid and non-assessable shares of Common Stock as shall have an aggregate
average closing bid price (as reported by The Nasdaq Stock Market) for the five
(5) consecutive trading days prior to the date such premium is payable equal in
amount to the cash payment of the premium which the Borrower and the Holder have
elected to pay in kind.
4. Prepayments. Borrower may prepay the principal balance hereof in
immediately available funds in whole or in part at any time upon ten (10)
business days' prior written notice. During such ten (10) day period, Holder
may, in its sole discretion, in lieu of receiving such prepayment, convert this
Convertible Note in accordance with the terms hereof. Each prepayment of
principal shall be accompanied by payment of all accrued but unpaid interest on
the principal balance hereof to the date of prepayment. Any prepayment of less
than all of the outstanding principal hereunder shall be applied to the
installments of principal hereunder in the inverse order of maturity. Each
prepayment shall also be accompanied by a substitute Convertible Note duly
executed by Borrower in the same form as this Convertible Note, except that the
principal amount of such substitute Convertible Note shall reflect the reduced
principal amount under this Convertible Note. Upon receipt of such prepayment
from Borrower and such substitute Convertible Note, Holder will surrender this
Convertible Note to Borrower.
5. Computation of Interest; Method of Payments. Accrued interest charges
hereunder shall be computed on the basis of a year of 360 days for the actual
number of days elapsed. If any payment of principal or interest hereunder shall
become due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in connection with
such payment.
Both principal and interest hereunder are payable in lawful money of the
United States of America to Holder at such account as Holder may direct Borrower
by wire transfer in immediately available funds prior to noon Atlantic standard
time (AST) on the date such payments are due, or as otherwise provided herein or
in the Loan Agreement; provided, however, that Holder may elect, in its sole
discretion, to receive payment for part or all of any accrued interest hereunder
in shares of
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<PAGE>
Common Stock, in lieu of immediately available funds, in such number of shares
to be determined based upon the average closing bid price (as reported by the
Nasdaq Stock Market) of the Common Stock for the five (5) consecutive trading
days immediately prior to the date that such interest is payable.
6. Other Charges. In addition to the interest charges described herein,
the Loan Agreement provides for the payment by Borrower of various other charges
and fees as set forth more fully in the Loan Agreement.
7. Acceleration. Upon and after the occurrence of an Event of Default,
this Convertible Note may, in accordance with the terms of the Loan Agreement,
and without demand, notice or legal process of any kind, be declared and
immediately shall become due and payable.
8. Certain Waivers by Borrower. Demand, presentment, protest and notice of
nonpayment and protest, notice of intention to accelerate maturity, notice of
acceleration of maturity and notice of dishonor are hereby waived by Borrower.
9. Permissible Rates of Interest. In no contingency or event whatsoever
shall interest charged hereunder, however such interest may be characterized or
computed, exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that Holder has received interest
hereunder in excess of the highest rate applicable hereto, Holder shall apply
such amounts in accordance with Section 3 of the Loan Agreement.
10. Conversion Rights.
a. Right to Convert. Part or all of the principal amount of this
Convertible Note may be converted, at the option of the Holder, at any time
after ninety (90) days from the date hereof and before it is paid in full in
accordance herewith, and without the payment of any additional consideration
thereof, into the number of fully paid, nonassessable shares of common stock,
$.001 par value per share, of the Corporation (the "Common Stock"), as is
determined by dividing the principal amount of this Convertible Note requested
by the Holder to be converted into Common Stock (as adjusted for stock splits,
stock dividends, combinations and similar recapitalizations affecting this
Convertible Note) by the lesser of (i) $1.33 (the "Fixed Conversion Price"), or
(ii) Eighty Percent (80%) of the average closing bid price (as reported by The
Nasdaq Stock Market) of the Common Stock for the five (5) consecutive trading
days immediately prior to the Date of Conversion, as defined below in Section
10.b.(ii) (such value is hereinafter referred to as the "Formula Conversion
Price"). Notwithstanding the foregoing, in no event shall the Convertible Note
be convertible into a cumulative aggregate number of shares of Common Stock in
excess of 238,387 (as adjusted for stock splits, reverse splits and similar
recapitalizations affecting such shares, the "Maximum Number of Shares"). In the
event the Holder of the Convertible Note (i) subsequent to having converted the
Convertible Note into the Maximum Number of Shares or (ii) upon the conversion
of the Convertible Note such that the number of shares of Common Stock issuable
upon conversion of the Convertible Note (without giving effect to the preceding
sentence) would exceed
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<PAGE>
the Maximum Number of Shares, submit a written notice to the Corporation
demanding redemption ("Notice of Redemption") of the principal and accrued
interest remaining after the conversion of the Convertible Note into the Maximum
Number of Shares, the Corporation shall redeem such remaining principal balance
and accrued interest for a price equal to such principal and accrued interest
plus a premium calculated in the same manner as the prepayment premium described
in Section 4 (the "Redemption Amount"). The Corporation shall pay such
Redemption Amount to the Holder within fifteen (15) calendar days of the date of
the Notice of Redemption, against delivery of the Convertible Note.
b. Mechanics of Conversion.
(i) No fractional shares of Common Stock shall be issued upon
conversion of this Convertible Note. In lieu of any fractional share to which
the Holder would otherwise be entitled, the Corporation shall round up to the
nearest whole share. In order to convert the Convertible Note into shares of
Common Stock, the Holder shall surrender the Convertible Note, either by
overnight courier or 2-day courier, to the office of the Corporation or its
transfer agent for the Convertible Notes, if any, and shall give written notice
to the Corporation at such office that the Holder elects to convert the same,
the principal amount of the Convertible Note so converted and a calculation of
the Conversion Price (with an advance copy of the notice by facsimile);
provided, however, that the Corporation shall not be obligated to issue
certificates evidencing shares of Common Stock issuable upon such conversion
unless the Convertible Note is delivered to the Corporation or its transfer
agent as provided above, or the Holder notifies the Corporation or its transfer
agent that the Convertible Note has been lost, stolen or destroyed and executes
an agreement satisfactory to the Corporation to indemnify the Corporation from
any loss incurred by it in connection with the Convertible Note.
(ii) The Corporation shall use its best efforts to issue and
deliver, within three (3) business days after delivery to the Corporation or its
transfer agent of such Convertible Note or such agreement of indemnification, to
the Holder of this Convertible Note at the address of the Holder on the books of
the Corporation, a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled as aforesaid. The date on
which notice of conversion is received by the Corporation (the "Date of
Conversion") shall be deemed to be the date of conversion, provided this
Convertible Note which may be converted is received by the Corporation or its
transfer agent, as the case may be, within three (3) business days thereafter
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date. If the
Convertible Note to be converted is not received by the Corporation or its
transfer agent within three (3) business days after the Date of Conversion, the
notice of conversion shall become null and void. In addition, if the Convertible
Note should be converted in part only, the Corporation shall, upon surrender of
this Convertible Note, issue, execute and deliver a new Convertible Note
representing the balance of the Convertible Note not so converted.
c. Restriction on Conversion. In no event shall the Holder of this
Convertible Note be entitled to convert the Convertible Note to the extent such
conversion would result in such Holder's beneficially owning more than five
percent (5%) of the outstanding shares of the
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<PAGE>
Corporation's Common Stock. For these purposes, beneficial ownership shall be
defined and calculated in accordance with Rule 13d-3, promulgated under the
Securities Exchange Act of 1934, as amended.
