Loan Agreement - Rascals International Inc., Rodmar Holdings LLC and Marod Holdings LLC
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made and entered into as of
November 6, 2002 by and between RASCALS INTERNATIONAL INC. (Borrower) with
its office at 136 Freeway Drive East, East Orange, NJ and RODMAR HOLDINGS LLC
and MAROD HOLDINGS LLC (Lenders), with their offices at 136 Freeway Drive East,
East Orange, NJ.
SECTION 1. THE LOAN
1.1.1 THE TERM LOAN.
Lenders have during the past two months loaned to Borrower the sum of
$466,170.00 in several disbursements (the "Term Loan"). The Term Loan shall
be evidenced by a promissory note (the "Note"), which shall provide for
monthly installment payments during 2003 and payment in full on or before
December 31, 2003.
1.1.2 OTHER LOANS.
Upon request, Lenders may extend from time to time, subject to the terms
of this Agreement and the terms of the relevant Note or Notes ("additional
Note or Notes"), additional facilities in the amount of any obligations of
Borrower that Lenders pay or satisfy.
1.2 TERMINOLOGY.
As used herein the word "Loan" shall mean, collectively, all the credit
facilities described above.
As used herein the word "Note" shall mean, collectively, all the
promissory notes described above.
As used herein, the words "Loan Documents" shall mean all documents
executed in connection with this Agreement.
As used herein, the term "HUB" shall mean Hudson United Bank, a New Jersey
Corporation, and any successors to the interest of same.
As used herein the term "HUB Agreement" shall mean the Mortgage Agreement
between the Borrower and HUB, and any documents executed and delivered
pursuant thereto.
1.3 SECURITY.
Simultaneous with the execution of this Loan Agreement, Borrower shall
execute a pledge agreement, and a financing statement, suitable for filing in
the office of the Secretary of State of the State of New Jersey and any other
state designated by Lenders, granting to Lenders a first priority security
interest, except the security interest created by the HUB Agreement (the "HUB
Lien"), in such of Borrower's property, as is described in said security
agreement. Exceptions to Lender's first priority, if any, are permitted only
as otherwise provided in this Agreement.
1.4 CONTROLLING DOCUMENT.
In the event of any inconsistency between the terms of this Agreement and
any Note or any of the other Loan Documents, the terms of such Note or other
Loan Documents will prevail over the terms of this Agreement.
SECTION 2. CONDITIONS PRECEDENT
Lenders shall not be obligated to disburse all or any portion of the
proceeds of the Loan unless at or prior to the time for the making of such
disbursement, the following conditions have been fulfilled to Lenders'
satisfaction.
2.1 BORROWING RESOLUTION.
Borrower shall have provided Lenders with certified copies of resolutions
duly adopted by the Board of Directors of Borrower, authorizing this Agreement
and the Loan Documents. Such resolutions shall also designate the persons who
are authorized to act on Borrower's behalf in connection with this Agreement
and to do the things required of Borrower pursuant to this Agreement.
2.2 CONTINUING COMPLIANCE.
At the time any disbursement is to be made, there shall not exist any
event, condition or act which constitutes an event of default under Section
6 hereof or any event, condition or act which with notice, lapse of time or
both would constitute such event of default; nor shall there be any such event
condition, or act immediately after the disbursement were it to be made.
2.3 SALE OF STOCK
Borrower agrees to sell and Lenders agree to purchase 15,000,000 shares
of the common stock of Borrower for $15,000. Payment shall be effected by
reduction of the principal amount of the Notes. Said stock shall be
unregistered under the Securities Act of 1933 (the "Act") and shall be
"restricted" stock within the meaning of Rule 144. Lenders acknowledge that
they are acquiring such shares solely with a view to investment for their own
account and not with a view to the resale or distribution of all or any part
thereof, and that Lenders will not dispose of any of such shares otherwise
than in accordance with the provisions of Rule 144 under the Act unless and
until either the distribution of such shares is registered under the Act or
the Borrower is satisfied that an exemption from such registration is
available.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
3.1 AUTHORITY TO BORROW.
The execution, delivery and performance of this Agreement, the Note and
all other agreements and instruments required by Lenders in connection with
the Loan are not in contravention of any of the terms of any indenture,
agreement or undertaking to which Borrower is a party or by which it or any
of its property is bound or affected.
3.2 FINANCIAL STATEMENTS.
The financial statements of Borrower, including both a balance sheet at
December 31, 2001, together with supporting schedules, and an income statement
for the twelve (12) months ended December 31, 2001, as well as Borrower's 3rd
quarter form 10QSBfilings have heretofore been furnished to Lenders, and are
true and complete and fairly represent the financial condition of Borrower
during the period covered thereby. Since September 30, 2002, there has been
no material adverse change in the financial condition or operations of
Borrower.
3.3 LITIGATION.
There is no litigation or proceeding pending or threatened against
Borrower or any of its property which is reasonably likely to affect the
financial condition, property or business of Borrower in a materially
adverse manner or result in liability in excess of Borrower's insurance
coverage.
