Exhibit 10.29
AGU TERM SHEET
TRANSACTION: Convertible, secured Loan with Warrants
BORROWER: AGU Entertainment Corp., a Delaware corporation
LENDER: Xxxxxxxx Entertainment Company, a Delaware LLC
LOAN AMOUNT: $3,000,000.00 to be funded on or before December 15, 2004, subject
to the provisions of the paragraph below entitled, "Security." All agreements
respecting the Loan shall be evidenced by a Securities Purchase Agreement,
providing for the purchase of the note, warrant and common stock issuable upon
conversion/exercise.
SECURITY: The Loan shall be securitized by a mortgage (subordinate only to the
existing first mortgage of approximately $7,000,000.00) on Xxxxxxxx's real
property located on the South side of Oakland Park Boulevard between 31st Avenue
and Somerset Drive in Lauderdale Lakes, Florida (the "Property"). The Property
consists of approximately 22.6 acres of land and an existing 162,000 square foot
building. The Loan shall also be secured by Xxxxxxxx's existing right of first
refusal to acquire two additional parcels of land located adjacent to the
Property. Borrower will provide an ALTA lenders title policy. It is understood
that, as of the date hereof, Xxxxxxxx has not acquired the Property; however,
Borrower is under contract to acquire the Property for a purchase price of
approximately $8,500,000, of which the Borrower has paid $850,000 to date in the
form of 250,000 shares of common stock (valued at $3.00 per share) and $100,000
in cash, and warrants that no default exists by any party under said contract.
Copies of all documentation with respect to such acquisition shall be delivered
to Lender, together with all other documents to be delivered pursuant to the
paragraph entitled, "Due Diligence." It is further understood that the Loan
shall be subject to and concurrent with the successful closing of the Property
prior to December 31, 2004. With the exception of all trucks acquired under the
asset purchase of Lights, Cable and Heavy Stuff, Inc., the loan will
additionally be collateralized by the security interest in Xxxxxxxx's personal
property, subject to security interests existing on the date of the loan.
LOAN TERM: Two years; provided, however, if the last calendar quarter EBITDA
(determined by GAAP, consistently applied) prior to the maturity of the Loan
Term shall not have at least equaled $5,000,000.00, Lender shall have the
on-going right, on a quarterly basis, to either call, convert or extend the Term
of the Loan until EBITDA shall at least equal $5,000,000.00 for any subsequent
calendar quarter.
EARLY CALL DATE: In the event Borrower's cash flow shall not at least equal
break-even (i.e. operating cash flow at least equals operating expenses) for the
calendar year of 2005, Lender shall have the right to call for full repayment of
the Loan, together with all accrued but unpaid interest thereon, upon 60 days
prior written notice to Borrower.
INTEREST RATE: 10% per annum, payable in monthly installments of interest
only.
FINDER'S FEE: Two points (i.e. $60,000.00) payable to Palmetto Services,
Inc., an affiliate of Lender, for finding the Loan.
LOAN EXPENSE: Xxxxxxxx shall reimburse Lender for all out-of-pocket expenses in
connection with the Loan transaction, including, without limitation, legal fees,
due diligence expenses, surveys, engineering reports and a Lender's ALTA Tile
Insurance Policy, whether or not the Loan is funded. Upon commencement of
drafting the definitive documents, Xxxxxxxx shall advance to Lender $25,000, to
cover a portion of such expenses.
INFORMATION: All financial and other information affecting Borrower as set forth
in the Loan Documents shall be provided to Lender on a monthly basis.
RIGHT OF TRANSFER: Borrower shall not be permitted to assign or otherwise
transfer its obligations or any asset securitizing the Loan to any party, except
to any affiliate of Borrower which affiliate shall be under the same management
as Borrower, without the prior written consent of Lender, which consent shall
not be unreasonably withheld.
PRE-PAYMENT: Borrower shall be permitted to pre-pay all or any portion of the
Loan without the prior written consent of Lender; provided, however, in the
event of any such pre-payment, Lender shall have the right to purchase shares of
Borrowers stock at the conversion price and at any time during the entire Loan
Term, as if the Loan (or any portion thereof) shall not have been pre-paid.
SHARE CONVERSION RIGHT: At any time during the Loan Term, Lender shall have the
right to convert all outstanding principal and interest due under the Loan to
shares of the Borrower's common stock at a conversion price of $1.50 per share.
FORCED CONVERSION: At any time after the expiration of the first anniversary of
the Loan Term, Borrower shall have the right to force conversion of the Loan,
provided (i) all shares to be acquired by Borrower shall be freely tradable
without restriction whatsoever, (ii) Borrower's shares shall have traded on the
market at a price of not less than $5.00 per share for 90 consecutive days
immediately prior to Xxxxxxxx's exercise of such right of forced conversion and
(iii) Borrower knows of no reason why the price of such shares would likely be
traded below $5.00 per share for a period of at least 30 days after the date of
such forced conversion.
WARRANT: Borrower will issue a Warrant to purchase up to 2,000,000 shares of
Borrower's common stock at an initial exercise price of $2.00 per share. The
term of the Warrant shall be five years.
ANTI-DILUTION: Both the Note and the Warrant will provide for anti-dilution
protection in the event of stock dividends, stock splits, other customary
dilutive events and the issuance of common shares by the Company but less than
the then conversion/exercise price. The latter anti-dilution protection shall be
a "ratchet" to the issue price, without taking into account the number of shares
sold by the Company. In the event the Company's EBITDA does not equal $4,000,000
during the last calendar quarter prior to maturity of the Loan term, the
conversion/exercise price under the Note and Warrant shall be ratcheted down to
the market price of the Company's common stock on the last day of the applicable
calendar quarter, to the extent such market price is less than the then
applicable conversion/exercise price.
REGISTRATION: Within 60 days of closing, the Company will prepare and file a
Registration Statement covering the shares of common stock assignable upon the
conversion of the Note and issuable upon exercise of the Warrants. The
Registration Statement shall be kept effective until such shares are sold or can
be sold under Rule 144(k). Borrower will enter into Xxxxxx's standard form
Registration Rights Agreement containing the foregoing terms and other customary
terms and provisions acceptable to Lender.
DUE DILIGENCE: Within five days of the date hereof, Borrower shall provide to
Lender all documents and other materials and information related to Borrower and
the Property, together with a preliminary title report relating to the Property
and option property. Lender shall have a due diligence period of 10 days in
which to either approve or disapprove same. Lender will also commence its
general due diligence review of Borrower, which will not be limited to any
specific timeframe. Concurrently with the date hereof, Xxxxxx's attorney shall
commence the preparation of all Loan Documents and related agreements in
connection with the proposed transaction. In the event Lender shall disapprove
any of the items provided by Borrower to Lender, as aforesaid, the proposed
transaction shall terminate and Borrower shall pay all out-of-pocket costs
incurred by Lender with respect to such preparation of documents and review of
all due diligence matters. The $25,000 cost advance referred to above shall be
applied to such costs. If there is an excess balance, such amount shall be
refunded to Borrower without interest.
NO COMMITMENT: This Memorandum shall not be deemed a commitment or obligation of
Lender to lend any funds to Borrower. It is agreed and understood that Xxxxxx
will only make such loan if the results of its due diligence review are
satisfactory to lender, in its sole and absolute discretion. This Memorandum is
not intended to set forth all terms and conditions of the various loan
agreements and documents.
Agreed in principle (except as respects the provisions of the Term Sheet
respecting the payment of Lender's fees and costs and the $25,000 advance, which
shall be deemed binding).
AGU Entertainment Corp.,
a Delaware corporation
By: /s/ Xxxxx Xxxx
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