11. Corporate Events.
a. Notices of Record Date. In the event of (i) any declaration by
the Corporation of a record date of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution (other than any record date declared in
connection with regularly scheduled dividend dates for the Corporation's 6%
Cumulative Convertible Series A Preferred Stock) or (ii) any capital
reorganization of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation, any merger or consolidation of the
Corporation and any other entity or person, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to the Holder of the Convertible Note at least ten (10) days prior to the
record date specified therein, a notice specifying (A) the date on which any
such record date is to be declared for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (C) the time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) become eligible to receive securities or
other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution or winding up.
b. Corporate Changes. The Fixed Conversion Price shall be
appropriately adjusted to reflect any stock dividend, stock split or share
combination of the Common Stock. If the Corporation shall, during the five (5)
consecutive trading-day period applicable in determining the Formula Conversion
Price for any shares of Common Stock, affect any stock dividend, stock split or
share combination, then for purposes of calculating the Formula Conversion Price
applicable to such conversion, the closing bid price for the Common Stock for
any trading day prior to such action which falls in such five (5) trading-day
period shall be adjusted to a price per share giving effect to such action. In
the event of a merger, reorganization, recapitalization or similar event of or
with respect to the Corporation (a "Corporate Change") (other than a Corporate
Change in which all or substantially all of the consideration received by the
holders of the Corporation's equity securities upon such Corporate Change
consists of cash or assets other than securities issued by the acquiring entity
or any affiliate thereof), the Convertible Note shall be assumed by the
acquiring entity and thereafter the Convertible Note shall be convertible into
such class and type of securities as the Holder would have received had the
Holder converted the Convertible Note immediately prior to such Corporate
Change, as appropriately adjusted to equitably reflect the Conversion Price and
any stock dividend, stock split or share combination of the Common Stock after
such corporate event, and in any such case appropriate provisions shall be made
with respect to the rights and interests of the Holder of the Convertible Note
to the end that the provisions hereof (including, without limitation, provisions
for the adjustment of the Conversion Price and of the number of shares issuable
upon conversion of the Convertible Note) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities thereafter
deliverable upon the exercise hereof.
5
<PAGE>
12. Spin Offs, Liquidating Distributions. In the event that the
Corporation shall make any distribution of its assets upon or with respect to
its capital stock, as a liquidating or partial liquidating dividend, or other
than as a dividend payable out of earnings or any surplus legally available for
dividends under the laws of the state of incorporation of the Corporation, the
Holder of the Convertible Note shall, upon the exercise of his right to convert
after the record date for such distribution or, in the absence of a record date,
after the date of such distribution, receive, in addition to the shares of
Common Stock so converted, the amount of such assets (or, at the option of the
Corporation, a sum equal to the value thereof at the time of distribution as
determined by the Board of Directors in its sole discretion) which would have
been distributed to the Holder if he had exercised his right to convert
immediately prior to the record date for such distribution or, in the absence of
a record date, immediately prior to the date of such distribution.
13. Reservation of Stock Issuable Upon Conversion. Subject to the
limitation on the number of shares issuable upon conversion of the Convertible
Note set forth in Section 10(a) above, the Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock solely for the purpose of effecting the conversion of the Convertible
Note, such number of its shares of Common Stock as shall from time to time be
sufficient to affect the conversion of the entire outstanding principal balance
of this Convertible Note; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to affect the conversion
of the entire outstanding principal balance of this Convertible Note, the
Corporation will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
14. Voting Rights. The Holder of this Convertible Note will not have any
voting rights, except as for the portions of this Convertible Note that have
been converted in accordance herein.
15. Notices. All notices, consents, waivers, and other communications
under this Convertible Note must made in accordance with the terms of Section 12
of the Loan Agreement at Holder's address stated herein on page 1 (or as such
address may be changed in accordance with Section 12 of the Loan Agreement) and
Borrower's address as set forth in the Loan Agreement.
16. Invalidity of Certain Provisions. Whenever possible, each provision of
this Convertible Note shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Convertible Note shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Convertible Note.
17. Incorporation by Reference of Certain Provisions of the Loan
Agreement. All of the representations, warranties, covenants, promises and other
agreements of the parties set forth in the Loan Agreement are incorporated by
reference herein. Any Event of Default under the Loan Agreement shall be an
event of default hereunder.
6
<PAGE>
THIS CONVERTIBLE NOTE SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS AND
DECISIONS AND NOT THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has executed this Convertible Note on
behalf of the Corporation on the day first written above.
COUNTRY STAR RESTAURANTS, INC.
By: /s/ Robert Schuster
-----------------------
_____________, Chairman
ATTEST:
- - --------------------------
_______________, Secretary
7
CONVERTIBLE NOTE
$1,374,847.50 February 12, 1997
FOR VALUE RECEIVED, the undersigned, COUNTRY STAR RESTAURANTS, INC., a
Delaware corporation ("Borrower" or the "Corporation"), HEREBY IRREVOCABLY
PROMISES TO PAY to the order of ROY B. RUBIN, M.D., P.C., M.P.P.P., an
individual residing at 9 Amherst Place, Woodland, California 95695 (together
with his successors and assigns, "Holder"), the principal sum of ONE MILLION
THREE HUNDRED SEVENTY FOUR THOUSAND, EIGHT HUNDRED FORTY SEVEN AND 50/100
DOLLARS ($1,374,847.50) together with interest on the principal balance hereof
at the rates provided below from the date such principal is advanced until
payment in full thereof.
This Convertible Note is subject to, and is entitled to the benefit of,
the Loan and Security Agreement dated as of February 12, 1997 between Borrower
and Cameron Capital Ltd.("CC") (as amended, restated, supplemented, or otherwise
modified from time to time, the "Loan Agreement"), which Loan Agreement, among
other things, contains provisions for acceleration of the maturity of a certain
Convertible Note made to CC by Borrower and to which reference is hereby made
for a more complete statement of the terms and conditions under which the loan
evidenced hereby is made and is to be repaid. Any capitalized terms used herein,
unless otherwise defined herein, shall have the meanings given to such terms in
the Loan Agreement.
1. Payment of Principal. The entire principal balance of this Convertible
Note shall be payable in immediately available funds on October 9, 1999;
provided, however, that notwithstanding the foregoing, the principal balance
hereof shall be payable in full upon acceleration as provided in the Loan
Agreement. Such principal payment shall be accompanied by a premium calculated
in the same manner as the prepayment premium as set forth in Section 4.
2. Interest. Borrower further promises to pay Holder interest on the
average daily outstanding principal amount hereof, on June 30 and December 31 of
each year, commencing on December 31, 1997, in arrears, at a rate of seven
percent (7%) per annum. Effective immediately upon the occurrence of an Event of
Default, the principal balance hereof and, to the extent permitted by applicable
law, any interest thereon not paid when due, shall bear interest payable upon
Holder's demand therefor at a rate which is ten percent (10.0%) in excess of the
rate otherwise payable under this Convertible Note.
3. Interest Payments After Default; Premium Payable if Registration Not
Effected.
a. Interest After Default. Following the occurrence of an Event of
Default and in addition to any other remedies Holder may have hereunder or under
the Loan Agreement, Borrower shall pay interest on the principal balance hereof
and, to the extent permitted by applicable law, any interest thereon not paid
when due, upon Holder's demand therefor from time to time at any time or, if no
such demand has been made, in accordance with the schedule set forth in Section
2 above.
<PAGE>
b. Premium if Registration Not Effected. In the event the
Registration Statement required to be filed by the Company pursuant to the
Registration Rights Agreement of even date between the Borrower and CC is not
filed with the Securities and Exchange Commission (the "Commission") on or
before May 1, 1997, or declared effective by the Commission on or before June
30, 1997, the Borrower shall, for each month or portion thereof that said
Registration Statement is not filed or declared effective, as the case may be,
in addition to the interest payable on the Convertible Note, pay the Holder a
premium equal to three percent (3%) of the face amount of the Convertible Note,
payable monthly in advance, commencing May 2, 1997 or July 1, 1997 as the case
may be. The premium to be paid, if any, shall constitute liquidated damages for
the Borrower's failure to cause the Registration Statement to be filed or to
become effective. The parties agree that the foregoing damages are reasonable
and that the anticipated damages for the failure of the Borrower to effect such
registration are uncertain in amount and difficult to be proved. The premium
shall be payable by wire transfer of immediately available funds unless the
Holder agrees to accept part or all of the payment of the premium in Common
Stock. In such event, the Borrower shall issue to the Holder such number of
fully paid and non-assessable shares of Common Stock as shall have an aggregate
average closing bid price (as reported by The Nasdaq Stock Market) for the five
(5) consecutive trading days prior to the date such premium is payable equal in
amount to the cash payment of the premium which the Borrower and the Holder have
elected to pay in kind.
