SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
-----------------------------------
Date of Report (Date of earliest event reported) JANUARY 20, 1998
----------------
-----------------------------------
COUNTRY STAR RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
-----------------------------------
DELAWARE 0-23136 62-1536550
- ---------------- ------------------------ ---------------
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
----------------------------------
4929 WILSHIRE BOULEVARD, SUITE 428, LOS ANGELES, CA 90010
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 213/634-5588
------------
<PAGE>
ITEM 9. OTHER EVENTS
Country Star Restaurants, Inc. (the "Company") reports on material
developments involving its Las Vegas, Nevada restaurant.
The Company opened its Country Star Las Vegas restaurant on the "Strip"
in Las Vegas in July, 1996. The restaurant was owned by a Nevada limited
liability company (the limited liability company is referred to herein as the
"Restaurant Operator"). The Company was the manager of and held the majority
interest in the Restaurant Operator. The other members of the Restaurant
Operator were Cirrus, Cirrus LLC ("Cirrus"), a Delaware limited liability
company and NevStar LLC ("NevStar"), a Nevada limited liability company. NevStar
was also the landlord of the restaurant's facility.
The Company was in arrears in the payment of October, November and
December, 1997 rent due under the lease. The aggregate amount of the arrearages
were $195,000.
NevStar as Landlord of the restaurant facility served a notice which
purported to terminate the lease as of December 22, 1997 for non-payment of
rent. The Landlord agreed not to take any actions to terminate the lease prior
to December 24, 1997. Management of the Company negotiated with NevStar as
Landlord for an agreement under which the Landlord would buy out the remaining
term of the lease.
Management was unable to reach an agreement with NevStar as Landlord
regarding a buy out of the lease and NevStar as Landlord would not agree to
delay its termination of the lease beyond December 24, 1997. The Company then
caused the Restaurant Operator to commence a federal bankruptcy proceeding in
order to preserve the remainder of the lease and the rights thereunder as an
asset of the Restaurant Operator. Such a bankruptcy proceeding had to be
commenced before the legal termination of the lease in order for the lease and
the rights thereunder to remain an asset of the Restaurant Operator.
The Company, NevStar as Landlord and the other members of the
Restaurant Operator have reached a settlement of their disputes and the
bankruptcy proceeding. Under the term of the settlement, all of the following
transactions closed simultaneously.
The Company purchased the interest of Cirrus in the Restaurant Operator
for aggregate consideration of $200,000 cash and 2,250,000 shares of the
Company's authorized common stock. The shares of common stock were issued under
section 4(2) of the Securities Act of 1933, as amended. The Company agreed to
file a registration statement permitting the resale of the shares.
-2-
<PAGE>
(Prior to the settlement, Mirage Resorts, Inc. ("Mirage") a Nevada
corporation, through an affiliate, Restaurant Ventures of Nevada, Inc. ("RVNI")
purchased NevStar from its owners, thereby acquiring NevStar's interests as
Landlord of the restaurant facility and as a member of the Restaurant Operator.)
The Company sold all of its interest in the Restaurant Operator,
including the interest purchased from Cirrus, to Mirage for consideration of
$1,550,000 cash. Mirage became the holder of all of the interests in the
Restaurant Operator. The Company agreed to pay when due all of the trade
payables of the Restaurant Operator and resigned as manager of the Restaurant
Operator.
RVNI agreed to a new lease of the restaurant facility directly to the
Company. The new lease will take effect upon dismissal of the bankruptcy
proceeding commenced by the Restaurant Operator. The new lease includes the
provisions of the prior lease to Restaurant Operator with certain modifications.
The modifications include a reduction in the base rent payable from $65,000 per
month to an amount equal to one-half (1/2) of the Company's positive cash flow
from operating the restaurant (with no reduction for the Company's corporate
overhead expenses). All arrearages currently due under the prior lease will be
waived. The new lease shall terminate on September 30, 1998, unless RVNI and the
Company mutually agree in writing to extend the lease on a month-to-month basis.
The Company has agreed to continue to manage the restaurant under the existing
management agreement until the effective date of the new lease.
The Company, Mirage and the Restaurant Operator agreed to seek jointly
the dismissal of the Restaurant Operator's bankruptcy proceeding.
The Company shall use the net proceeds from the sale of its interest in
the Restaurant Operator to Mirage for working capital and repayment of
indebtedness.
ITEM 7. EXHIBITS
1. LLC Interest Purchase Agreement and Assignment between
the Company and Mirage Resorts International, Inc.
2. Agreement regarding new lease between the Company and
Restaurant Ventures of Nevada, Inc.
-3-
<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 thereunto duly authorized, in the City of Los Angeles, State of
California on January 20, 1998.
COUNTRY STAR RESTAURANTS, INC.
(Registrant)
Dated: JANUARY 20, 1998 /s/ DAN J. RUBIN
---------------------
(Signature)
Dan J. Rubin,
Chief Executive Officer and
President
-4-
LLC INTEREST PURCHASE AGREEMENT
AND
ASSIGNMENT
This LLC INTEREST PURCHASE AGREEMENT AND ASSIGNMENT is made and entered
into effective as of December 30, 1997, by and between Country Star Restaurants,
Inc., a Delaware corporation ("SELLER"), and Mirage Resorts, Incorporated, a
Nevada corporation ("BUYER").
INTRODUCTION
Country Star Las Vegas, LLC (the "LLC") was formed and has been
operated pursuant to the Country Star Las Vegas Limited Liability Company
Operating Agreement entered into and made effective the 6th day of September,
1995, by and between Seller and NevStar Restaurants, LLC, a Nevada limited
liability company ("NEVSTAR"), as amended by that certain Amendment to Country
Star Las Vegas Limited Liability Company Operating Agreement entered into and
made effective the ___ [sic] day of November, 1995, by and between Seller,
NevStar, and Cirrus, Cirrus, LLC, a Delaware limited liability company
("CIRRUS") (collectively, the "OPERATING AGREEMENT").
