U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO ______
COMMISSION FILE NUMBER 0-21423
CHICAGO PIZZA & BREWERY, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0485615
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
26131 MARGUERITE PARKWAY
SUITE A
MISSION VIEJO, CALIFORNIA 92692
(Address and zip code of Registrant's principal executive offices)
(949) 367-8616
(Registrants telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO.
--
As of May 1, 2000, there were 7,658,321 shares of Common Stock of the Registrant
outstanding and 8,284,584 Redeemable Warrants of the Registrant outstanding.
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CHICAGO PIZZA & BREWERY, INC. AND SUBSIDIARIES
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
1
Consolidated Balance Sheets -
March 31, 2000 (Unaudited) and December 31, 1999 1
Unaudited Consolidated Statements of Operations -
Three Months Ended March 31, 2000 and
March 31, 1999 2
Unaudited Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2000 and
March 31, 1999 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Item 3. Quantitative and Qualitative Disclosures about Market Risk 8
8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ` 8
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of
Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES
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3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL INFORMATION
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CHICAGO PIZZA & BREWERY, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31,
2000 DECEMBER 31,
(UNAUDITED) 1999
------------ ------------
ASSETS:
<S> <C> <C>
Current assets: - -
Cash and cash equivalents $ 444,497 $ 188,811
Accounts receivable 142,079 141,968
Inventory 471,271 455,880
Prepaids and other current assets 342,230 271,854
-------------- -------------
Total current assets 1,400,077 1,058,513
Property and equipment, net 14,956,121 12,529,913
Other assets 371,546 353,595
Intangible assets, net 5,160,703 5,202,085
-------------- --------------
Total assets $ 21,888,447 $ 19,144,106
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable $ 2,196,513 $ 1,114,757
Accrued expenses 1,895,724 1,710,984
Current portion of notes payable
to related parties 357,321 350,341
Current portion of long-term debt 280,152 284,919
Current portion of obligations
under capital lease 125,270 146,942
-------------- --------------
Total current liabilities 4,854,980 3,607,943
Notes payable to related parties 1,276,908 1,368,807
Long-term debt 2,006,864 687,331
Obligations under capital lease 8,342 22,574
Other liabilities 212,702 109,131
-------------- --------------
Total liabilities 8,359,796 5,795,786
-------------- --------------
Commitments and contingencies
Minority interest in partnership 256,582 249,159
Shareholders' equity:
Preferred stock, 5,000,000 shares
authorized, none issued or
outstanding
Common stock, no par value, 60,000,000
shares authorized and 7,658,321 shares
issued and outstanding as of
March 31, 2000 and December 31, 1999 16,076,132 16,076,132
Capital surplus 975,280 975,280
Accumulated deficit (3,779,343) (3,952,251)
-------------- --------------
Total shareholders' equity 13,272,069 13,099,161
-------------- --------------
Total liabilities and shareholders' equity $ 21,888,447 $ 19,144,106
============== ==============
The accompanying notes are an integral part of these consolidated financial statements.