4. Prepayments. Borrower may prepay the principal balance hereof in
immediately available funds in whole or in part at any time upon ten (10)
business days' prior written notice. During such ten (10) day period, Holder
may, in its sole discretion, in lieu of receiving such prepayment, convert this
Convertible Note in accordance with the terms hereof. Each prepayment of
principal shall be accompanied by payment of all accrued but unpaid interest on
the principal balance hereof to the date of prepayment. Any prepayment of less
than all of the outstanding principal hereunder shall be applied to the
installments of principal hereunder in the inverse order of maturity. Each
prepayment shall also be accompanied by a substitute Convertible Note duly
executed by Borrower in the same form as this Convertible Note, except that the
principal amount of such substitute Convertible Note shall reflect the reduced
principal amount under this Convertible Note. Upon receipt of such prepayment
from Borrower and such substitute Convertible Note, Holder will surrender this
Convertible Note to Borrower.
5. Computation of Interest; Method of Payments. Accrued interest charges
hereunder shall be computed on the basis of a year of 360 days for the actual
number of days elapsed. If any payment of principal or interest hereunder shall
become due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in connection with
such payment.
Both principal and interest hereunder are payable in lawful money of the
United States of America to Holder at such account as Holder may direct Borrower
by wire transfer in immediately available funds prior to noon Atlantic standard
time (AST) on the date such payments are due, or as otherwise provided herein or
in the Loan Agreement; provided, however, that Holder may elect, in its sole
discretion, to receive payment for part or all of any accrued interest hereunder
in shares of
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<PAGE>
Common Stock, in lieu of immediately available funds, in such number of shares
to be determined based upon the average closing bid price (as reported by the
Nasdaq Stock Market) of the Common Stock for the five (5) consecutive trading
days immediately prior to the date that such interest is payable.
6. Other Charges. In addition to the interest charges described herein,
the Loan Agreement provides for the payment by Borrower of various other charges
and fees as set forth more fully in the Loan Agreement.
7. Acceleration. Upon and after the occurrence of an Event of Default,
this Convertible Note may, in accordance with the terms of the Loan Agreement,
and without demand, notice or legal process of any kind, be declared and
immediately shall become due and payable.
8. Certain Waivers by Borrower. Demand, presentment, protest and notice of
nonpayment and protest, notice of intention to accelerate maturity, notice of
acceleration of maturity and notice of dishonor are hereby waived by Borrower.
9. Permissible Rates of Interest. In no contingency or event whatsoever
shall interest charged hereunder, however such interest may be characterized or
computed, exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that Holder has received interest
hereunder in excess of the highest rate applicable hereto, Holder shall apply
such amounts in accordance with Section 3 of the Loan Agreement.
10. Conversion Rights.
a. Right to Convert. Part or all of the principal amount of this
Convertible Note may be converted, at the option of the Holder, at any time
after ninety (90) days from the date hereof and before it is paid in full in
accordance herewith, and without the payment of any additional consideration
thereof, into the number of fully paid, nonassessable shares of common stock,
$.001 par value per share, of the Corporation (the "Common Stock"), as is
determined by dividing the principal amount of this Convertible Note requested
by the Holder to be converted into Common Stock (as adjusted for stock splits,
stock dividends, combinations and similar recapitalizations affecting this
Convertible Note) by the lesser of (i) $1.33 (the "Fixed Conversion Price"), or
(ii) Eighty Percent (80%) of the average closing bid price (as reported by The
Nasdaq Stock Market) of the Common Stock for the five (5) consecutive trading
days immediately prior to the Date of Conversion, as defined below in Section
10.b.(ii) (such value is hereinafter referred to as the "Formula Conversion
Price"). Notwithstanding the foregoing, in no event shall the Convertible Note
be convertible into a cumulative aggregate number of shares of Common Stock in
excess of 238,387 (as adjusted for stock splits, reverse splits and similar
recapitalizations affecting such shares, the "Maximum Number of Shares"). In the
event the Holder of the Convertible Note (i) subsequent to having converted the
Convertible Note into the Maximum Number of Shares or (ii) upon the conversion
of the Convertible Note such that the number of shares of Common Stock issuable
upon conversion of the Convertible Note (without giving effect to the preceding
sentence) would exceed
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<PAGE>
the Maximum Number of Shares, submit a written notice to the Corporation
demanding redemption ("Notice of Redemption") of the principal and accrued
interest remaining after the conversion of the Convertible Note into the Maximum
Number of Shares, the Corporation shall redeem such remaining principal balance
and accrued interest for a price equal to such principal and accrued interest
plus a premium calculated in the same manner as the prepayment premium described
in Section 4 (the "Redemption Amount"). The Corporation shall pay such
Redemption Amount to the Holder within fifteen (15) calendar days of the date of
the Notice of Redemption, against delivery of the Convertible Note.
b. Mechanics of Conversion.
(i) No fractional shares of Common Stock shall be issued upon
conversion of this Convertible Note. In lieu of any fractional share to which
the Holder would otherwise be entitled, the Corporation shall round up to the
nearest whole share. In order to convert the Convertible Note into shares of
Common Stock, the Holder shall surrender the Convertible Note, either by
overnight courier or 2-day courier, to the office of the Corporation or its
transfer agent for the Convertible Notes, if any, and shall give written notice
to the Corporation at such office that the Holder elects to convert the same,
the principal amount of the Convertible Note so converted and a calculation of
the Conversion Price (with an advance copy of the notice by facsimile);
provided, however, that the Corporation shall not be obligated to issue
certificates evidencing shares of Common Stock issuable upon such conversion
unless the Convertible Note is delivered to the Corporation or its transfer
agent as provided above, or the Holder notifies the Corporation or its transfer
agent that the Convertible Note has been lost, stolen or destroyed and executes
an agreement satisfactory to the Corporation to indemnify the Corporation from
any loss incurred by it in connection with the Convertible Note.
(ii) The Corporation shall use its best efforts to issue and
deliver, within three (3) business days after delivery to the Corporation or its
transfer agent of such Convertible Note or such agreement of indemnification, to
the Holder of this Convertible Note at the address of the Holder on the books of
the Corporation, a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled as aforesaid. The date on
which notice of conversion is received by the Corporation (the "Date of
Conversion") shall be deemed to be the date of conversion, provided this
Convertible Note which may be converted is received by the Corporation or its
transfer agent, as the case may be, within three (3) business days thereafter
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date. If the
Convertible Note to be converted is not received by the Corporation or its
transfer agent within three (3) business days after the Date of Conversion, the
notice of conversion shall become null and void. In addition, if the Convertible
Note should be converted in part only, the Corporation shall, upon surrender of
this Convertible Note, issue, execute and deliver a new Convertible Note
representing the balance of the Convertible Note not so converted.
c. Restriction on Conversion. In no event shall the Holder of this
Convertible Note be entitled to convert the Convertible Note to the extent such
conversion would result in such Holder's beneficially owning more than five
percent (5%) of the outstanding shares of the
4
<PAGE>
Corporation's Common Stock. For these purposes, beneficial ownership shall be
defined and calculated in accordance with Rule 13d-3, promulgated under the
Securities Exchange Act of 1934, as amended.
11. Corporate Events.
a. Notices of Record Date. In the event of (i) any declaration by
the Corporation of a record date of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution (other than any record date declared in
connection with regularly scheduled dividend dates for the Corporation's 6%
Cumulative Convertible Series A Preferred Stock) or (ii) any capital
reorganization of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation, any merger or consolidation of the
Corporation and any other entity or person, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to the Holder of the Convertible Note at least ten (10) days prior to the
record date specified therein, a notice specifying (A) the date on which any
such record date is to be declared for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (C) the time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) become eligible to receive securities or
other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution or winding up.
b. Corporate Changes. The Fixed Conversion Price shall be
appropriately adjusted to reflect any stock dividend, stock split or share
combination of the Common Stock. If the Corporation shall, during the five (5)
consecutive trading-day period applicable in determining the Formula Conversion
Price for any shares of Common Stock, affect any stock dividend, stock split or
share combination, then for purposes of calculating the Formula Conversion Price
applicable to such conversion, the closing bid price for the Common Stock for
any trading day prior to such action which falls in such five (5) trading-day
period shall be adjusted to a price per share giving effect to such action. In
the event of a merger, reorganization, recapitalization or similar event of or
with respect to the Corporation (a "Corporate Change") (other than a Corporate
Change in which all or substantially all of the consideration received by the
holders of the Corporation's equity securities upon such Corporate Change
consists of cash or assets other than securities issued by the acquiring entity
or any affiliate thereof), the Convertible Note shall be assumed by the
acquiring entity and thereafter the Convertible Note shall be convertible into
such class and type of securities as the Holder would have received had the
Holder converted the Convertible Note immediately prior to such Corporate
Change, as appropriately adjusted to equitably reflect the Conversion Price and
any stock dividend, stock split or share combination of the Common Stock after
such corporate event, and in any such case appropriate provisions shall be made
with respect to the rights and interests of the Holder of the Convertible Note
to the end that the provisions hereof (including, without limitation, provisions
for the adjustment of the Conversion Price and of the number of shares issuable
upon conversion of the Convertible Note) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities thereafter
deliverable upon the exercise hereof.