Seller desires to sell and assign to Buyer, and Buyer desires to
purchase from Seller, on the terms set forth in this Agreement, the entire
interest in the LLC currently held by Seller. Upon such sale and assignment
pursuant hereto, Buyer will become a substituted member of the LLC with respect
to such interest.
In consideration of the premises and the mutual benefits to be derived
from this Agreement and of the respective representations, warranties,
agreements, indemnities, and promises contained herein, the parties, intending
to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATIONS
SECTION 1.1 Definitions. As used in this Agreement, unless the context
otherwise requires, the following terms shall have the following meanings:
"ACCOUNTS PAYABLE SCHEDULE" means that certain schedule of the accounts
payable of the LLC as of the date hereof, which is attached hereto as Exhibit A.
"AGREEMENT" means this LLC Interest Purchase Agreement and Assignment
between Seller and Buyer (including any Exhibits and Schedules hereto) and all
amendments hereto made in accordance with the provisions of Section 7.1.
"AGREEMENT REGARDING LEASE" means that certain Agreement dated as of
the date hereof by and between Restaurant Ventures of Nevada, Inc., and Seller
regarding certain modifications to the Lease.
<PAGE>
"BALANCE SHEET" means that certain balance sheet dated as of September
30, 1997 of the LLC, which is attached hereto as Exhibit B.
"BUYER" has the meaning specified in the recitals to this Agreement.
"BUYER INDEMNITEE" has the meaning specified in Section 6.1(b).
"CIRRUS" has the meaning specified in the recitals to this Agreement.
"CLOSING" has the meaning specified in Section 2.2.
"CONTRACTS" has the meaning specified in Section 3.11(a).
"ENCUMBRANCE" means any security interest, pledge, mortgage, lien
(including environmental and tax liens), charge, encumbrance, adverse claim,
preferential arrangement, or restriction of any kind, including, without
limitation, any restriction on the use, voting, transfer, receipt of income or
other exercise of any attributes of ownership.
"ENVIRONMENTAL CLAIM" means any judicial, administrative or regulatory
actions, suits, demands, demand letters, claims, liens, notices of noncompliance
or violation, notices of liability or potential liability, investigations, or
proceedings relating to any Environmental Law, Environmental Permit or arising
from alleged injury or threat of injury to natural resources, health, safety or
the environment.
"ENVIRONMENTAL LAW" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, order, judgment, decree, injunction,
requirement, judicial or regulatory agency interpretation, policy or guidance or
agreement with any governmental entity relating to (a) the environment,
(including, without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface land, subsurface land, plant and animal life or
any other natural resource) or to human health or safety, or (b) the exposure
to, or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as now or hereafter in effect,
including, without limitation, (i) the Oil Pollution Act of 1990, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Water Pollution Control Act, the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act of 1976, the Solid Waste Disposal Act,
the Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, the Federal Occupation Safety and Health Act, and (ii) any
common or civil law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance, trespass and
strict liability) that may impose liability or obligations or injuries or
damages due to, or threatened as a result of, the presence of or exposure to any
Hazardous Substance.
-2-
<PAGE>
"ENVIRONMENTAL PERMIT" means any permit, license, approval,
identification number, or other authorization required under any Environmental
Law.
"HAZARDOUS SUBSTANCE" means any substance presently or hereafter
listed, defined, designated, classified, or regulated as hazardous, toxic,
radioactive or dangerous or words of similar import, under any federal, state,
local or foreign law, statute, ordinance, rule, regulation, code, order,
judgment, decree, injunction, requirement, or judicial or agency interpretation,
policy or guidance, whether by type or by quantity, including any substance
containing any such substance as a component, including, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance or petroleum or any
derivative or by-product or break-down product thereof, radon, radioactive
material, asbestos, asbestos containing material, urea formaldehyde foam
insulation, lead, and polychlorinated biphenyl.
"INDEMNIFIED BUYER LIABILITIES" has the meaning specified in Section
6.3(b).
"LEASE" means that certain Amended and Restated Lease Agreement having
an effective date of February 22, 1995 by and between Four Seas Investment
Company, a Nevada limited partnership, and M.D. Close and Hope C. Close Trust
R-201, and Seller.
"LIABILITIES" has the meaning specified in Section 6.1(a).
"LLC" has the meaning specified in the recitals to this Agreement.
"MATERIAL ADVERSE EFFECT" with respect to any Person means any
circumstance, change, event, transaction, loss, failure, effect, or other
occurrence, whether individually or in the aggregate with any other
circumstance, change, event, transaction, loss, failure, effect or other
occurrence, which is or is reasonably likely to be materially adverse to the
business, operations, properties, or conditions (financial or otherwise) of such
Person.
"NEVSTAR" has the meaning specified in the recitals to this Agreement.
"OPERATING AGREEMENT" has the meaning specified in the recitals to this
Agreement.
"PERSON" means any individual, partnership, limited liability company,
corporation, trust, or other entity.
"PURCHASE PRICE" has the meaning specified in Section 2.1(a).
"PURCHASED INTEREST" has the meaning specified in Section 2.1(a).
"SELLER" has the meaning specified in the recitals to this Agreement.
-3-
<PAGE>
"TAX" means any and all fees (including without limitation
documentation, recording, license, and registration fees), taxes (including
without limitation net income, alternative, unitary, alternative minimum,
minimum franchise, value added, ad valorem, income, receipts, capital, excise,
sales, use, leasing, fuel, excess profits, turnover, occupational, property
(personal and real, tangible and intangible), transfer, recording and stamp
taxes, levies, imposts, duties, charges, fees assessments, or withholdings of
any nature whatsoever, general or special, ordinary or extraordinary, and any
transaction privilege or similar taxes) imposed by or on behalf of a
governmental authority, together with any and all penalties, fines, additions to
tax and interest thereon.