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1
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CHICAGO PIZZA & BREWERY, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . $10,178,645 $ 8,092,403
Cost of sales. . . . . . . . . . . . . . . . . . . 2,801,755 2,224,396
Gross profit . . . . . . . . . . . . . . . 7,376,890 5,868,007
Costs and expenses:
Labor and benefits . . . . . . . . . . . . . . . . 3,687,975 2,977,630
Occupancy. . . . . . . . . . . . . . . . . . . . . 833,937 709,223
Operating expenses . . . . . . . . . . . . . . . . 1,107,196 907,763
Preopening costs . . . . . . . . . . . . . . . . . 146,109 195,202
General and administrative . . . . . . . . . . . . 913,049 663,694
Depreciation and amortization. . . . . . . . . . . 425,881 354,205
------------ ------------
Total cost and expenses. . . . . . . . . . . . . . 7,114,147 5,807,717
------------ ------------
Income from operations . . . . . . . . . . 262,743 60,290
Other income (expense):
Interest expense . . . . . . . . . . . . . . . . . (78,179) (67,258)
Interest income. . . . . . . . . . . . . . . . . . 3,253 9,927
Other income (expense), net. . . . . . . . . . . . (1,162) 768
------------ ------------
Total other income (expense) . . . . . . . (76,088) (56,563)
------------ ------------
Income before minority interest,
income taxes and change in
accounting . . . . . . . . . . . . 186,655 3,727
Minority interest in partnership . . . . . . . . . (7,423) (9,657)
------------ ------------
Income (loss) before income taxes and
change in accounting. . . . . . . 179,232 (5,930)
Income tax expense . . . . . . . . . . . . . . . (6,323) (1,615)
------------ ------------
Income (loss) before change in
accounting. . . . . . . . . . . . 172,909 (7,545)
Cumulative effect of change in accounting. . . . . (106,175)
------------ ------------
Net income (loss). . . . . . . . . . . . . $ 172,909 ($ 113,720)
============ ============
Net income (loss) per share:
Basic and dilutive:
Income (loss) before cumulative effect of
change in accounting . . . . . . . . . . . . . $ 0.02 ($ 0.00)
Cumulative effect of change in accounting. . . . . ($ 0.02)
------------ ------------
Net income (loss). . . . . . . . . . . . . $ 0.02 ($ 0.02)
============ ============
Weighted average number of shares outstanding:
Basic. . . . . . . . . . . . . . . . . . . 7,658,321 6,824,988
============ ============
Dilutive . . . . . . . . . . . . . . . . . 7,665,388 6,824,988
============ ============
The accompanying notes are an integral part of these consolidated financial statements.
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2
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CHICAGO PIZZA & BREWERY, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . $ 172,909 ($ 113,720)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . 425,881 354,205
Change in accounting principle . . . . . . . . . . . . . . . . 106,175
Minority interest in partnership . . . . . . . . . . . . . . . 7,423 9,657
Loss on sale of assets . . . . . . . . . . . . . . . . . . . . 1,000
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . . . . . . . (111) 51,265
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . (15,391) (22,934)
Prepaids and other current assets. . . . . . . . . . . . . (70,376) (125,825)
Other assets . . . . . . . . . . . . . . . . . . . . . . . (19,340) (3,558)
Accounts payable . . . . . . . . . . . . . . . . . . . . . 1,081,756 242,465
Accrued expenses . . . . . . . . . . . . . . . . . . . . . 184,740 139,387
Other liabilities. . . . . . . . . . . . . . . . . . . . . 103,571 (3,242)
------------ ------------
Net cash provided by operating activities . . . . . . . 1,872,062 633,875
------------ ------------
Cash flows used in investing activities:
Purchases of equipment . . . . . . . . . . . . . . . . . . . . (2,810,319) (1,220,770)
------------ ------------
Cash flows provided by (used in) financing activities:
Proceeds from sale of common stock . . . . . . . . . . . . . . 1,000,000
Loan proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 1,390,500 699,604
Payments on related party debt . . . . . . . . . . . . . . . . (84,919) (88,439)
Payments on debt . . . . . . . . . . . . . . . . . . . . . . . (75,734) (69,786)
Capital lease payments . . . . . . . . . . . . . . . . . . . . (35,904) (30,067)
------------ ------------
Net cash provided by financing activities . . . . . . . 1,193,943 1,511,312
------------ ------------
Net increase in cash and cash equivalents . . . . . . . 255,686 924,417
Cash and cash equivalents, beginning of period . . . . . . . . 188,811 1,490,705
------------ ------------
Cash and cash equivalents, end of period . . . . . . . . . . . $ 444,497 $ 2,415,122
============ ============
The accompanying notes are an integral part of these consolidated financial statements.
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3
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CHICAGO PIZZA & BREWERY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Chicago
Pizza & Brewery, Inc. and its subsidiaries (the "Company") for the three months
ended March 31, 2000 and 1999 have been prepared in accordance with generally
accepted accounting principles, and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. These financial statements have not been audited by
independent accountants, but include all adjustments (consisting of normal
recurring adjustments) which are, in Management's opinion, necessary for a fair
presentation of the financial condition, results of operations and cash flows
for such periods. However, these results are not necessarily indicative of
results for any other interim period or for the full year.