5
<PAGE>
12. Spin Offs, Liquidating Distributions. In the event that the
Corporation shall make any distribution of its assets upon or with respect to
its capital stock, as a liquidating or partial liquidating dividend, or other
than as a dividend payable out of earnings or any surplus legally available for
dividends under the laws of the state of incorporation of the Corporation, the
Holder of the Convertible Note shall, upon the exercise of his right to convert
after the record date for such distribution or, in the absence of a record date,
after the date of such distribution, receive, in addition to the shares of
Common Stock so converted, the amount of such assets (or, at the option of the
Corporation, a sum equal to the value thereof at the time of distribution as
determined by the Board of Directors in its sole discretion) which would have
been distributed to the Holder if he had exercised his right to convert
immediately prior to the record date for such distribution or, in the absence of
a record date, immediately prior to the date of such distribution.
13. Reservation of Stock Issuable Upon Conversion. Subject to the
limitation on the number of shares issuable upon conversion of the Convertible
Note set forth in Section 10(a) above, the Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock solely for the purpose of effecting the conversion of the Convertible
Note, such number of its shares of Common Stock as shall from time to time be
sufficient to affect the conversion of the entire outstanding principal balance
of this Convertible Note; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to affect the conversion
of the entire outstanding principal balance of this Convertible Note, the
Corporation will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
14. Voting Rights. The Holder of this Convertible Note will not have any
voting rights, except as for the portions of this Convertible Note that have
been converted in accordance herein.
15. Notices. All notices, consents, waivers, and other communications
under this Convertible Note must made in accordance with the terms of Section 12
of the Loan Agreement at Holder's address stated herein on page 1 (or as such
address may be changed in accordance with Section 12 of the Loan Agreement) and
Borrower's address as set forth in the Loan Agreement.
16. Invalidity of Certain Provisions. Whenever possible, each provision of
this Convertible Note shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Convertible Note shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Convertible Note.
17. Incorporation by Reference of Certain Provisions of the Loan
Agreement. All of the representations, warranties, covenants, promises and other
agreements of the parties set forth in the Loan Agreement are incorporated by
reference herein. Any Event of Default under the Loan Agreement shall be an
event of default hereunder.
6
<PAGE>
THIS CONVERTIBLE NOTE SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS AND
DECISIONS AND NOT THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has executed this Convertible Note on
behalf of the Corporation on the day first written above.
COUNTRY STAR RESTAURANTS, INC.
By: /s/ Robert Schuster
-----------------------
_____________, Chairman
ATTEST:
- - --------------------------
_______________, Secretary
7
THIS WARRANT AND THE SHARES OF COMMON STOCK OF COUNTRY STAR RESTAURANTS, INC. TO
BE ISSUED UPON ANY EXERCISE OF THE WARRANT HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR
TRANSFER UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT, OR
IN THE OPINION OF COUNSEL, SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS IS NOT REQUIRED.
WARRANT
to Purchase Shares
of
Common Stock
of
COUNTRY STAR RESTAURANTS, INC.
February 12, , 1997
This certifies that, for value received, Dan Rubin ("Rubin") and any
subsequent transferee of this Warrant (each, a "Holder") is entitled to
purchase, subject to the provisions of this Warrant, from Country Star
Restaurants, Inc., a Delaware corporation (the "Issuer"), at any time or from
time to time on or after the date hereof and on or before February 12, 2002 (the
"Expiration Date"), Eighty Three Thousand Three Hundred Thirty Three (83,333)
fully paid and nonassessable shares of common stock (the "Common Stock"), of the
Issuer at an exercise price of $.625 per share, subject to adjustment pursuant
to the terms hereunder (the "Exercise Price") (such shares of Common Stock and
other securities issued and issuable upon exercise of this Warrant sometimes are
referred to herein as the "Warrant Shares").
Section 1. Definitions.Capitalized terms not otherwise defined herein
shall have the meanings assigned to them in the Loan and Security Agreement (the
"Loan Agreement") dated February 12, 1997 between and among CC, the Issuer and
other parties who from time to time execute the Loan Agreement.
Section 2. Exercise of Warrant.
(a) Subject to the provisions hereof, this Warrant may be exercised,
in whole or in part, but not as to a fractional share, at any time or from
time to time on or after
1
<PAGE>
the date hereof and on or before the Expiration Date, by presentation and
surrender hereof to the Issuer at the address which, in accordance with
the provisions of Section 9 hereof, is then effective for notices to the
Issuer, with the Election to Purchase Form annexed hereto as Schedule One,
duly executed and accompanied by payment to the Issuer as further set
forth below in this Section 2, for the account of the Issuer, of the
Exercise Price for the number of Warrant Shares specified in such form. If
this Warrant should be exercised in part only, the Issuer shall, upon
surrender of this Warrant, execute and deliver a new Warrant evidencing
the rights of the Holder hereof to purchase the balance of the Warrant
Shares purchasable hereunder. The Issuer shall maintain at its principal
place of business a register for the registration of this Warrant and
registration of transfer of this Warrant. The Exercise Price for the
number of Warrant Shares specified in the Election to Purchase Form shall
be payable in United States Dollars by certified or official bank check
payable to the order of the Issuer or by wire transfer of immediately
available funds to an account specified by the Issuer for that purpose.
(b) Certificates representing Warrant Shares shall bear the
following restrictive legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act").
They may not be offered or transferred by sale, assignment, pledge
or otherwise unless (i) a registration statement for the securities
under the Securities Act is in effect or (ii) the corporation has
received an opinion of counsel, which opinion is satisfactory to the
corporation, to the effect that such registration is not required
under the Securities Act."
(c) Notwithstanding any provisions herein to the contrary, if the
Fair Market Value (hereinafter defined) of one share of Common Stock is
greater than the Exercise Price (at the date of calculation as set forth
below), in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being canceled) by surrender of this Warrant at
the principal office of the Issuer together with the properly endorsed
Notice of Exercise and notice of such election in which event the Issuer
shall issue to the Holder a number of shares of Common Stock computed
using the following formula:
Y (A-B)
X = ---------
A
Where X = the number of shares of Common Stock to be issued to
the Holder
Y = the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is
being exercised, the portion of the Warrant being
canceled (at the
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<PAGE>
date of such calculation)
A = the Fair Market Value of one share of the Issuer's
Common Stock (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, Fair Market Value of one share of
Common Stock shall be the average closing bid price (as reported by The
Nasdaq Stock Market) of the Issuer's Common Stock for the five (5)
consecutive trading days ending on the trading day immediately preceding
the date of the Election to Purchase.
Section 3. Reservation of Shares; Preservation of Rights of Holder. The
Issuer hereby agrees that there shall be reserved for issuance and/or delivery
upon exercise of this Warrant, such number of Warrant Shares as shall be
required for issuance or delivery upon exercise of this Warrant. The Warrant
surrendered upon exercise shall be canceled by the Issuer. After the Expiration
Date, no shares of Common Stock shall be subject to reservation in respect of
this Warrant. The Issuer further agrees (i) that it will not, by amendment of
its Certificate of Incorporation or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observation or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by the Issuer,
(ii) promptly to take such action as may be required of the Issuer to permit the
Holder to exercise this Warrant and the Issuer duly and effectively to issue
shares of its Common Stock or other securities as provided herein upon the
exercise hereof, and (iii) promptly to take all action required or provided
herein to protect the rights of the Holder granted hereunder against dilution.
