Country Star Restaurants, Inc. Announces Financial Restructuring And Termination of
Letter of Intent with Coventry Industries Corp.
PR Newswire - February 25, 1998 18:11
CAFED COVN %RST %RCN V%PRN P%PRN
LOS ANGELES, Feb. 25 /PRNewswire/ -- Country Star Restaurants, Inc.
(Nasdaq: CAFED) (the "Company"), a Delaware corporation, has reached an
agreement to restructure approximately $2,950,000 of its long term debt. The
holder of this debt has accepted in full payment of its debt total
consideration consisting of a cash payment or $1,300,000 and 670,000 shares of
the Company's Common Stock.
Dan Rubin, Chief Executive Officer and President of the Company, stated
that the debt reduction will substantially improve the Company's balance sheet
and position the Company more favorably for its future plans. The Company
will realize in the first quarter of 1998 a one-time extraordinary gain of
approximately $1.5 million because of the financial restructuring.
The Company also has ceased negotiations regarding the acquisition of a
controlling interest of the Company by Coventry Industries Corp.
(Nasdaq: COVN).
Cameron Capital, Ltd. ("Cameron"), an institutional investor, had
originally held $4,000,000 of convertible long term debt due on
October 9, 1999 and bearing interest at the rate of seven percent (7%) per
annum. Cameron had converted approximately $1,050,000 principal amount of the
debt into Common Stock of the Company, leaving a balance due of approximately
$2,950,000. A dispute between the Company and Cameron had arisen regarding
the proper use of the proceeds realized by the Company from the agreements
dated December 30, 1997, it had entered into regarding the modification of the
lease of its Las Vegas facility. Cameron contended that the Company was
obligated to use the proceeds to prepay its debt; the Company believed that
the proceeds were needed for working capital and the repayment of other debt.
Cameron had commenced legal action against the Company on February 13, 1998 in
United States District Court for the Northern District of Illinois in which it
sought recovery of the full $1,550,000 received by the Company in connection
with the lease modification. Cameron had obtained a temporary restraining
order which prohibited the Company from using any of the proceeds of the lease
modification until the dispute could be resolved. The Company and Cameron
agreed to settle Cameron's legal action in order to avoid the uncertainty of
litigation and the expense of proceeding through discovery and trial.
Under the terms of the Settlement Agreement dated
February 18, 1998 (the "Settlement Agreement"), Cameron agreed to dismiss its
legal action against the Company and to accept as a full settlement of its
long term debt aggregate consideration consisting of a cash payment of
$1,300,000 payable at closing and the issuance of 670,000 shares of the
Company's Common Stock, par value $.Ol per share. Cameron does not have any
registration rights with respect to the Common Stock but is eligible to resell
certain amounts immediately pursuant to the provisions of Rule 144 under the
Securities Act of 1933, as amended. The Settlement Agreement provides for
mutual releases of all claims held by the Company against Cameron and by
Cameron against the Company and Dan Rubin, its Chief Executive Officer and
President.
The Company was able to fund the cash payment of the Agreement with
Cameron with the proceeds it received from a $1,300,000 line of credit loan to
the Company made by a private investor (the "Lender"). This sum was lent to
the Company pursuant to the terms and conditions of the Loan and Security
Agreement dated February 12, 1997 between the Company, Cameron and various
lenders. This loan is due on October 9, 1999 and bears interest at the rate
of prime plus four percent (4%). The Lender also received warrants to acquire
43,333 shares of the Company's Common Stock at an exercise price of $6.25 per
share. Any portion or all of the principal amount of the line of credit
advance made by Lender outstanding may be converted into Common Stock of the
Company.
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) $13.30, 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 conversion formula is subject to adjustment in the event
of stock splits, stock dividends, mergers, consolidations, or similar
transactions. The Loan and Security Agreement was also amended to provide for
immediate repayment of the loan in the event of any change in control of the
Company.
Country Star owns and operates two Country Star American Music Grills: in
Hollywood, at the entrance to Universal Studios; and in Las Vegas on the
famous "Strip" at Harmon Avenue.
Any statements that are not historical facts contained in this Press
Release 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.
SOURCE Country Star Restaurants, Inc.
/CONTACT: Robert L. Davidson, Secretary of Country Star Restaurants,
212-545-4720/
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