SECTION 1.2 Interpretations. Except as otherwise expressly provided
herein, the following rules of interpretation apply to this Agreement: (i) the
singular includes the plural and the plural includes the singular except when
the context otherwise requires; (ii) "include" and "including" are not limiting;
(iii) a reference to any agreement or contract includes exhibits, schedules, and
permitted supplements and amendments thereto; (iv) a reference to a law includes
any amendment or modification to such law and any rules or regulations issued
thereunder, (v) a reference to a Person includes such Person's permitted
successors and assigns; and (vi) unless the context otherwise requires, a
reference in this Agreement to an Article, Section, Paragraph, Exhibit, or
Schedule is to the respective Article, Section, Paragraph, Exhibit, or Schedule
of or to this Agreement.
ARTICLE II
SALE AND PURCHASE OF LLC INTEREST
SECTION 2.1 Sale and Purchase of LLC Interest.
(a) Upon the terms set forth in this Agreement, Seller hereby
sells, assigns, transfers, conveys, and delivers to Buyer, and Buyer hereby
purchases from Seller, all of Seller's right, title, and interest as a member in
the LLC (the "PURCHASED INTEREST"), free and clear of all Encumbrances.
Concurrently herewith, Buyer is paying and delivering to Seller, as the purchase
price for the Purchased Interest, one million five hundred fifty thousand
dollars ($1,550,000) (the "PURCHASE PRICE") by a check drawn on Buyer's
corporate account.
(b) After giving effect to the sale and purchase under this
Section 2.1, Buyer shall be a substituted member in the LLC, holding the entire
right, title, and interest previously held by Seller as a member of the LLC.
SECTION 2.2 Closing. The consummation of the transactions contemplated
by this Agreement (the "CLOSING") shall take place immediately upon the
execution of this Agreement by the parties hereto.
-4-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement, Seller
represents and warrants to Buyer as follows:
SECTION 3.1 EXISTENCE AND POWER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the corporate power and authority to own, operate or lease the
properties owned, operated or leased by it and to carry on its business as it
has been and is currently conducted as of the date hereof and as contemplated
hereby. Seller is duly licensed or qualified to do business and in good standing
in each jurisdiction in which the properties owned or leased by it or the
operation of its business makes such licensing or qualification necessary or
desirable, except where failure to be so licensed or qualified would not have a
Material Adverse Effect on its financial condition or its ability to perform its
obligations hereunder or under the Agreement Regarding Lease or to consummate
the transaction contemplated hereby or thereby. Seller has the corporate power
and authority to execute and deliver this Agreement and the Agreement Regarding
Lease and to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby, and the execution, delivery,
and performance of this Agreement and the Agreement Regarding Lease has been
duly authorized by all necessary corporate actions (whether by Seller's Board of
Directors or stockholders). Each of this Agreement and the Agreement Regarding
Lease has been duly executed and delivered by Seller and, assuming the due
authorization, execution, and delivery by Buyer, constitutes the legal, valid
and binding obligation of Seller enforceable against Seller in accordance with
its terms except (a) as such enforcement may be subject to bankruptcy,
insolvency or similar laws now or hereafter in effect relating to creditors
rights generally, and (b) as the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
SECTION 3.2 TITLE TO THE PURCHASED INTEREST. Seller has, and is hereby
transferring to Buyer, good, valid, and marketable title in the Purchased
Interest, free and clear of any Encumbrance. Seller has not assigned,
transferred, or otherwise disposed of the Purchased Interest or any of its
rights under the Operating Agreement. Concurrently with the execution of this
Agreement, Seller is acquiring the entire membership interest of Cirrus in the
LLC. The Purchased Interest constitutes all the outstanding membership interests
in the LLC, other than the membership interest owned by Nevstar. Neither the LLC
nor any member has granted any Person any right or has entered into any
agreement or understanding (whether by option, warrant, call, commitment,
conversion, plan or otherwise), fixed or contingent, with respect to the
acquisition, purchase, sale, transfer, assignment, creation, or issuance of any
interest in the LLC.
-5-
<PAGE>
SECTION 3.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. Neither the
execution, delivery and performance of this Agreement or the Agreement Regarding
Lease nor the consummation by Seller of the transactions contemplated hereby or
thereby (i) conflicts with or violates or constitutes a breach of or a default
(with notice or lapse of time or both) under, or give rise to any right of
termination, cancellation or acceleration or guaranteed payments under or to a
loss of a material benefit under (A) any law, regulation, order, writ,
injunction, decree, determination, or award of any court, any governmental
department, board, agency or instrumentality, domestic or foreign, or any
arbitrator, applicable to Seller or the LLC, (B) the certificate of
incorporation or by-laws of Seller or the Operating Agreement or other governing
document of the LLC (other than with respect to certain of NevStar's rights
under the Operating Agreement, which have been waived by NevStar), or (C) any
contract, agreement, instrument, mortgage, note, lease or other arrangement
binding on or affecting Seller or the LLC or any of their respective properties;
(ii) requires any consent, authorization or approval under any contract,
agreement, instrument, mortgage, note, lease or other arrangement to which
Seller or the LLC or any of their respective properties is bound; (iii) requires
any consent, approval, order, authorization or permit of, or registration,
filing or notification to, any governmental or regulatory authority or agency;
or (iv) results in the creation or imposition of any Encumbrance upon any
property of Seller or the LLC.