3.4 DEFAULT.
Borrower is not now in default in the payment of any of its material
obligations, and there exists no event, condition or act which constitutes an
event of default under Section 6 hereof and no condition, event or act which
with notice or lapse of time, or both, would constitute an event of default.
3.5 COMPLIANCE WITH LAWS.
Borrower is not in violation with respect to any applicable laws, rules,
ordinances or regulations that materially affect the operations or financial
condition of Borrower.
3.6 CONTINUING REPRESENTATIONS.
These representations shall be considered to have been made again at and
as of the date of each disbursement of the Loan and shall be true and correct
as of such date or dates.
SECTION 4. AFFIRMATIVE COVENANTS
Until the Note and additional Notes and all sums payable pursuant to this
Agreement or any other of the Loan Documents have been paid in full, unless
Lenders waive compliance in writing, Borrower agrees that:
4.1 INSURANCE.
Borrower will keep all of its insurable property, real, personal or mixed,
insured by companies and in amounts approved by Lenders against fire and such
other risks, and in such amounts, as is customarily obtained by companies
conducting similar business with respect to like properties. Borrower will
furnish to Lenders statements of its insurance coverage, will promptly furnish
Lenders other or additional insurance deemed necessary by and upon request
of Lenders to the extent that such insurance may be available and hereby
assigns to Lenders, as security for Borrower's obligations to Lenders, the
proceeds of any such insurance. Lenders will be named loss payee on all
policies insuring collateral. Borrower will maintain adequate worker's
compensation insurance and adequate insurance against liability for damage to
persons or property. All policies shall require at least thirty (30) days'
written notice to Lenders before any policy may be altered or cancelled.
4.2 ADDITIONAL REQUIREMENTS.
Borrower will promptly, upon demand by Lenders, take such further action
and execute all such additional documents and instruments in connection
with this Agreement as Lenders in their reasonable discretion deem necessary,
and promptly supply Lenders with such other information concerning its affairs
as Lenders may request from time to time.
SECTION 5. NEGATIVE COVENANTS
Until the Note and all other sums payable pursuant to this Agreement or
any other of the Loan Documents have been paid in full, unless Lenders waives
compliance in writing, Borrower agrees that:
5.1 ENCUMBRANCES AND LIENS.
Except for the HUB Lien and those already disclosed on its fiscal year
end 12/31/01 financial statement, and its interim financial statements of
9/30/02 Borrower will not create, assume or suffer to exist any mortgage,
pledge, security interest, encumbrance, or lien (other than for taxes not
delinquent and for taxes and other items being contested in good faith) on
property of any kind, whether real, personal or mixed, now owned or hereafter
acquired, or upon the income or profits thereof, except to Lenders and except
for minor encumbrances and easements on real property which do not affect its
market value, and except for existing liens on Borrower's personal property
and future purchase money security interests encumbering only the personal
property purchased.
5.2 BORROWINGS.
Borrower will not sell, discount or otherwise transfer any account
receivable or any note, draft or other evidence of indebtedness, except to
Lenders or except to a financial institution at face value for deposit or
collection purposes only and without any fee other than fees normally charged
by the financial institution for deposit or collection services. Borrower
will not borrow any money, become contingently liable to borrow money, nor
enter any agreement to directly or indirectly obtain borrowed money, except
pursuant to agreements made with Lenders.
5.3 SALE OF ASSETS, LIQUIDATION OR MERGER.
Borrower will neither liquidate nor dissolve nor enter into any
consolidation, merger, partnership or other combinations, nor convey, nor sell,
nor lease all or the greater part of its assets or business, nor purchase or
lease all or the greater part of the assets or business of another, without
prior written consent from Lenders.
5.4 LOANS, ADVANCES AND GUARANTIES.
Borrower will not, except in the ordinary course of business as currently
conducted, make any loans or advances, become a guarantor or surety, pledge
its credit or properties in any manner or extend credit.
5.5 PAYMENT OF DIVIDENDS.
Borrower will not declare or pay any dividends, other than a dividend
payable in its own common Stock, or authorize or make any other distribution
with respect to any of its stock now or hereafter outstanding.
5.6 RETIREMENT OF STOCK.
Borrower will not acquire or retire any share of its capital stock for
value.
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the following events ("Events of Default")
shall terminate any obligation on the part of Lenders to make or continue the
Loan and automatically, unless otherwise provided under the relevant Note,
shall make all sums of interest and principal and any other amounts owing
under the Loan immediately due and payable, without notice of default,
presentment or demand for payment, protest or notice of nonpayment or
dishonor, or any other notices or demands:
6.1 Borrower shall default in the due and punctual payment of the principal
of or the interest on any one or more of the Notes; or
6.2 Any default shall occur under any one or more of the Notes; or
6.3 Borrower shall default in the due performance or observance of any
covenant or condition of the Loan Documents; or
6.4 The occurrence of any event which permits the acceleration of the
maturity of any material indebtedness owing by borrower to any third party,
under any agreement or undertaking, including but not limited to the HUB
agreement.