Certain information and footnote disclosures normally included in financial
statements in accordance with generally accepted accounting principles have been
omitted pursuant to requirements of the Securities and Exchange Commission
(SEC). A description of the Company's accounting policies and other financial
information is included in the audited consolidated financial statements as
filed with the SEC on Form 10-K for the year ended December 31, 1999. Management
believes that the disclosures included in the accompanying interim financial
statements and footnotes are adequate to make the information not misleading,
but should be read in conjunction with the consolidated financial statements and
notes thereto included in the Form 10-K. The accompanying consolidated balance
sheet as of December 31, 1999 has been derived from the audited financial
statements.
ORGANIZATION
Chicago Pizza & Brewery, Inc. (the "Company" or "BJ's") owns and operates 27
restaurants located in Southern California, Oregon, Washington and Colorado and
an interest in one restaurant in Lahaina, Maui. Each of these restaurants is
operated as either a BJ's Pizza, Grill & Brewery, a BJ's Pizza & Grill, a BJ's
Pizza & Grill - OTC or a Pietro's Pizza restaurant. The menu at the BJ's
restaurants feature BJ's award-winning, signature deep-dish pizza, BJ's own
hand-crafted beers as well as a great selection of appetizers, entrees, pastas,
sandwiches, specialty salads and desserts. The five BJ's Pizza, Grill & Brewery
restaurants feature in-house brewing facilities where BJ's hand-crafted beers
are produced. The eight Pietro's Pizza restaurants serve primarily Pietro's
thin-crust pizza in a very casual, counter-service environment.
The Company's current focus is on the development of the larger footprint
BJ's restaurants in high profile locations with favorable demographics. The
Company opened a BJ's Pizza & Grill in Valencia, California in March 2000.
During the first quarter 2000, the Company acquired a restaurant location in
West Covina, California and anticipates opening a BJ's Pizza, Grill & Brewery in
early summer 2000. The Company also signed during the first quarter 2000 a
sublease to develop a BJ's Pizza & Grill in Burbank, California and acquired
selected assets, including the liquor license, of the previous restaurant at
this location. The expected opening of this BJ's Pizza & Grill is early summer
2000. The Company entered into a new lease for an existing restaurant location
in Huntington Beach, California and anticipates opening a BJ's Pizza & Grill in
mid-summer 2000. The Company is currently in negotiations for additional sites
in California, Arizona and Washington.
RECENTLY ISSUED ACCOUNTING STANDARDS
As had been the practice of many restaurant entities, the Company
previously deferred its restaurant preopening costs and amortized them over the
twelve-month period following the opening of each new restaurant. In April 1998,
the Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants issued Statement of Position 98-5 (SOP 98-5),
Accounting for the Costs of Start-Up Activities. SOP 98-5 requires all costs of
start-up activities that are not otherwise capitalizable as long-lived assets to
be expensed as incurred. The Company adopted SOP 98-5 during the first quarter
of 1999. This accounting standard accelerates the Company's recognition of costs
associated with the opening of new restaurants but will benefit the post-opening
results of new restaurants. The Company's total deferred preopening costs were
$106,175 at January 1, 1999. As provided by SOP 98-5, the Company wrote off the
balance of deferred preopening costs during the first quarter of 1999.
4
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Other recently issued standards of the FASB are not expected to affect the
Company, as conditions to which those standards apply are absent from the
Company's operations.
DIVIDEND POLICY
The Company has not paid any dividends since its inception and has
currently not allocated any funds for the payment of dividends. Rather, it is
the current policy of the Company to retain earnings, if any, for expansion of
its operations, remodeling of existing restaurants and other general corporate
purposes and to not pay any cash dividends in the foreseeable future. Should the
Company decide to pay dividends in the future, such payments would be at the
discretion of the Board of Directors.
LONG-TERM CONSTRUCTION LOAN
In February 2000, the Company entered into an agreement with a bank
for a collateralized term loan for a maximum amount of $4,000,000. There is an
initial twelve-month draw down period and a subsequent thirty-six month term out
period. Interest accrued on outstanding borrowings shall be Wall Street Journal
Prime plus 2.0% or LIBOR plus 3.5%, and Wall Street Journal Prime plus 3.0%,
floating or fixed at the Company's preference, during the term out period.
