COVENANT, GUARANTY AND ESCROW AGREEMENT
DATE February 2, 2006
PARTIES
Guarantors
"Headliners" Headliners Entertainment Group, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxx XX 00000
"G&H" G&H Management, LLC
000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxx XX 00000
"Xxxxxxxxx" Xxxxxxx Xxxxxxxxx, individually
00 Xxxxxx Xxxx Xxxxx, Xxxxxxxxxx, XX 00000
"Maker" Rascals Montclair, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxx XX 00000
"Payee" Anomaly Capital, LLC
000 Xxxxxxxx Xxxxxx, Xxxxx X, Xxx Xxxx, XX 00000
"Escrow Agent" C. Xxxxxxxx Xxxxx, Esq,
00 Xxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000
"Note" Promissory Note dated February 1, 2006
"Obligations" All debts, liabilities and obligations of Maker to Payee
under the Note.
PREMISES
1. Headliners is a party to a management agreement with the Maker, under
which Headliners benefits from the business conducted in the Maker's
premises.
2. G&H is a principal shareholder of Headliners, and Xxxxxxxxx is the
Chief Executive Officer of both Maker and Headliners.
3. The Guarantors, because of their interest in the business of Maker,
have agreed to make certain covenants and commitments in order to induce
Payee to lend money to Maker.
AGREEMENT
1. Guaranty. The Guarantors hereby, jointly and severally, guarantee
payment of the Obligations.
2. Stock Issuance. Headliners agrees that, immediately after the funding
of the Note, it will issue to Payee Two Million (2,000,000) shares of
common stock (the "Inducement Shares"). Payee understands that the
Inducement Shares will not be "free-trading, and represents that he is
taking the Inducement Shares for investment, without any intention of
distributing the Inducement Shares prior to the effective date of the
Registration Statement identified below.
3. Registration Rights. Within sixty (60) days after the execution of
this Agreement, the Company shall file with the Securities and Exchange
Commission a registration statement and such other documents, including
a prospectus, as may be necessary in the opinion of counsel for the
Company in order to comply with the provisions of the Securities Act, so
as to permit a public sale by the Payee of the Inducement Shares and the
Pledged Shares (collectively, the "Registrable Shares"). In connection
with the registration of the Registrable Shares, the Company covenants
and agrees as follows:
a) The Company will use its best efforts to cause the registration
statement to be declared effective as promptly as practicable.
The Company will comply and provide any and all documents
required to have the Registration Statement declared effective.
The Company will provide any such information and/or
documentation to the Securities and Exchange Commission within
ten (10) days of any request.
b) Until either (i) all of the Registrable Shares have been sold or
(ii) the Payee will be able to sell all of the remaining
Registrable Shares in the public market without a prospectus,
the Company will file such amendments to the registration
statement as are necessary in order to permit continued use of
the prospectus.
c) Payee shall have the right to request copies of all such
filings, amendments and/or correspondence to and from the
Securities and Exchange Commission.
4. Pledge and Escrow.
a. Immediately after the funding of the Note, Headliners will cause
a certificate (the "Certificate") for seven million five hundred
thousand (7,500,000) shares of common stock (the "Pledged Shares") to
be issued in the name of the Payee and delivered to the Escrow Agent.
The Escrow Agent will hold the Certificate in safe-keeping until she
delivers it in accordance with the provisions of this Section 4.
b. In the event that Payee delivers to the Escrow Agent documentary
evidence sufficient to satisfy her that an Event of Default under the
Note has occurred, then the Escrow Agent shall notify Headliners in
writing of said Default and provide evidence of Default. If within
five (5) days of written notice to Headliners by Escrow Agent, Escrow
Agent has not received sufficient evidence from Headliners that said
Default has been cured, Escrow Agent shall deliver the Certificate to
Payee.
c. In the event that Headliners or Maker delivers to the Escrow
Agent documentary evidence sufficient to satisfy her that the Note
has been satisfied in full, then the Escrow Agent shall notify Payee
of the delivery. If within ten (10) days of notice to Payee, Escrow
Agent has not received from Payee evidence to the contrary that the
Note has not been paid in full, Escrow Agent will release the
Certificate to Headliners.
d. The Escrow Agent shall have no duties or obligations under this
Agreement except as expressly set forth herein, shall be responsible
only for the performance of such duties and obligations, shall not be
required to take any action other than in accordance with the terms
hereof and shall not be in any manner liable or responsible for any
loss or damage arising by reason of any act or omission to act by her
hereunder or in connection with any of the transactions contemplated
hereby, including, but not limited to, any loss that may occur by
reason of forgery, false representations, the exercise of her
discretion in any particular manner or for any other reason except
for her gross negligence or willful misconduct.
e. If the Escrow Agent receives a notice from any party that a
dispute exists with respect to the delivery and/or ownership or right
of possession of the Certificate, the Escrow Agent shall retain the
Certificate in her possession and shall deliver such Certificate in
accordance with the joint written instructions of all parties to the
dispute or a final order, decree or judgment of a court of competent
jurisdiction. The Escrow Agent shall be under no duty whatsoever to
institute or defend any such proceedings with respect to the
Certificate. The Escrow Agent may resign and be discharged of her
duties hereunder at any time by giving written notice to all of the
parties hereto. Such resignation shall take effect twenty (20) days
after the giving of such notice or upon the earlier receipt by the
Escrow Agent of an instrument of acceptance executed by a successor
escrow agent and upon delivery by the Escrow Agent of the Certificate
to such successor. The Escrow Agent shall also be discharged of her
duties and obligations hereunder upon deposit in a court of competent
jurisdiction of the Certificate and any other documents or
instruments then held by the Escrow Agent hereunder.
5. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be delivered by an overnight
delivery or courier service with a national reputation or delivered in
person or by facsimile to the party to whom it is to be given at the
address of such party set forth in this Section 5 (or to such other address
as the party shall have furnished in writing in accordance with the
provisions of this Section 5.
If to Payee:
Anomaly Capital, LLC
000 Xxxxxxxx Xxxxxx, Xxxxx X
Xxx Xxxx, XX 00000
Fax:
If to Maker, G&H, Headliners or Xxxxxxxxx:
Headliners Entertainment Group, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Fax: 000-000-0000
with a copy to (which copy shall not constitute notice):
Xxxxxx Xxxxxx, Esq.
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000-0000
Fax: 000-000-0000
If to Escrow Agent:
C. Xxxxxxxx Xxxxx, Esq.
Xxxxx & Associates, LLC
00 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: 000-000-0000
Such addresses may be changed by notice given as provided in this subsection.
Notices shall be effective upon the date of receipt.
IN WITNESS WHEREOF, the parties have made this agreement.
HEADLINERS ENTERTAINMENT GROUP, INC. RASCALS MONTCLAIR, INC.
By: /s/ Xx Xxxxxxxxx By: /s/ Xx Xxxxxxxxx
----------------------------- -----------------------------
Xx Xxxxxxxxx, President Xx Xxxxxxxxx, President
G&H MANAGEMENT, LLC ANOMALY CAPITAL, LLC
By: /s/ Xx Xxxxxxxxx By: /s/ Xxxxxxx Xxxxxxx
----------------------------- -----------------------------
Xx Xxxxxxxxx, Manager Xxxxxxx Xxxxxxx, Manager
/s/ Xxxxxxx Xxxxxxxxx /s/ C. Xxxxxxxx Xxxxx
------------------------------- -----------------------------
XXXXXXX XXXXXXXXX, Individually C. XXXXXXXX XXXXX, ESQ.