SECTION 3.4 ORGANIZATION OF THE LLC. The LLC is a limited liability
company duly formed, validly existing, and in good standing under the laws of
the State of Nevada, and has all requisite power and authority to own, operate,
or lease the properties owned, operated or leased by the LLC and to carry on its
business as it has been and is currently conducted as of the date hereof and as
contemplated by the Operating Agreement. The LLC is duly licensed or qualified
to do business in the State of Nevada and is in good standing in the State of
Nevada.
SECTION 3.5 NO LLC SUBSIDIARIES. There are no corporations,
partnerships, joint ventures, associations, or other entities in which the LLC
owns, of record or beneficially, any direct or indirect equity or other interest
or any right (contingent or otherwise) to acquire the same, or in which the LLC
otherwise participates.
SECTION 3.6 LLC PROPERTY. The LLC has good, valid, and marketable title
to all the properties, interests in properties and assets owned, licensed or
leased by it (including without limitation the Lease), free and clear of any
Encumbrance other than as set forth on the Balance Sheet. Without limiting the
generality of the foregoing, the rights of the LLC, in or to any intellectual
property owned by or licensed to the LLC do not conflict with or infringe on the
rights of any other Person.
SECTION 3.7 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES.
(a) The Balance Sheet fairly presents, in all material
respects, in conformity with generally accepted accounting principles applied on
a consistent basis (except as may be indicated in the notes thereto), the
financial position of the LLC as of September 30, 1997, and
-6-
<PAGE>
the Accounts Payable Schedule is a complete and accurate list of the LLC's
accounts payable as of the date hereof.
(b) The LLC has no liabilities of any nature (whether accrued,
absolute, contingent or otherwise), except for (i) liabilities set forth in the
Balance Sheet or on the notes thereto, (ii) accounts payable listed on the
Accounts Payable Schedule, and (iii) the potential claim of Steve Motley and
Karen Donahue referred to in the December 3, 1997 letter from Kevin R. Briggs,
Esq. to Jeffrey P. Meyer, Esq.
(c) The LLC has not distributed any assets to any of its
members, whether by way of redemption, return of capital, distribution, or
otherwise.
SECTION 3.8 COMPLIANCE WITH LAWS. The LLC has not been and is not in
conflict with, or in violation of, any law, rule, regulation, order, judgment or
decree (including without limitation those relating to environmental, or health
or occupational safety matters) applicable to the LLC or by which the LLC or any
of its properties are bound or affected. The LLC has all governmental licenses,
franchises, permits, approvals, authorizations, exemptions, certificates,
registrations, and similar documents or instruments (including, without
limitation, all health and safety licenses, permits, and authorizations)
necessary to carry on their respective businesses as they are now being
conducted.
SECTION 3.9 ABSENCE OF CERTAIN CHANGES. Since September 30, 1997,
except as set forth in the Balance Sheet or the notes thereto, the LLC has
conducted its business only in the ordinary course, and there has not been (i)
any declaration, setting aside or payment of any dividend or other distribution
with respect to its membership interests, (ii) any incurrence, assumption or
guarantees by the LLC of any indebtedness for borrowed money other than in the
ordinary course of business, (iii) any making of any loan, advance or capital
contributions to, or investments in, any other person, (iv) any split,
combination or reclassification of any of its membership interests or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for membership interests in the LLC, (v) (x)
any granting by the LLC to any member, manager, representative or employee of
the LLC of any increase in compensation, except in the ordinary course of
business consistent with past practice or as was required under employment
agreements in effect on the date of the Balance Sheet, (y) any granting by the
LLC to any such person of any increase in severance or termination pay, except
as part of a standard employment package to any person promoted or hired, or as
was required under employment, severance or termination agreements in effect as
of the date of the Balance Sheet or (z) except termination arrangements in the
ordinary course of business consistent with past practice with employees, any
entry by the LLC into any employment, severance or termination agreement with a
member, manager, representative or employee of the LLC, (vi) any damage,
destruction or loss, whether or not covered by insurance, that would be expected
to have a Material Adverse Effect on the LLC, (vii) any transaction or
commitment made, or any contract or agreement entered into, by the LLC relating
to its assets or business (including without limitation the acquisition or
disposition of
-7-
<PAGE>
any assets), or any relinquishment by the LLC of any contractual or other right,
in either case, material to the LLC, other than transactions and commitments in
the ordinary course of business and those contemplated by this Agreement and the
Agreement Regarding Lease, (viii) any change in accounting methods, principles
or practices by the LLC materially affecting its assets, liabilities or
business, except insofar as may have been required by a change in generally
accepted accounting principles, (ix) any transaction, payment or commitment
made, or any contract or agreement entered into, by the LLC with or to any
affiliate of the LLC; or (ix) any other event, development or change which is
reasonably likely to have a Material Adverse Effect on the LLC.
SECTION 3.10 LABOR MATTERS. The LLC has fewer than 100 employees.
SECTION 3.11 AGREEMENTS. (a) The LLC is not a party to any agreement,
contract, lease, license, commitment, or instrument (including any and all
amendments thereto) (individually, a "CONTRACT"; and collectively, the
"CONTRACTS"), nor are any of its assets bound or subject to any Contract, except
for Contracts entered into in the ordinary course of business and consistent
with past practice.
(b) The Lease is unmodified and in full force and effect, and
there are no other agreements, written or oral, between the LLC and any third
parties, or by and amongst any third parties, claiming an interest in the
interest of the LLC in the Lease or otherwise relating to the use and occupancy
of the property covered by the Lease.
SECTION 3.12 ENVIRONMENTAL MATTERS. During the time that the LLC has
had possession of its facilities and the properties on which it operates, there
has not been:
(a) any Environmental Claim asserted against the LLC relating
in any way to the business or activities of the LLC; or
(b) (i) any violation of any Environmental Law by the LLC, or
any employee, representative, agent or any other person or entity acting on
behalf of the LLC (including, without limitation, any failure to obtain or
comply with any permit, license or other approval or authorization under the
provisions of any Environmental Law) or (ii) any discharge, spill, transport,
release, disposal, presence, alleged presence, or otherwise of any Hazardous
Substances in connection with such facilities or properties (including, without
limitation, any such action which could result in a liability or loss under any
Environmental Law relating to investigation, removal, remediation, containment,
cleanup or abatement of the presence, release, or threatened release of any
Hazardous Substance, whether on-site or off-site).