Payment shall be interest only during the draw down period and an even
amortization during the term out period, with a final maturity on February 15,
2004. A net-profit recapture is to be applied to the final year of the term loan
if the Company's profits for the year ending December 31, 2000 exceed
$2,000,000. Net profit in excess of this amount is to be applied to the debt
outstanding at that time under this loan agreement. At March 31, 2000, the
outstanding principal balance under this borrowing arrangement was $1,390,500.
The weighted average interest rate from the date of initial drawdown through
March 31, 2000 was 9.60 percent. The Company paid a one percent loan fee.
In conjunction with the loan agreement, the Company granted a security
interest to the bank in all of the Company's inventory, accounts, equipment and
general intangibles, whether now owned or hereinafter acquired. Also included
under this security agreement are all proceeds, including insurance proceeds,
from the sale, destruction, loss or other disposition of the collateralized
property. The security interest extends to all records and data relating to the
secured property as well as the computer software required to maintain or
process any such records and data.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's Unaudited Consolidated Financial Statements and notes thereto
included elsewhere in this Form 10-Q. Except for the historical information
contained herein, the discussion in this Form 10-Q contains certain forward
looking statements that involve risks and uncertainties, such as statements of
the Company's plans, objectives, expectations and intentions. The cautionary
statements made in this Form 10-Q should be read as being applicable to all
related forward-looking statements wherever they appear in this Form 10-Q. The
Company's actual results could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, without
limitation, those factors discussed herein and in the Company's annual report as
reported on Form 10-K dated December 31, 1999 including, without limitation:
(i) the Company's ability to manage growth and conversions, (ii) construction
delays, (iii) marketing and other limitations as a result of the Company's
historic concentration in Southern California and current concentration in the
Northwest, (iv) restaurant and brewery industry competition, (v) impact of
certain brewery business considerations, including without limitation,
dependence upon suppliers and related hazards, (vi) increase in food costs and
wages, including without limitation the recent increase in minimum wage, (vii)
consumer trends, (viii) potential uninsured losses and liabilities, (ix)
trademark and servicemark risks, and (x) other general economic and regulatory
conditions and requirements.
5
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RESULTS OF OPERATIONS
Three-Month Period Ended March 31, 2000 Compared to Three-Month Period Ended
March 31, 1999.
Revenues. Total revenues for the three months ended March 31, 2000 increased to
$10,179,000 from $8,092,000 for the comparable period in 1999, an increase of
$2,087,000 or 25.8%. The increase is primarily the result of:
The opening of restaurants in Arcadia and La Mesa, California in January 1999
and November 1999, respectively, and a restaurant & brewery in Woodland Hills,
California in April 1999. These new locations provided an increase in revenues
of $1,976,000 during the first quarter of 2000.
An increase in the BJ's restaurants same store sales for the comparable periods
of $523,000, or 9.0%. Management believes this increase was due to (i) an
increase in customer counts in the California and Colorado restaurants, and (ii)
an increase in check averages produced by a price increase implemented in
November 1999.
The increase in revenues resulting from the above factors was partially offset
by:
The closing of two restaurants in Oregon, a BJ's in The Dalles in May 1999 and a
Pietro's in Eugene in June 1999. The closures of these locations in mid-year of
1999 reduced first quarter of 2000 revenues by $354,000 when compared with 1999,
when they were open the entire three-month period.
A decrease in the Pietro's restaurants same store sales for the comparable
periods of $50,000, or 4.0%.
Cost of Sales. Cost of food, beverages and paper (cost of sales) for the
restaurants increased to $2,802,000 for the three months ended March 31, 2000
from $2,224,000 for the comparable period of 1999, an increase of $578,000 or
26.0%. This increase was in line with the 25.8% increase in revenues discussed
above. As a percentage of sales, cost of sales was stable at 27.5% for both the
2000 and 1999 three-month periods. The Company's same-store cost of sales, as a
percentage of sales, improved to 27.3% during the three months ended March 31,
2000 from 28.3% for the comparable period of 1999. The improvement in same store
cost of sales was partially offset by the higher food costs associated with the
opening of the new restaurants in Woodland Hills and La Mesa, California. As a
percentage of their revenues, these new stores collectively incurred food costs
of 29.0% for the first quarter of 2000. A higher cost of sales percentage in the
early months of operations is in line with the Company's experience when opening
new restaurants.