Without limiting the generality of the foregoing, should the Warrant Shares at
any time consist in whole or in part of shares of capital stock having a par
value, the Issuer agrees that before taking any action which would cause an
adjustment of the Exercise Price so that the same would be less than the then
par value of such Warrant Shares, the Issuer shall take any corporate action
which may, in the opinion of its counsel, be necessary in order that the Issuer
may validly and legally issue fully paid and nonassessable shares of such Common
Stock at the Exercise Price as so adjusted. The Issuer further agrees that it
will not establish a par value for its Common Stock while this Warrant is
outstanding in an amount greater than the Exercise Price.
Section 4. Exchange, Transfer, Assignment or Loss of Warrant. Any
attempted transfer of this Warrant, the Warrant Shares or any new Warrant not in
accordance with this Section shall be null and void, and the Issuer shall not in
any way be required to give effect to such transfer. No transfer of this Warrant
shall be effective for any purpose hereunder until (i) written notice of such
transfer and of the name and address of the transferee has been received by the
Issuer, and (ii) the transferee shall first agree in a writing deposited with
the Secretary of the Issuer to be bound by all the provisions of this Warrant.
Upon surrender of this Warrant to the Issuer by any transferee authorized under
the provisions of this Section 4, the Issuer shall, without charge, execute and
deliver a new Warrant registered in the name of such transferee at the address
specified by such transferee, and this Warrant shall promptly be canceled. The
Issuer
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<PAGE>
may deem and treat the registered holder of any Warrant as the absolute owner
thereof for all purposes, and the Issuer shall not be affected by any notice to
the contrary. Any Warrant, if presented by an authorized transferee, may be
exercised by such transferee without prior delivery of a new Warrant issued in
the name of the transferee.
Upon receipt by the Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Issuer will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute a separate contractual obligation on the
part of the Issuer, whether or not the Warrant so lost, stolen, destroyed or
mutilated shall be at any time enforceable by anyone.
Section 5. Rights of Holder. Neither a Holder nor his transferee by devise
or the laws of descent and distribution or otherwise shall be, or have any
rights or privileges of, a stockholder of the Issuer with respect to any Warrant
Shares, unless and until certificates representing such Warrant Shares shall
have been issued and delivered thereto.
Section 6. Adjustments in Exercise Price and Warrant Shares. The Exercise
Price and Warrant Shares shall be subject to adjustment from time to time as
provided in this Section 6.
(a) If the Issuer is recapitalized through the subdivision or
combination of its outstanding shares of Common Stock into a larger or
smaller number of shares, the number of shares of Common Stock for which
this Warrant may be exercised shall be increased or reduced, as of the
record date for such recapitalization, in the same proportion as the
increase or decrease in the outstanding shares of Common Stock, and the
Exercise Price shall be adjusted so that the aggregate amount payable for
the purchase of all Warrant Shares issuable hereunder immediately after
the record date for such recapitalization shall equal the aggregate amount
so payable immediately before such record date.
(b) If the Issuer declares a dividend on Common Stock, or makes a
distribution to holders of Common Stock, and such dividend or distribution
is payable or made in Common Stock or securities convertible into or
exchangeable for Common Stock, or rights to purchase Common Stock or
securities convertible into or exchangeable for Common Stock, the number
of shares of Common Stock for which this Warrant may be exercised shall be
increased, as of the record date for determining which holders of Common
Stock shall be entitled to receive such dividend or distribution, in
proportion to the increase in the number of outstanding shares (and shares
of Common Stock issuable upon conversion of all such securities
convertible into Common Stock) of Common Stock as a result of such
dividend or distribution, and the Exercise Price shall be adjusted so that
the aggregate amount payable for the purchase of all the Warrant Shares
issuable hereunder immediately after the record date for such dividend or
distribution shall equal the aggregate amount so payable immediately
before such record date.
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<PAGE>
(c) If the Issuer declares a dividend on Common Stock (other than a
dividend covered by subsection (b) above) or distributes to holders of its
Common Stock, other than as part of its dissolution or liquidation or the
winding up of its affairs, any shares of its capital stock, any evidence
of indebtedness or any cash or other of its assets (other than Common
Stock or securities convertible into or exchangeable for Common Stock),
the Holder shall receive notice of such event as set forth in Section 8
below.
(d) In case of any consolidation of the Issuer with, or merger of
the Issuer into, any other corporation (other than a consolidation or
merger in which the Issuer is the continuing corporation and in which no
change occurs in its outstanding Common Stock), or in case of any sale or
transfer of all or substantially all of the assets of the Issuer, or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Issuer, except where the Issuer is the surviving
entity and no change occurs in its outstanding Common Stock), the
corporation formed by such consolidation or the corporation resulting from
such merger or the corporation which shall have acquired such assets or
securities of the Issuer, as the case may be, shall execute and deliver to
the Holder simultaneously therewith a new Warrant, satisfactory in form
and substance to the Holder, together with such other documents as the
Holder may reasonably request, entitling the Holder thereof to receive
upon exercise of such Warrant the kind and amount of shares of stock and
other securities and property receivable upon such consolidation, merger,
sale, transfer, or exchange of securities, or upon the dissolution
following such sale or other transfer, by a holder of the number of shares
of Common Stock purchasable upon exercise of this Warrant immediately
prior to such consolidation, merger, sale, transfer, or exchange. Such new
Warrant shall contain the same basic other terms and conditions as this
Warrant and shall provide for adjustments which, for events subsequent to
the effective date of such written instrument, shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 6. The above provisions of this paragraph (d) shall similarly
apply to successive consolidations, mergers, exchanges, sales or other
transfers covered hereby.
(e) If the Issuer shall, at any time before the expiration of this
Warrant, sell all or substantially all of its assets and distribute the
proceeds thereof to the Issuer's stockholders, the Holder shall, upon
exercise of this Warrant have the right to receive, in lieu of the shares
of Common Stock of the Issuer that the Holder otherwise would have been
entitled to receive, the same kind and amount of assets as would have been
issued, distributed or paid to the Holder upon any such distribution with
respect to such shares of Common Stock of the Issuer had the Holder been
the holder of record of such shares of Common Stock receivable upon
exercise of this Warrant on the date for determining those entitled to
receive any such distribution. If any such distribution results in any
cash distribution in excess of the Exercise Price provided by this Warrant
for the shares of Common Stock receivable upon exercise of this Warrant,
the Holder may, at the Holder's option, exercise this Warrant without
making payment of the Exercise Price and, in such case, the Issuer shall,
upon distribution to the Holder, consider the Exercise Price to have
5
<PAGE>
been paid in full and, in making settlement to the Holder, shall obtain
receipt of the Exercise Price by deducting an amount equal to the Exercise
Price for the shares of Common Stock receivable upon exercise of this
Warrant from the amount payable to the Holder.
(f) If an event occurs which is similar in nature to the events
described in this Section 6, but is not expressly covered hereby, the
Board of Directors of the Issuer shall make or arrange for an equitable
adjustment to the number of Warrant Shares and the Exercise Price.
(g) The term "Common Stock" shall mean the Common Stock of the
Issuer as the same exists at February 12, 1997 or as such stock may be
constituted from time to time, except that for the purpose of this Section
6, the term "Common Stock" shall include any stock of any class of the
Issuer which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Issuer and which is not subject to
redemption by the Issuer.
(h) The Issuer shall retain a firm of independent public accountants
of recognized standing (who may be any such firm regularly employed by the
Issuer) to make any computation required under this Section 6, and a
certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 6.
(i) Whenever the number of Warrant Shares or the Exercise Price
shall be adjusted as required by the provisions of this Section 6, the
Issuer forthwith shall file in the custody of its secretary or an
assistant secretary, at its principal office, and furnish to each Holder
hereof, a certificate prepared in accordance with paragraph (h) above,
showing the adjusted number of Warrant Shares and the adjusted Exercise
Price and setting forth in reasonable detail the circumstances requiring
the adjustments.
(j) Notwithstanding any other provision, this Warrant shall be
binding upon and inure to the benefit of any successors and assigns of the
Issuer.
(k) No adjustment in the Exercise Price in accordance with the
provisions of this Section 6 need be made if such adjustment would amount
to a change in such Exercise Price of less than $.01; provided however,
that the amount by which any adjustment is not made by reason of the
provisions of this paragraph (k) shall be carried forward and taken into
account at the time of any subsequent adjustment in the Exercise Price.