SECTION 3.13 BROKERS. No broker, finder, or investment banker is
entitled to any brokerage, finder's, or other fee or commission in connection
with the transactions hereunder based upon arrangements made by or on behalf of
Seller.
-8-
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement, Buyer
represents and warrants to Seller as follows:
SECTION 4.1 EXISTENCE AND POWER. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada, and
has the corporate power and authority to own, operate or lease the properties
owned, operated or leased by it and to carry on its business as it has been and
is currently conducted as of the date hereof and as contemplated hereby. Buyer
is duly licensed or qualified to do business and in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary or desirable,
except where failure to be so licensed or qualified would not have a Material
Adverse Effect on its financial condition or its ability to perform its
obligations hereunder or to consummate the transaction contemplated hereby.
Buyer has the corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transaction contemplated hereby, and the execution, delivery, and performance of
this Agreement has been duly authorized by all necessary corporate actions. This
Agreement has been duly executed and delivered by Buyer and, assuming the due
authorization, execution, and delivery by Buyer, constitutes the legal, valid
and binding obligation of Buyer enforceable against Buyer in accordance with its
terms except (a) as such enforcement may be subject to bankruptcy, insolvency or
similar laws now or hereafter in effect relating to creditors rights generally,
and (b) as the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
ARTICLE V
COVENANTS AND CONSENTS
SECTION 5.1 Payment of Trade Payables by Seller. Seller hereby assumes
and agrees promptly to pay and discharge when due all of the trade payables of
the LLC.
-9-
<PAGE>
SECTION 5.2 Resignation as Manager of LLC. Effective immediately upon
the Closing, Seller shall automatically be deemed to have resigned as a manager
of the LLC and shall cause all other managers of the LLC then in office to
resign such positions.
SECTION 5.3 Consent to Transfers. Seller hereby confirms that it has
consented to the transfer by NevStar, concurrently herewith, of all of its
right, title, and interest as a member in the LLC to Buyer and to Buyer becoming
a substituted member with respect to such transferred interest.
SECTION 5.4 Release from Confidentiality Agreement. Buyer hereby
releases Seller and Mr. Dan Rubin (in any capacity) from any obligations that it
or he may have under that certain document which is entitled "Confidentiality
Agreement and Liquidated Damages" and which is marked "Draft of December 11,
1997".
ARTICLE VI
INDEMNIFICATION
SECTION 6.1 Definitions.
(a) Liabilities. For purposes of this Article VI and subject
at all times to the exclusions set forth in Section 6.3(b), "LIABILITIES" shall
mean any and all costs, liabilities, losses, actual damages (including
consequential, punitive and natural resources damages resulting from third party
claims), Taxes, penalties, fines, and assessments (whether criminal or civil),
actions, suits, claims, obligations, injuries, judgments, disbursements, and
demands of any kind or nature whatsoever, and, except as otherwise expressly
provided in this Article VI, shall include all reasonable out-of-pocket costs,
disbursements, and expenses actually incurred (including reasonable consultant,
expert, and attorney's fees and expenses and costs of investigation, except as
otherwise expressly provided herein).
(b) Buyer Indemnitee. For purposes of this Article VI, a
"BUYER INDEMNITEE" shall mean the Buyer, its successors and permitted assigns,
and any of their shareholders, officers, directors, employees, agents, and
representatives.
SECTION 6.2 Survival of Representations and Warranties. The covenants,
agreements, indemnification obligations, representations, and warranties of each
of the parties hereto shall survive the Closing until the expiration of the
applicable statute of limitations.
SECTION 6.3 Indemnification of Buyer.
(a) Indemnity. Subject to the exclusions stated in Section
6.3(b) below, and without limiting any other rights which a Buyer Indemnitee may
have hereunder or under applicable law, Seller hereby agrees to defend,
indemnify and hold harmless each Buyer
-10-
<PAGE>
Indemnitee from and against all Liabilities that may at any time be incurred by,
imposed on or asserted against such Buyer Indemnitee, directly or indirectly
based on, or arising or resulting from (i) the breach of, or misstatement of any
material fact contained in, any representation, warranty, or agreement of Seller
contained in this Agreement or in any certificate, financial statement, or other
document furnished pursuant hereto or (ii) the potential claims of Steve Motley
and Karen Donahue referred to in the December 3, 1997 letter from Kevin R.
Briggs, Esq. to Jeffrey P. Meyer, Esq.
(b) Exclusions. Notwithstanding any provision hereof to the
contrary, Seller shall have no obligation to indemnify any Buyer Indemnitee
under this Section 6.3 for any Liability to the extent attributable to the gross
negligence or willful misconduct of, or the falsity or inaccuracy of any
material fact contained in any representation or warranty of such Buyer
Indemnitee. Liabilities arising out of, resulting from or relating to any
matters described in Section 6.3(a) and not excluded from indemnification
pursuant to this Section 6.3(b) are hereinafter referred to as "INDEMNIFIED
BUYER LIABILITIES."
SECTION 6.4 Indemnified Buyer Liabilities Covered by Insurance. In the
case of any Indemnified Buyer Liability to be indemnified by Seller hereunder
which is covered by a policy of insurance, the Buyer Indemnitee to be
indemnified shall cooperate with the insurers in the exercise of their rights to
investigate, defend, or compromise such Indemnified Buyer Liability as may be
required to retain the benefits of such insurance with respect to such
Indemnified Buyer Liability. Neither any failure to cooperate that does not
cause any material damage to Seller, nor any cooperation shall have any effect
whatsoever on the obligations of Seller to indemnify such Buyer Indemnitee.