Labor. Labor costs for the restaurants increased to $3,688,000 in the
three months ended March 31, 2000 from $2,978,000 for the comparable period in
1999, an increase of $710,000 or 23.8%. As a percentage of revenues, labor
costs decreased to 36.2% in the 2000 period from 36.8% in the 1999 period. The
overall increase is attributable to the opening of the new California
restaurants; labor costs at these three restaurants totaled $984,000. The
decrease as a percentage of sales was primarily due to increased sales and more
efficient staffing of the Arcadia, California restaurant, which was opened in
January 1999. The Company intentionally overstaffs new restaurants during the
startup phase of operations to allow for newly trained employees, an initial
higher customer count and to ensure a good dining experience by its customers.
Same-store labor costs increased $187,000, or 7.5%, to $2,680,000 for the
quarter ended March 31, 2000 from $2,493,000 for the comparable period of 1999.
As a percentage of revenues same-store labor costs for the three months of 1999
increased to 35.7% from 35.5% for the comparable period of 1999. Management
feels the increase in same-store labor costs as a percentage of revenues is due
primarily to a 4.0% decrease in sales at the northwest Pietro's restaurants.
Occupancy. Occupancy costs increased to $834,000 during the three months
ended March 31, 2000 from $709,000 during the comparable period in 1999, an
increase of $125,000, or 17.6%. As a percentage of revenues, occupancy costs
decreased to 8.2% in the 2000 period from 8.8% in the 1999 period. The primary
reason for the percentage decrease in occupancy costs relative to revenues was
the increase in comparable store sales. Additionally, the two Northwest stores
closed during the second quarter of 1999 experienced a combined occupancy cost
percentage of 14.2% for the three-month period ended March 31, 1999.
6
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Operating Expenses. Operating expenses increased to $1,107,000 during the
three months ended March 31, 2000 from $908,000 during the comparable period in
1999, an increase of $199,000 or 21.9%. As a percentage of revenues, operating
expenses decreased to 10.9% in the 2000 period from 11.2% in the 1999 period.
Operating expenses include restaurant-level operating costs, the major
components of which include marketing, repairs and maintenance, supplies and
utilities. Management believes the primary reasons for the decrease in operating
expenses as a percentage of revenues were (i) the increase in same store sales,
and (ii) a focus on more efficient restaurant operations.
General and Administrative Expenses. General and administrative expenses
increased to $913,000 during the three months ended March 31, 2000 from $664,000
during the comparable period in 1999, an increase of $249,000 or 37.5%. As a
percentage of revenues general and administrative expenses increased to 9.0%
from 8.2% of the comparable period of 1999. The increase in general and
administrative expenses was primarily due to acquiring resources to plan and
implement the Company's growth strategy, incurring costs in locating and
evaluating sites for future restaurants and developing staff and systems to
manage anticipated future expansion.
Preopening Costs. During the first quarter of 1999, the company adopted
Statement of Position 98-5 (SOP 98-5), Accounting for the Costs of Start-Up
Activities, which requires all costs of start-up activities that are not
otherwise capitalizable as long-lived assets to be expensed as incurred. The
Company previously deferred its restaurant preopening costs and amortized them
over the twelve-month period following the opening of each new restaurant. This
new accounting standard accelerates the Company's recognition of costs
associated with the opening of new restaurants. During the three month period
ending March 31, 2000, the Company incurred costs of $146,000 due to
preparations for the opening of its new restaurant in Valencia, California and
the restaurants being developed in West Covina and Burbank, California. These
costs will fluctuate from year to year, possibly significantly, depending upon,
but not limited to, the number of restaurants under development, the size and
concept of the restaurants being developed and the complexity of the staff
hiring and training process.
Depreciation and Amortization. Depreciation and amortization increased to
$426,000 during the three month period ended March 31, 2000 from $354,000 during
the comparable period in 1999, an increase of $72,000 or 20.3%. This increase
was primarily due to the addition of restaurant equipment, furniture and
improvements and brewery equipment totaling $4,458,000 for the restaurants
opened in Arcadia, Woodland Hills and La Mesa, California.