(l) If an adjustment is made under this Section 6 and the event to
which the adjustment relates does not occur, then any adjustments in
accordance with this Section 6 shall be readjusted to the Exercise Price
and the number of Warrant Shares which would
6
<PAGE>
be in effect had the earlier adjustment not been made.
Section 7. Taxes on Issue or Transfer of Common Stock and Warrant. The
Issuer shall pay any and all documentary stamp or similar issue or transfer
taxes payable in respect of the issue or delivery of shares of Common Stock or
other securities on the exercise of this Warrant. The Issuer shall not be
required to pay any tax which may be payable in respect of any transfer of this
Warrant or in respect of any transfers involved in the issue or delivery of
shares or the exercise of this Warrant in a name other than that of the Holder
and the person requesting such transfer, issue or delivery shall be responsible
for the payment of any such tax (and the Issuer shall not be required to issue
or deliver said shares until such tax has been paid or provided for).
Section 8. Notice of Adjustment. So long as this Warrant shall be
outstanding, (a) if the Issuer shall propose to pay any dividends or make any
distribution upon the Common Stock, or (b) if the Issuer shall offer generally
to the holders of Common Stock the right to subscribe to or purchase any shares
of any class of Common Stock or securities convertible into Common Stock or any
other similar rights, or (c) if there shall be any proposed capital
reorganization of the Issuer in which the Issuer is not the surviving entity,
recapitalization of the capital stock of the Issuer, consolidation or merger of
the Issuer with or into another corporation, sale, lease or other transfer of
all or substantially all of the property and assets of the Issuer, or voluntary
or involuntary dissolution, liquidation or winding up of the Issuer, or (d) if
the Issuer shall give to its stockholders any notice, report or other
communication respecting any significant or special action or event, then in
such event, the Issuer shall give to the Holder, at least ten (10) days prior to
the relevant date described below, a notice containing a description of the
proposed action or event and stating the date or expected date on which a record
of the Issuer's stockholders is to be taken for any of the foregoing purposes,
and the date or expected date on which any such dividend, distribution,
subscription, reclassification, reorganization, consolidation, combination,
merger, conveyance, sale, lease or transfer, dissolution, liquidation or winding
up is to take place and the date or expected date, if any is to be fixed, as of
which the holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities or other property deliverable upon such
event.
Section 9. Notice. Any notice to be given or to be served upon any party
in connection with the Warrant must be in writing and will be deemed to have
been given and received upon confirmed receipt, if sent by facsimile, or two (2)
days after it has been submitted for delivery by Federal Express or an
equivalent carrier, charges prepaid and addressed to the following addresses
with a confirmation of delivery:
7
<PAGE>
If to the Issuer, to:
Country Star Restaurants, Inc.
11150 Santa Monica Boulevard, Suite 650
Los Angeles, California 90025
Attn.: Peter R. Feinstein, President
Telephone: (310) 268-2200
Facsimile: (310) 268-2208
with a copy simultaneously by like means to:
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022
Attn.: Clifford A. Brandeis
Telephone: (212) 223-6700
Facsimile: (212) 223-6433
If to the Holder, to:
Dan Rubin
171 East 84th Street, No. 11D
New York, New York 10028
Telephone: (212) 879-5304
Facsimile: (212) 396-2751
with a copy simultaneously by like means to:
Wolf Haldenstein Adler Freeman & Herz LLP
270 Madison Avenue
New York, New York 10015
Telephone: (212) 545-4600
Facsimile: (212) 686-0114
Any party may, at any time by giving notice to the other party, designate any
other address in substitution of an address established pursuant to the
foregoing to which such notice will be given.
Section 10. Registration Rights. This Warrant and the Warrant Shares are
and shall remain subject to the Registration Rights Agreement dated January __,
1997 between and among CC, the Issuer and other parties who from time to time
execute the Registration Rights Agreement.
8
<PAGE>
Section 11. Governing Law; Choice of Forum. (a) This Warrant shall be
interpreted and the rights and liabilities of the parties hereto determined in
accordance with the internal laws (as opposed to the conflict of laws
provisions) of the State of Illinois.
(b) Holder and Issuer hereby agree to the exclusive jurisdiction of
the United States District Court of the Northern District of Illinois and the
State Courts of Illinois located in Cook County, Illinois and waive any
objection based on venue or forum non conveniens with respect to any action
instituted therein, and agree that any dispute concerning the relationship
between Holder and Issuer or the conduct of either party in connection with this
Warrant or otherwise shall be heard only in the courts described above.
Dated: February 12, 1997
COUNTRY STAR RESTAURANTS, INC.
By: /s/ Robert Schuster
-------------------------------
Name: Robert Schuster
-------------------------------
Title: Chairman of the Board
-------------------------------
ATTEST:
/s/ Robert L. Davidson
- - -----------------------------
Robert L. Davidson, Secretary
[Signature Page to Warrant to Purchase Shares of Common Stock
of Country Star Restaurants, Inc.]
9
<PAGE>
Schedule One
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise this Warrant and to
purchase ______ shares of Country Star Restaurants, Inc. Common Stock issuable
upon the exercise of this Warrant, and requests that certificates for such
shares be issued in the name of:
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Address)
________________________________________________________________________________
(United States Social Security or other taxpayer
identifying number, if applicable)
and, if different from above, be delivered to:
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Address)
and, if the number of Warrant Shares so purchased are not all of the Warrant
Shares issuable upon exercise of this Warrant, that a Warrant to purchase the
balance of such Warrant Shares be registered in the name of, and delivered to,
the undersigned at the address stated below.
Date: __________ __, _____
Name of Registered Owner: ______________________________________________________
________________________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
Signature: _____________________________________________________________________
10
February 12, 1997
Board of Directors
Country Star Restaurants, Inc.
11150 Santa Monica Boulevard
Suite 650
Los Angeles, CA 90025
Gentlemen:
The undersigned agrees that upon receipt of the appropriate notice from
Country Star Restaurants, Inc. (the "Company"), I shall enter into the
Consulting Agreement annexed hereto.
Very truly yours,
/s/ Robert J. Schuster
-----------------------------
Robert J. Schuster
/mi
<PAGE>
CONSULTING AGREEMENT
Consulting agreement (the "Agreement") dated as of ____________ ___, 199__
by and between Country Star Restaurants, Inc., a Delaware corporation having
offices at 11150 Santa Monica Boulevard, Suite 650, Los Angeles, California
90025 (the "Company") and Robert J. Schuster, an individual residing at 1060
Hanley Avenue, Los Angeles, California 90049 ("Individual").
W I T N E S S E T H:
WHEREAS, Individual has been employed by the Company as its Chief
Executive Officer since December 1993 pursuant to an Employment Agreement, which
employment was amended in August 1994 and was subsequently amended in July of
1996 (such agreement, as amended, the "Employment Agreement"); and
WHEREAS, since inception of the Company, Individual has served as the
Chairman of the Board of Directors of the Company; and
WHEREAS, each of the Company and the Individual desires to terminate
Individual's Employment Agreement and services as the Company's Chief Executive
Officer and a director of the Company, and the Company wishes to retain the
services of the Individual as a consultant to the Company and each of the
parties hereto wishes to clarify the rights and obligations that each have with
respect to the other in connection with Individual's consultancy.
NOW, THEREFORE, in consideration of the agreements and covenants herein
set forth, the parties hereto agree as follows:
1. Consulting. The Company hereby retains Individual as a consultant, and
Individual hereby accepts such consultancy and agrees to render his services as
a consultant for the "Term" (as defined in Section 4 below) of this Agreement,
subject to all of the provisions herein set forth.
2. Duties and Responsibilities of Consultant. Individual agrees to provide
the Company with his personal services as a consultant on a non-exclusive basis
with respect to any matters required by the Company which relate to the business
now or hereafter carried on or contemplated by the Company. Notwithstanding the
non-exclusivity of such consultancy, Consultant expressly acknowledges and
agrees that during the term of this consultancy he shall not render any services
whatsoever to any other corporation, partnership, individual, entity or person
in connection with the restaurant industry. It is expressly acknowledged and
agreed that in connection with the performance of Individual's duties as a
consultant hereunder, Individual shall not be obligated to devote a minimum
number of hours per week to the business of the Company, but rather, the amount
of time and effort required hereunder on the part of the
<PAGE>
Individual as a consultant to the Company shall be subject to the good faith and
mutual determination of the Individual and the Company. Notwithstanding the
foregoing, Individual shall report to the Company's Board of Directors and Chief
Executive Officer and shall be available for consultation for each of the ten
(10) full business days (9:00 a.m. through 5:00 p.m.) following the effective
date of this Agreement.