SECTION 6.5 Control of Litigation. Any Buyer Indemnitee shall promptly
notify Seller of the commencement of any action, suit, or proceeding with
respect to an Indemnified Buyer Liability or the assertion of any Indemnified
Buyer Liability, in each case as to which indemnification is sought; PROVIDED,
that the failure to provide such notice shall not release Seller from any of its
obligations to indemnify hereunder to the extent that such failure does not
materially prejudice the rights of Seller in its ability to defend such
Indemnified Buyer Liability. Seller shall, at its own expense, assume or cause
to be assumed the defense of any such Indemnified Buyer Liability within thirty
(30) days after the affected Buyer Indemnitee shall have notified Seller
thereof. Such Buyer Indemnitee, upon reasonable notice by Seller or the Person
assuming the defense shall consult from time to time with respect to such
Indemnified Buyer Liability and provide Seller or the Person assuming the
defense with any documents or other items or access to any witness which Seller
or the Person assuming the defense deems in its reasonable judgment to be
necessary in connection with the defense of such Indemnified Buyer Liability,
and Seller shall pay or reimburse or cause to be paid or reimbursed, any
reasonable out-of-pocket costs therefor. Such Buyer Indemnitee may participate
in the defense of any such Indemnified Buyer Liability and employ separate
counsel, at its own expense, unless such Buyer Indemnitee shall have reasonably
determined that counsel selected by Seller or such Person has a conflict of
interest because of the
-11-
<PAGE>
availability of different or additional defenses to such Buyer Indemnitee, in
which case Seller shall pay or cause to be paid the costs and expenses of
counsel employed by the Buyer. Seller and its insurers may, in their sole
discretion, defend, settle, or compromise any such action, suit or proceeding;
PROVIDED, that Seller and its insurers shall be liable in respect of all
Indemnified Buyer Liabilities relating thereto (whether by payment of any
judgment, settlement, amount or indemnity hereunder) and no settlement or
compromise shall be entered into unless such Buyer Indemnitee is fully released
or discharged from all such Indemnified Buyer Liabilities. Participation by any
such Buyer Indemnitee in any such action, suit, or claim shall not constitute a
waiver of the indemnification provided in this Article VI. Nothing contained in
this Section 6.5 shall be deemed to require the Buyer Indemnitee to contest any
Indemnified Buyer Liability or to assume responsibility for or control of any
judicial proceeding with respect thereto.
SECTION 6.6 Settlements. No Buyer Indemnitee shall enter into a
settlement or other compromise with respect to any Indemnified Buyer Liability
without the prior written consent of Seller, which consent shall not be
unreasonably withheld, unless the Buyer Indemnitee waives its right to be
indemnified with respect to such Indemnified Buyer Liability under this Article
VI.
SECTION 6.7 Subrogation, Etc. To the extent that an Indemnified Buyer
Liability to be indemnified by Seller under this Article VI is in fact paid by
Seller or any other Person, Seller or such Person shall be subrogated to the
extent of such payment to the rights and remedies of the Buyer Indemnitee with
respect to the transaction, event, or matter giving rise to such Indemnified
Buyer Liability. Should the Buyer Indemnitee receive any refund, in whole or in
part, with respect to any Indemnified Buyer Liability paid by Seller or such
Person hereunder, it shall promptly pay over the amount refunded, together with
any interest received with respect to such amount, to Seller or such Person.
SECTION 6.8 Netting of Recoveries. In determining the amount of any
indemnification or other recovery available to any Buyer Indemnitee under this
Article VI, with respect to any specific claim, such amount shall be reduced by
any other amount the Buyer Indemnitee has recovered with respect to such claim.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 Amendments, Etc. No amendment, modification, or waiver of
any provision of this Agreement, or consent to any departure from the terms of
this Agreement by any party hereto shall be effective unless the same shall be
in writing and signed by all the parties hereto, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
-12-
<PAGE>
SECTION 7.2 Notices, Etc. All notices, requests, claims, demands, and
other communications provided for or permitted hereunder shall be in writing
(including telecopy communication) and telecopied, mailed (registered, airmail
postage and charges prepaid), or delivered personally to the address or telecopy
number set forth below or at such other address or telecopy number as shall be
designated by a party in a written notice to the other parties. All such notices
and communications shall, when mailed or telecopied, be effective when received
at the relevant address. Telecopied communications must be followed by a hard
copy of such telecopied communication sent by first class mail, postage and
charges prepaid.
To Buyer or Restaurant Ventures of Nevada, Inc. (under the Agreement
Regarding Lease):
Mirage Resorts, Incorporated
3400 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Telecopier: (702) 792-7628
Attention: Mr. Daniel R. Lee
Chief Financial Officer and
Treasurer
with a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 500
Los Angeles, California 90067
Telecopier: (310) 203-7199
Attention: C. Kevin McGeehan, Esq.
To Seller:
Country Star Restaurants, Inc.
4929 Wilshire Boulevard, Suite 428
Los Angeles, California 90010
Telecopier: (213) 634-5580
Attention: Mr. Dan Rubin
Chief Executive Officer
with a copy to:
Meyer & Associates
1875 Century Park East, Suite 600
Los Angeles, California 90067
Telecopier: (310) 551-2045
Attention: Jeffrey P. Meyer, Esq.
-13-
<PAGE>
SECTION 7.3 No Waiver; Remedies. No failure on the part of any party
hereto to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 7.4 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that none of the parties shall have the right to assign its
respective rights or obligations hereunder or any interest herein without the
prior written consent of the non-assigning parties.