Interest Expense. Interest expense increased to $78,000 during the quarter
ended March 31, 2000 from $67,000 during the comparable period in 1999, an
increase of $11,000 or 16.4%. This increase was primarily due to the additional
debt incurred by the Company to finance equipment for the new restaurants in
Arcadia, Woodland Hills and Valencia, California, as well as the restaurants
being constructed in West Covina, Burbank and Huntington Beach, California.
Interest expense related to these projects was $31,000 during the first quarter
of 2000; this amount was partially offset by reduced interest expense on older
debt due to normal principal amortization.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities, as detailed in the Consolidated
Statement of Cash Flows, provided $1,872,000 net cash during the three months
ended March 31, 2000, a $1,238,000, or 195.3%, increase over the $634,000
generated in the comparable period of the prior year. Since the completion of
the Company's initial public offering in October of 1996, the Company has
invested in restaurant development. Capital expenditures for the acquisition of
restaurant and brewery equipment and leasehold improvements to develop new
restaurants totaled $2,810,000 and $1,221,000 for the three months ended March
31, 2000 and 1999, respectively, an increase of $1,589,000, or 130.1%. These
expenditures were required to develop the new restaurant in Valencia,
California, as well the development of the three restaurants currently under
construction and scheduled for various opening dates through mid-summer 2000.
Debt reduction, including the principal portion of capitalized lease payments,
for the quarter ended March 31, 2000 and 1999 totaled $197,000 and $188,000,
respectively.
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The Company intends to continue the development of additional restaurants.
Management believes that the funds available under the existing credit
facilities described previously and future operating cash flow will be
sufficient for the Company to fund its operations and continue to meet its
business plan over the next year. However, no assurance can be given that
management can successfully implement such objectives. Further, there can be no
assurance that future events, including problems, delays, additional expenses
and difficulties encountered in expansion and conversion of restaurants, will
not require additional financing, or that such financing will be available if
necessary.
IMPACT OF INFLATION
Impact of inflation on food, labor and occupancy costs can significantly
affect the Company's operations. Many of the Company's employees are paid
hourly rates related to the federal minimum wage, which has been increased
numerous times and remains subject to future increases.
SEASONALITY AND ADVERSE WEATHER
The Company's results of operations have historically been impacted by
seasonality, which directly impacts tourism at the Company's coastal locations.
The summer months (June through August) have traditionally been higher volume
periods than other periods of the year.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to market risk from changes in commodity prices,
since many of the food products purchased by the Company are affected by
commodity pricing, and, therefore, are vulnerable to unpredictable price
fluctuations. Over the recent past, the Company has experienced price volatility
in such products as cheese and produce. The Company buys a significant portion
of its product from a distributor, and has only minimal forward purchasing
agreements with other suppliers. Material changes in commodity prices could
negatively affect the Company's margins in the short-term.
Longer-term changes in commodity pricing would affect most of the
restaurant industry as well the Company. The Company most likely would be able
to mitigate increased commodity prices by increasing menu prices, thereby
passing them through to consumers, and by varying its menu product mix. However,
competitive circumstances could limit menu pricing and/or mix strategies, and,
in those circumstances, commodity price fluctuations would negatively impact the
Company's margins. Management believes, however, that were such circumstances to
occur, they would not materially impact the Company's results of operations.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Restaurants such as those operated by the Company are subject to a
continuous stream of litigation in the ordinary course of business, most of
which the Company expects to be covered by its general liability insurance.
Punitive damages awards, however, are not covered by the Company's general
liability insurance. To date, the Company has not paid punitive damages with
respect to any claims, but there can be no assurance that punitive damages will
not be awarded with respect to any future claims or any other actions.
The Company is a defendant in a lawsuit brought by the owner and landlord
of property in Aloha, Oregon where the Company formerly operated a Pietro's
restaurant. This restaurant was heavily damaged by fire in February 1997, and
the Company received insurance proceeds for its assets that were lost in the
fire. The property owner contends that it was the Company's obligation to
rebuild a restaurant at this location with the insurance proceeds. The Company
has continued to pay rent since the fire, but is of the opinion that the
insurance payments were made to compensate the Company for the loss of its
personal property, and the obligation to repair the fire damage rests with the
landlord. The Company has filed a counterclaim for breach of its lease, and to
recover damages it has suffered due to the landlord's failure to rebuild.