3. Consideration. As full and total consideration for his services
hereunder, the Company shall: (i) pay to the Individual for the Term hereof, the
applicable pro-rata amount of Individual's "Base Salary" (as that term is
defined in the Employment Agreement), payable in bi-weekly annual installments;
(ii) provide to Individual for the Term hereof, at the Company's cost, and for
three (3) months thereafter, the health insurance benefits that Individual was
receiving from the Company immediately prior to the commencement of the Term of
this Agreement; and (iii) pay on behalf of Individual for the Term hereof and
for three (3) months thereafter, $1,500 per month with respect to the automotive
lease currently paid for by the Company. It is expressly understood and agreed
that in the event of the death, incapacity or disability (as defined in the
Employment Agreement) of Individual prior to the expiration of the Term of this
Agreement (or prior to the one year anniversary of the commencement of this
consultancy agreement with respect to the health insurance and automotive
allowance) that the Company shall nevertheless continue to be obligated to make
the payments due pursuant to this Section 3 to Individual's estate, executives
or administrators as the case may be. Individual shall be entitled to receive
all benefits and remuneration hereunder without the Company having any right of
setoff whatsoever, with respect to any monies, payments, considerations, loans,
guarantees, extensions of credit, or any benefits of any nature that may have
been received by Individual or extended by the Company in connection with the
Employment Agreement or otherwise; provided, however, that all of such items
received by Individual or extended by the Company were duly and properly
authorized by the Company's Board of Directors. In addition, it is expressly
agreed that the Individual shall not be entitled to any payments relating to the
Employment Agreement (including severance payments contemplated under Section 8
thereof) and that the Individual shall hold harmless and release the Company
from all liability and obligations under the Employment Agreement.
4. Term; Effect of Notice. The term of this Agreement shall commence
immediately upon receipt by Individuals of a written notice from the Company in
accordance with the immediately following sentence (the "Notice"), and shall
expire nine (9) months thereafter. To be effective, such Notice shall be given
in accordance with the terms of Section 6 below and shall state that
Individual's Employment Agreement is automatically and immediately terminated
and that this Agreement is automatically in full force and effect. Individual
expressly
-1-
<PAGE>
agrees that upon the receipt of the Notice, that the Employment Agreement,
except as otherwise expressly set forth herein, shall be terminated
automatically and shall be null and void in all respects and each of Cameron
Capital Ltd. and the Company expressly acknowledges and agrees that this
Agreement shall automatically become effective immediately upon commencement of,
and shall remain in effect throughout, the Term. In addition, upon Individual's
receipt of the Notice, Individual shall automatically be deemed to have resigned
from the Company's Board of Directors, effective immediately and without
disagreement.
5. Non-Competition; Termination for Cause. Notwithstanding the termination
of the Employment Agreement, Individual expressly agrees that the
non-competition provisions set forth in Section 9 of the Employment Agreement
shall remain in full force and effect upon the termination of the Employment
Agreement and the entering into of this agreement. In addition the termination
for cause provisions in Section 8(a) of the Employment Agreement are
incorporated herein by reference and shall apply to the termination of
Consultant's engagement hereunder.
6. Notices. Except as otherwise specified herein to the contrary, all
notices, requests, demands and other communications required or desired to be
given hereunder shall only be effective if given in writing by hand, by
certified or registered mail, return receipt requested, postage prepaid, or by
U.S. express mail service, or by private overnight mail service (e.g. Federal
Express). Any such notice shall be deemed to have been given (a) on the business
day actually received if given by hand or facsimile transmission, (b) on the
business day immediately subsequent to mailing, if sent by U.S. express mail
service or private overnight mail service, or (c) three (3) business days
following the mailing thereof, if mailed by certified or registered mail,
postage prepaid, return receipt requested, and all such notices shall be sent to
the addresses first set forth above, or to such other address or addresses as a
party may have advised the other in the manner provided in this Section 6, or in
the case of the Individual, at Individual's office address, which is the same
address as the Company.
7. Inurement; Assignment. In the event of a sale of the Company, or a
division, subsidiary or affiliate thereof, whether by way of stock sale, sale of
assets, merger or other business combination, as applicable, the rights and
obligations of the Company under this Agreement shall inure to the benefit of
and shall be binding upon any successor of the Company or to the business of the
Company, subject to the provisions hereof. The Company may assign this Agreement
to any person, firm or corporation controlling, controlled by, or under common
control with the Company provided that, in the event of any such assignment, the
services to be rendered by Individual to such assignee shall be of the same
nature and professional status
-2-
<PAGE>
provided for in this Agreement. The Company's obligations hereunder shall be
unaffected by any assignment. Neither this Agreement nor any rights or
obligations of Individual hereunder shall be transferable or assignable by
Individual.
8. Entire Agreement. This Agreement sets forth the entire and only
agreement or understanding between the parties relating to the subject matter
hereof and supersedes and cancels all previous agreements, (including, without
limitation, the Employment Agreement) negotiations, letters of intent,
commitments and representations in respect thereof between them, and no party
shall be bound by any conditions, definitions, warranties or representations
with respect to the subject matter of this Agreement as provided in this
Agreement.
9. Waivers. No waiver by any party of any default with respect to any
provision, condition or requirement hereof shall be deemed to be a waiver of any
other provision, condition or requirement hereof; nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
10. Preservation of Intent. Should any provision of this Agreement be
determined by a court having jurisdiction in the premises to be illegal or in
conflict with any laws of any state or jurisdiction or otherwise unenforceable,
the Company and Individual agree that such provision shall be modified to the
extent legally possible so that the intent of this Agreement may be legally
carried out and the provisions hereof may be enforced to the maximum extent
possible.
11. Amendment. This Agreement may not be amended in any respect except by
an instrument in writing signed by the parties hereto.
12. Headings. The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which when
taken together shall constitute one and the same instrument.
14. Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of California,
without giving reference to principles of conflict of law. Each of the parties
hereto irrevocably consents to the venue and jurisdiction of the federal and
state courts located in the State of California, County of Los Angeles.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
COUNTRY STAR RESTAURANTS, INC.
By:___________________________________
Name:
Title:
______________________________________
Robert J. Schuster
-4-
COUNTRY STAR RESTAURANTS, INC.
11150 SANTA MONICA BOULEVARD
LOS ANGELES, CA 90025
February 12, 1997
Peter R. Feinstein
18341 Lake Encino Drive
Encino, CA 91316
Re: Notice of Effectiveness of Consulting Agreement
Dear Peter:
This letter is to notify you that: (i) your Employment Agreement with
Country Star Restaurants, Inc. (the "Company") is hereby terminated in
accordance with and to the extent set forth in the Consulting Agreement between
you and the Company; and (ii) the Consulting Agreement is automatically in full
force and effect.
Please sign below to: (i) confirm your receipt of this notice, (ii) to
acknowledge its adequacy and conformity with the terms of the Employment
Agreement and the Consulting Agreement; and (iii) to acknowledge that you have
read and understood the terms of the Consulting Agreement and that such
agreement has been duly executed and delivered by you.
COUNTRY STAR RESTAURANTS, INC.
By: /s/ Robert J. Schuster
-------------------------
Name: Robert J. Schuster
Title: CEO
Acknowledged and Agreed:
/s/ Peter R. Feinstein
Peter R. Feinstein
<PAGE>
CONSULTING AGREEMENT
Consulting agreement (the "Agreement") dated as of February 12, 1997 by
and between Country Star Restaurants, Inc., a Delaware corporation having
offices at 11150 Santa Monica Boulevard, Suite 650, Los Angeles, California
90025 (the "Company") and Peter R. Feinstein, an individual residing at 18341
Lake Encino Drive, Encino, CA 91316 ("Individual").