SECTION 7.5 Severability. Each provision of this Agreement is intended
to be severable, and, if any term or provision of this Agreement is determined
to be illegal or invalid for any reason whatsoever, such illegality or
invalidity shall not affect the validity or legality of the remainder of this
Agreement.
SECTION 7.6 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original and, when taken together, shall
constitute one agreement.
SECTION 7.7 Consent to Jurisdiction. Seller and the Buyer each (i)
irrevocably submits to the jurisdiction of any Nevada state court sitting in Las
Vegas or the United States District Court for the District of Nevada in any
action arising out of this Agreement, (ii) agrees that all claims in such action
may be decided in such court, (iii) waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum, and (iv) consents to
the service of process by mail. Nothing herein shall affect the right of any
party to serve legal process in any manner permitted by law or shall affect its
right to bring any action in any other court.
SECTION 7.8 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Nevada, regardless of the
law that might otherwise govern under applicable principles of conflict of laws
thereof.
SECTION 7.9 Headings. The various Article, Section, and Paragraph
headings in this Agreement are included herein for convenience of reference
only, do not constitute a part of this Agreement for any other purpose, and
shall not be considered in interpreting this Agreement.
-14-
<PAGE>
SECTION 7.10 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY OTHERWISE HAVE TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 7.11 Entire Agreement. This Agreement, including the Exhibits
and Schedules hereto, embody the entire agreement and understanding of the
parties hereto in respect of the subject matter hereof and supersede all prior
agreements, representations, warranties and understandings between or among the
parties with respect to such subject matter.
SECTION 7.12 Additional Documents and Acts. Each party agrees to
execute and deliver, from time to time, such additional documents and
instruments and to perform such additional acts as may be necessary or
appropriate to effectuate, carry out, and perform all of the terms, provisions,
and conditions of this Agreement and the transactions contemplated hereby.
(SIGNATURES ON FOLLOWING PAGE)
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed effective as of the date first above written.
MIRAGE RESORTS, INCORPORATED,
A NEVADA CORPORATION
By: DANIEL R. LEE
---------------------------------
Name: Daniel R. Lee
Title: Chief Financial Officer
and Treasurer
COUNTRY STAR RESTAURANTS, INC.,
A DELAWARE CORPORATION
By: DAN RUBIN
---------------------------------
Name: Dan Rubin
Title: Chief Executive Officer
-16-
<PAGE>
EXHIBIT A
ACCOUNTS PAYABLE SCHEDULE
-17-
<PAGE>
EXHIBIT B
BALANCE SHEET
-18-
<PAGE>
AGREEMENT
This Agreement (the "Agreement") is made and entered into as of
December 30, 1997 by and between Restaurant Ventures of Nevada, Inc., a Nevada
corporation ("Landlord") and Country Star Restaurants, Inc., a Delaware
corporation ("Tenant") based on the following facts and circumstances:
A. Landlord owns the "Land" as designated as the crosshatched areas and
improvements located thereon (collectively the "Property") as shown as Exhibit A
to that certain Amended and Restated Lease Agreement dated effective February
22, 1995, a copy of which is attached hereto as Exhibit 1 (the "Prior Lease").
The Prior Lease will be cancelled and terminated immediately prior to the
Effective Date of the New Lease. The Effective Date is hereby defined to be the
first business day after one of the following has occurred: (1) the involuntary
chapter 11 case commenced with regard to Country Star Las Vegas, LLC in the
United States Bankruptcy Court for the Central District of California (the
"Case") has been dismissed; (2) an order authorizing the rejection of the "Prior
Lease" has been entered in the Case and such rejection has become effective; or
(3) an order authorizing the parties hereto to terminate the Prior Lease and
enter into a new lease of the Property on substantially the terms set forth
herein has been entered in the Case.
B. Landlord desires to let to Tenant and Tenant desires to let from
Landlord the Property on the terms to be provided in the "New Lease" to be
executed by Landlord and Tenant prior to the Effective Date which shall include
the terms referenced herein and such other terms as are incorporated by
reference from the Prior Lease to the extent provided for herein.
C. The parties desire that the employees employed by "CSLV" (as
hereinafter defined) become effective January 5, 1998 the employees of the
Tenant and that between the execution hereof and the Effective Date, the
Property be operated by Tenant under a management arrangement.
Based on the foregoing facts and circumstances, and for good and
valuable consideration, the parties hereby agree as follows:
1. NEW LEASE.
The Prior Lease shall be terminated and a "New
Lease" shall be executed by Landlord and Tenant prior to the Effective Date
which will include the provisions of the Prior Lease modified to reflect the
fact that the improvements to be constructed have now been completed to the
satisfaction of Tenant and that the New Lease is for the duration as set forth
herein with no renewal options and that the personal property located on the
Property as of the Effective Date will, to the
-1-
<PAGE>
extent owned by Landlord be leased to Tenant, together with all real property
within the definition of Property on an absolutely AS-IS, where is, basis. In
addition, the following shall be included in the New Lease:
(A) Section 4(a), 4(b), 4(c), 4(d), and 4(e)
of the Prior Lease shall not be included in the New Lease and in their place the
following shall be substituted: Base Rent shall be one-half of positive Cash
Flow calculated on a monthly basis. Base Rent shall be paid within 10 days of
each calendar month's end. As used in this Agreement, "Cash Flow" shall mean (i)
"Gross Receipts" of Tenant as defined in the Prior Lease, less only (a)
operating expenses of Tenant (prior to deducting Base Rent payable to Landlord
hereunder) and (b) cost of goods sold by Tenant at the Property. Tenant's
operating expenses shall not include any amount with respect to any services or
facilities provided to Tenant, directly or indirectly, or any amount payable to
any employee, officer, director or consultant of Tenant or any of its affiliates
except for employees at the level of general manager or below and who are
located on a full time basis in Las Vegas for the business conducted on the
Property (other than 1/2 of an accounts payable employee, 1/2 of a payroll
employee, and 1/2 of Layne Wooten's salaries and other customary employee
related expenses which shall be Operating Expenses even if they are less than
full time and not located in Las Vegas). In the event that any month's Cash Flow
is a negative number, Landlord shall have no liability with respect to any such
amount nor shall such loss be used to offset positive Cash Flow in any other
month. Landlord is hereby granted the right from time to time to inspect the
books and records of Tenant to determine compliance with the terms of this
Agreement. Tenant shall make such books and records available to Landlord or its
representatives on (2) business days notice. The inability of the Tenant
pursuant to the Lease to deduct amounts from the Base Rent shall not relieve the
Tenant from any obligation to pay any such amounts.