8
<PAGE>
A settlement agreement has been offered by the landlord, which contemplates
a one-time payment by the Company to the landlord of $40,000 and other minor
considerations. If a settlement agreement is not completed, the case may proceed
to trial. The Company has not made an accrual for any possible settlement amount
and does not believe the lawsuit will have a material adverse effect on its
consolidated financial position or consolidated results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Amended and Restated Articles of Incorporation of the
Company, as amended incorporated by reference to the Company's
Registration Statement on Form SB-2, effective October 8, 1996 (SEC
File No. 333-5182-LA), referred to as the "Registration Statement".
3.2 Bylaws of the Company, as amended, incorporated by reference to
Exhibit of Form 10-Q dated March 31, 2000.
4.1 Specimen Common Stock Certificate of the Company (incorporated by
reference to Exhibit 4.1 of the Registration Statement).
4.2 Warrant Agreement (incorporated by reference to Exhibit 4.2 of the
Registration Statement).
4.3 Specimen Common Stock Purchase Warrant (incorporated by reference
to Exhibit 4.3 of the Registration Statement).
4.4 Form of Representative's Warrant (incorporated by reference to
Exhibit 4.4. of the Registration Statement).
<PAGE>
10.1 Assignment and Assumption Agreement of Real Estate Lease, dated
March 30, 2000 between Chicago Pizza & Brewery, Inc., C & P Properties
#1 and Performance Restaurant Group, Inc. for a BJ's Pizza & Grill
restaurant in Burbank, California.
10.2 Loan Agreement, Security Agreement and Promissory Note between
Chicago Pizza & Brewery, Inc. and Washington Mutual Bank dba WM Business
Bank for a secured $4,000,000 credit facility for restaurant development.
9
<PAGE>
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended
March 31, 2000.
10
<PAGE>
SIGNATURES
In accordance with 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.
CHICAGO PIZZA & BREWERY, INC.
(Registrant)
May 11, 2000 By: /s/ PAUL A. MOTENKO
--------------------
Paul A. Motenko
Co-Chief Executive Officer, Vice
President, Secretary and Co-Chairman
of the Board of Directors
By: /s/ JEREMIAH J. HENNESSY
-------------------------
Jeremiah J. Hennessy
Co-Chief Executive Officer and Co-
Chairman of the Board of Directors
By: /s/ ERNEST T. KLINGER
----------------------
Ernest T. Klinger
President, Chief Financial Officer and
Co-Chairman of the Board of Directors
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Chicago
Pizza & Brewery, Inc.'s Consolidated Financial Statements for the three-month
periods ended March 31, 2000 and 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 444 189
<SECURITIES> 0 0
<RECEIVABLES> 142 142
<ALLOWANCES> 0 0
<INVENTORY> 471 456
<CURRENT-ASSETS> 1,400 1,059
<PP&E> 19,545 13,810
<DEPRECIATION> 4,589 3,303
<TOTAL-ASSETS> 21,888 19,257
<CURRENT-LIABILITIES> 4,855 3,619
<BONDS> 4,055 3,439
0 0
0 0
<COMMON> 16,076 16,076
<OTHER-SE> (2,804) (3,420)
<TOTAL-LIABILITY-AND-EQUITY> 21,888 19,257
<SALES> 10,179 8,092
<TOTAL-REVENUES> 10,179 8,092
<CGS> 2,802 2,224
<TOTAL-COSTS> 7,114 5,808
<OTHER-EXPENSES> (1) 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 78 67
<INCOME-PRETAX> 179 (6)
<INCOME-TAX> 6 2
<INCOME-CONTINUING> 173 (8)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 (106)
<NET-INCOME> 173 (114)
<EPS-BASIC> 0.02 (0.02)
<EPS-DILUTED> 0.02 (0.02)
</TABLE>
LEASE ASSIGNMENT AND ASSUMPTION AGREEMENT AND THIRD AMENDMENT OF LEASE
This Lease Assignment and Assumption Agreement and Third Amendment of Lease
dated March 30, 2000 is hereby made a part of that certain LEASE and FIRST
ADDENDUM TO LEASE dated September 16, 1983, the SECOND ADDENDUM TO LEASE
AGREEMENT dated October 20,1983, the SECOND ADDENDUM TO LEASE AGREEMENT dated
February 20, 1984, AMENDMENT TO LEASE dated July 16, 1992, ASSIGNMENT CONSENT
dated December 7, 1993, SECOND AMENDMENT TO LEASE dated September 20, 1995 and
ESTOPPEL CERTIFICATE dated September 20, 1995, (collectively hereinafter
referred to as "the Lease") for the real property located at 107 South First
Street, Burbank California (hereinafter the "Premises"), by and between C & P
Properties #1, a California limited partnership (hereinafter, "Landlord"),
Performance Restaurant Group, Inc. a Ohio corporation (hereinafter, "Assignor"),
and Cl&ago Pizza & Brewery, Inc., a California corporation (hereinafter,
"Tenant").