SECTION 7. SHAREHOLDER'S APPROVAL
In the event of default under Section 6 hereof the Borrower shall
promptly obtain the approval of its shareholders for the Loan. Provided that
Borrower obtains such shareholder approval for the Loan within 45 days of the
default under Section 6 hereof (unless the shareholder material is reviewed
by the Securities and Exchange Commission, in which case the period of review
will be added to the 45 days):
7.1 the Lenders shall take no action to enforce the Note or additional Notes
unless or until (a) any creditor of Borrower takes action against Borrower
which would jeopardize Lenders' first priority security interest; or (b) the
HUB lien has been released, modified or waived such that enforcement by the
Lenders would not constitute a predicate for legal action by HUB; and
7.2 if the Lenders become entitled to take action to enforce the Note or
additional Notes pursuant to Section 7.1 hereof Lenders, at their option may,
in addition to all the remedies available to them under the Loan Documents,
purchase all or a portion of the shares of Borrower's subsidiaries set out in
Schedule 1 of the Pledge Agreement by applying the principal and interest due
on the Notes and alternative Notes to the purchase price based on the fair
market value of the subsidiaries determined in accordance with Section 7.3
hereof.
7.3 "Fair Market Value" equals the sum of 2/3 of the results of Formula 1
and 1/3 of the results of Formula 2 calculated as follows:
a) as to the shares of Rascals Comedy Club Stage Door Grill, Inc.
Formula 1: quarterly net income plus depreciation times 10
Formula 2: 1.25 times quarterly revenue
b) as to the shares of D.E.M. Amusement, Inc
Formula 1: quarterly net income plus depreciation times 1/2 times a
fraction, the numerator is the number of months before the club in West
Orange closes and the denominator is 12
Formula 2: .125 times revenue times a fraction, the numerator is the
number of months before the club in West Orange closes and the
denominator is 12.
In making the forgoing calculations, quarterly net income and revenue will
be determined by reference to the Borrower's internal financial statements for
the fiscal quarter completed immediately prior to the date of purchase.
SECTION 8. MISCELLANEOUS PROVISIONS
8.1 ADDITIONAL REMEDIES.
The rights, power and remedies given to Lenders hereunder shall be
cumulative and not alternative and shall be in addition to all rights, powers
and remedies given to Lenders by law against Borrower or any other person,
including but not limited to Lenders's rights of setoff .
8.2 NONWAIVER.
Any forbearance or failure or delay by Lenders in exercising any right,
power or remedy hereunder shall not be deemed a waiver thereof and any single
or partial exercise of any right, power or remedy shall not preclude the
further exercise thereof. No waiver shall be effective unless it is in
writing and signed by an officer of Lenders.
8.3 INUREMENT.
The benefits of this Agreement shall inure to the successor and assigns
of Lenders and the permitted successors and assignees of Borrower, and any
assignment of Borrower without Lenders's consent shall be null and void.
8.4 APPLICABLE LAW.
The validity and enforceability of this Agreement, the construction of
its terms, and the interpretation of the rights and duties of the parties
shall be governed by the laws of the State of New Jersey without reference
to any conflict of law principles that would tend to preclude application of
the substantive law of the state of New Jersey. Any and all actions filed by
the parties hereto arising out of this agreement must be brought exclusively
in any State or Federal court located in the state of New Jersey and the
parties waive any objection to venue or forum non conveniens of any action
so filled.
8.5 SEVERABILITY.
Should any one or more provisions of this Agreement be determined to be
illegal or unenforceable, all other provisions nevertheless shall be effective.
8.6 INTEGRATION CLAUSE.
Except for documents and instruments specifically referenced herein, this
Agreement constitutes the entire agreement between Lenders and Borrower
regarding the Loan and all prior communications verbal or written between
Borrower and Lenders shall be of no further effect or evidentiary value.
8.7 CONSTRUCTION.
The section and subsection headings herein are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
8.8 AMENDMENTS.
This Agreement may be amended only in writing signed by all parties
hereto.
8.9 COUNTERPARTS.
Borrower and Lenders may execute one or more counterparts to this
Agreement, each of which shall be deemed an original.
SECTION 9. SERVICE OF NOTICES
9.1 Any notices or other communications provided for or allowed hereunder
shall be effective only when given by one of the following methods and
addressed to the respective party at its address given at the beginning of
this Agreement and shall be considered to have been validly given: (a) upon
delivery, if delivered personally; (b) upon receipt, if mailed, first class
postage prepaid, with the United States Postal Service; (c) on the next
business day, if sent by overnight courier service of recognized standing; and
(d) upon telephoned confirmation of receipt, if telecopied.
9.2 The addresses to which notices or demands are to be given may be changed
from time to time by notice delivered as provided above.
THIS AGREEMENT is executed on behalf of the parties by duly authorized
officers as of the date first above written.
RODMAR HOLDINGS LLC (Lender)
By:
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Name: Eduardo Rodriguez
Title: Manager
MAROD HOLDINGS LLC (Lender)
By:
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Name: Michael Margolies
Title: Manager
RASCALS INTERNATIONAL, INC. (Borrower)
By:
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Name: Eduardo Rodriquez
Title: President