W I T N E S S E T H:
WHEREAS, Individual has been employed by the Company as its President
since December 1993 pursuant to an Employment Agreement, which employment was
amended in August 1994 and was subsequently amended in July of 1996 (such
agreement, as amended, the "Employment Agreement"); and
WHEREAS, since inception of the Company, Individual has served on the
Board of Directors of the Company; and
WHEREAS, each of the Company and the Individual desires to terminate
Individual's Employment Agreement and services as the Company's President and a
director of the Company, and the Company wishes to retain the services of the
Individual as a consultant to the Company and each of the parties hereto wishes
to clarify the rights and obligations that each have with respect to the other
in connection with Individual's consultancy.
NOW, THEREFORE, in consideration of the agreements and covenants herein
set forth, the parties hereto agree as follows:
1. Consulting. The Company hereby retains Individual as a consultant, and
Individual hereby accepts such consultancy and agrees to render his services as
a consultant for the "Term" (as defined in Section 4 below) of this Agreement,
subject to all of the provisions herein set forth.
2. Duties and Responsibilities of Consultant. Individual agrees to provide
the Company with his personal services as a consultant on a non-exclusive basis
with respect to any matters required by the Company which relate to the business
now or hereafter carried on or contemplated by the Company. Notwithstanding the
non-exclusivity of such consultancy, Consultant expressly acknowledges and
agrees that during the term of this consultancy he shall not render any services
whatsoever to any other corporation, partnership, individual, entity or person
in connection with the restaurant industry. It is expressly acknowledged and
agreed that in connection with the performance of Individual's duties as a
consultant hereunder, Individual shall not be obligated to devote a minimum
number of hours per week to the business of the Company, but rather, the amount
of time and effort required hereunder on the part of the Individual as a
consultant to the Company shall be subject to the good faith and mutual
<PAGE>
determination of the Individual and the Company. Notwithstanding the foregoing,
Individual shall report to the Company's Board of Directors and Chief Executive
Officer and shall be available for consultation for each of the ten (10) full
business days (9:00 a.m. through 5:00 p.m.) following the effective date of this
Agreement.
3. Consideration. As full and total consideration for his services
hereunder, the Company shall: (i) pay to the Individual for the Term hereof, the
applicable pro-rata amount of Individual's "Base Salary" (as that term is
defined in the Employment Agreement), payable in bi-weekly annual installments;
(ii) provide to Individual for the Term hereof, at the Company's cost, and for
three (3) months thereafter, the health insurance benefits that Individual was
receiving from the Company immediately prior to the commencement of the Term of
this Agreement; (iii) pay on behalf of Individual for the Term hereof and for
three (3) months thereafter, $1,500 per month with respect to the automotive
lease currently paid for by the Company; and (iv) the term of the $59,500 loan
made by the Company to Individual which is presently due on January 2, 1998
shall be extended for an additional year and shall be due on January 2, 1999. It
is expressly understood and agreed that in the event of the death, incapacity or
disability (as defined in the Employment Agreement) of Individual prior to the
expiration of the Term of this Agreement (or prior to the one year anniversary
of the commencement of this consultancy agreement with respect to the health
insurance and automotive allowance) that the Company shall nevertheless continue
to be obligated to make the payments due pursuant to this Section 3 to
Individual's estate, executives or administrators as the case may be. Individual
shall be entitled to receive all benefits and remuneration hereunder without the
Company having any right of setoff whatsoever, with respect to any monies,
payments, considerations, loans, guarantees, extensions of credit, or any
benefits of any nature that may have been received by Individual or extended by
the Company in connection with the Employment Agreement or otherwise; provided,
however, that all of such items received by Individual or extended by the
Company were duly and properly authorized by the Company's Board of Directors.
In addition, it is expressly agreed that the Individual shall not be entitled to
any payments relating to the Employment Agreement (including severance payments
contemplated under Section 8 thereof) and that the Individual shall hold
harmless and release the Company from all liability and obligations under the
Employment Agreement.
4. Term; Effect of Notice. The term of this Agreement shall commence
immediately upon receipt by Individuals of a written notice from the Company in
accordance with the immediately following sentence (the "Notice"), and shall
expire nine (9) months thereafter. To be effective, such Notice shall be given
in accordance with the terms of Section 6 below and
-1-
<PAGE>
shall state that Individual's Employment Agreement is automatically and
immediately terminated and that this Agreement is automatically in full force
and effect. Individual expressly agrees that upon the receipt of the Notice,
that the Employment Agreement, except as otherwise expressly set forth herein,
shall be terminated automatically and shall be null and void in all respects and
each of Cameron Capital Ltd. and the Company expressly acknowledges and agrees
that this Agreement shall automatically become effective immediately upon
commencement of, and shall remain in effect throughout, the Term. In addition,
upon Individual's receipt of the Notice, Individual shall automatically be
deemed to have resigned from the Company's Board of Directors, effective
immediately and without disagreement.
5. Non-Competition; Termination for Cause. Notwithstanding the termination
of the Employment Agreement, Individual expressly agrees that the
non-competition provisions set forth in Section 9 of the Employment Agreement
shall remain in full force and effect upon the termination of the Employment
Agreement and the entering into of this agreement. In addition the termination
for cause provisions in Section 8(a) of the Employment Agreement are
incorporated herein by reference and shall apply to the termination of
Consultant's engagement hereunder.
6. Notices. Except as otherwise specified herein to the contrary, all
notices, requests, demands and other communications required or desired to be
given hereunder shall only be effective if given in writing by hand, by
certified or registered mail, return receipt requested, postage prepaid, or by
U.S. express mail service, or by private overnight mail service (e.g. Federal
Express). Any such notice shall be deemed to have been given (a) on the business
day actually received if given by hand or facsimile transmission, (b) on the
business day immediately subsequent to mailing, if sent by U.S. express mail
service or private overnight mail service, or (c) three (3) business days
following the mailing thereof, if mailed by certified or registered mail,
postage prepaid, return receipt requested, and all such notices shall be sent to
the addresses first set forth above, or to such other address or addresses as a
party may have advised the other in the manner provided in this Section 6, or in
the case of the Individual, at Individual's office address, which is the same
address as the Company.
7. Inurement; Assignment. In the event of a sale of the Company, or a
division, subsidiary or affiliate thereof, whether by way of stock sale, sale of
assets, merger or other business combination, as applicable, the rights and
obligations of the Company under this Agreement shall inure to the benefit of
and shall be binding upon any successor of the Company or to the business of the
Company, subject to the provisions hereof. The Company may assign this Agreement
to any person, firm or corporation controlling, controlled by, or under common
control
-2-
<PAGE>
with the Company provided that, in the event of any such assignment, the
services to be rendered by Individual to such assignee shall be of the same
nature and professional status provided for in this Agreement. The Company's
obligations hereunder shall be unaffected by any assignment. Neither this
Agreement nor any rights or obligations of Individual hereunder shall be
transferable or assignable by Individual.
8. Entire Agreement. This Agreement sets forth the entire and only
agreement or understanding between the parties relating to the subject matter
hereof and supersedes and cancels all previous agreements, (including, without
limitation, the Employment Agreement) negotiations, letters of intent,
commitments and representations in respect thereof between them, and no party
shall be bound by any conditions, definitions, warranties or representations
with respect to the subject matter of this Agreement as provided in this
Agreement.
9. Waivers. No waiver by any party of any default with respect to any
provision, condition or requirement hereof shall be deemed to be a waiver of any
other provision, condition or requirement hereof; nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
10. Preservation of Intent. Should any provision of this Agreement be
determined by a court having jurisdiction in the premises to be illegal or in
conflict with any laws of any state or jurisdiction or otherwise unenforceable,
the Company and Individual agree that such provision shall be modified to the
extent legally possible so that the intent of this Agreement may be legally
carried out and the provisions hereof may be enforced to the maximum extent
possible.
11. Amendment. This Agreement may not be amended in any respect except by
an instrument in writing signed by the parties hereto.
12. Headings. The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which when
taken together shall constitute one and the same instrument.
14. Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of California,
without giving reference to principles of conflict of law. Each of the parties
hereto irrevocably consents to the venue and jurisdiction of the federal and
state courts located in the State of California, County of Los Angeles.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
COUNTRY STAR RESTAURANTS, INC.
By: /s/ Robert J. Schuster
-------------------------
Name: Robert J. Schuster
Title: CEO
/s/Peter R. Feinstein
Peter R. Feinstein
-4-