(B) Notwithstanding any other provision of the
New Lease (or the Prior Lease) to the contrary, the New Lease will provide that
the New Lease shall terminate automatically and without further action on
September 30, 1998, unless, prior to such date, Landlord and Tenant mutually
agree in writing to extend the New Lease on a month-to-month basis thereafter.
In the event that Landlord and Tenant agree to such a month-to-month extension,
any such tenancy may be terminated by Landlord or by Tenant upon thirty (30)
days prior written notice to the other. Except as expressly set forth in this
Section, neither Tenant nor anyone claiming through Tenant or any of its
affiliates shall have any right to occupy any portion of the Property. The
provisions of Section 1(a) of the Prior Lease relating to the term and Section 2
of the Prior Lease shall not be included in the New Lease.
-2-
<PAGE>
(C) At the termination of the New Lease for
reasons other than a default by the Tenant, the Tenant may, and shall at
Landlord request, remove (i) the "Country Star" signage, (ii) supplies which
bear the "Country Star" name or logo, and (iii) tables which have "Country Star"
logo tops. The Tenant will not remove any other items and will leave in place
all furniture, furnishings, fixtures, all of the inventory (whether any of the
inventory of Tenant is in any way unique), and equipment not described in the
foregoing sentence. Without limiting the foregoing, on behalf of itself or
others who own such items, Tenant may remove the country music memorabilia and
display cases containing such memorabilia from the Property; provided, however,
that Tenant shall immediately upon such removal return such memorabilia and
display cases to their lawful owners and indemnify and hold harmless CSLV and
Landlord against any claims relating thereto and, at Tenant's expense, repair
any damage done in removing such display cases. Tenant shall be given sixty (60)
days prior notice to remove the items in this Section 1(c).
(D) The security deposit posted by the tenant
under the Prior Lease shall not be applied against any liability under the Prior
Lease but shall be transferred and applied as a security deposit under the New
Lease.
2. INTERIM MANAGEMENT.
Concurrent with this Agreement, Landlord has
acquired all of the ownership interest of Country Star Las Vegas, LLC ("CSLV");
accordingly, subject to the modifications set forth hereinbelow in this Section,
Landlord and Tenant agree to have Tenant continue to perform its obligations as
the "Manager" pursuant to the terms of that certain Restaurant Management
Agreement between Tenant and CSLV (the "Restaurant Management Agreement"), a
copy of which is attached hereto as Exhibit "B." Except as modified by this
Agreement, Tenant agrees to perform all of its duties and obligations pursuant
to the Restaurant Management Agreement. Tenant hereby agrees to the following
modifications to the Restaurant Management Agreement: (i) all of the fees or any
other amounts owing to Tenant pursuant to the Restaurant Management Agreement be
and they hereby are released, (ii) from and after the date of this Agreement,
the Tenant shall perform the duties of the Manager pursuant to the Restaurant
Management Agreement without fee or other consideration and (iii) the Restaurant
Management Agreement shall terminate upon effectiveness of the Lease between
Landlord and Tenant. In any event the Restaurant Management Agreement shall
terminate no later than September 30, 1998.
3. EMPLOYEES.
Effective January 5, 1998 Tenant agrees to
employ all employees employed as of the date hereof by CSLV in
-3-
<PAGE>
the operation of the business conducted on the Property and Tenant shall be
responsible for and shall indemnify, defend and hold CSLV and Landlord harmless
from any claims by any such employees including without limitation accrued
vacation pay and any termination benefits or expenses. Tenant shall pay or shall
cause such employees to be paid through January 4, 1998.
4. INSURANCE.
As soon as is reasonably possible after the
execution hereof, Tenant will insure the Property in a manner equivalent to the
requirements of the Prior Lease.
5. FURTHER ASSURANCES.
Each party agrees to execute any additional
documents, and to cooperate in good faith by taking any necessary additional
actions, to fulfill the contemplated transactions. However, no memorandum or
other document evidencing the New Lease or management arrangements referenced
herein shall be recorded on the land records. Tenant agrees to execute and
acknowledge a termination of any existing memorandum or other recorded
documentation regarding the Prior Lease.
6. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement together with that certain
Agreement and Release of even date herewith, and that certain LLC Interest
Purchase Agreement of even date herewith constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings or negotiations, oral or
written. It may not be amended or waived except by a writing signed by each of
the parties hereto.
7. GOVERNING LAW.
This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada.
8. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and insure
to the benefit of the parties and their respective successors
and assigns.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above set forth.
"Tenant"
COUNTRY STAR RESTAURANTS, INC., a
Delaware corporation
By: /s/ DAN RUBIN
---------------------------------
Daniel Rubin
Its: CEO
---------------------------------
"Landlord"
Restaurant Ventures of Nevada, Inc.,
a Nevada corporation
By Mirage Resorts, Incorporated,
a Nevada corporation
Its authorized agent
By: /s/ DANIEL LEE
---------------------------------
Daniel Lee
Its Chief Financial Officer
-5-