It is agreed that should there be any conflict between the provisions of This
Lease Assignment and Assumption Agreement and Third Amendment of Lease and that
certain LEASE and FIRST ADDENDUM TO LEASE dated September 16, 1983, the SECOND
ADDENDUM TO LEASE AGREEMENT dated October 20, 1983, the SECOND ADDENDUM TO LEASE
AGREEMENT dated February 20, 1984, AMENDMENT TO LEASE dated July 16, 1992,
ASSIGNMENT CONSENT dated December 7, 1993, SECOND AMENDMENT TO LEASE dated
September 20, 1995 and ESTOPPEL CERTIFICATE dated September 20, 1995, the
provisions of this Lease Assignment and Assumption Agreement and Third Amendment
of Lease shall prevail.
IT IS AGREED:
A) Assignment, Assumption and ConsentTenant hereby agrees to assume of all of
------------------------------------
the obligations under the Lease, and Landlord hereby consents to the assignment
of the Lease to Tenant by Assignor. Upon full execution of this Lease Assignment
and Assumption Agreement and Third Amendment of Lease, Tenant shall assume any
and all rights and obligations under the Lease. Such Assignment shall be
effective as of March30,2000 (hereinafter, the "Assignment Date").
--------
IT IS FURTHER AGREED THAT THE FOLLOWING SECTIONS OF THE LEASE WILL BE MODIFIED
AS PROVIDED HEREIN:
<PAGE>
B) Section 1. of the Lease dated September 16, 1983, is hereby stricken in it's
entirety, and replaced with the following:
" 1. Premises.The Premises consists of the following: approximately 21,000 sq.
---------
ft. of land as more particularly described in Exhibit "B" attached hereto and
incorporated herein by this reference and depicted in red on the revised Exhibit
"A"; the improvements (hereinafter defined) thereon as herein provided; an
exclusive right of use the parking spaces around the Restaurant within the area
depicted in green on the revised Exhibit "X'; and a non-exclusive right to use
no less than 150 parking spaces within the adjacent office parking area depicted
in yellow on the revised Exhibit "N' for use on weekends and on weekdays after
5:30 PM, as provided for in section 5 herein."
Q. Section 2 of the Lease dated September 16, 1983, is hereby stricken in it's
entirety, and replaced with the following:
2. "Construction.
--------------
2.1 Plans. Assignor has previously constructed or cause to be constructed,
a
building, landscaping and related improvements (collectively the "Improvements")
for
the Premises according to plans and specifications previously prepared by
Assignor.
The Improvements consist of a restaurant, cocktail lounge, discotheque and patio
in a
building containing ' approximately 11,000 sq. ft. Tenant may make certain
improvements, modifications or alterations to the premises at its sole cost and
expense,
subject to Landlord's approval, according to plans and specifications to be
prepared by
Tenant at its expense (hereinafter, "Plans").
2.2 Approval ofPlans. Landlord shall have 15 days after receipt of the
------------
Plans from Tenant within which to review and approve them. If Landlord notifies
Tenant of Landlord's disapproval of the Plans, then Landlord shall advise tenant
of the reasons for the disapproval and the items that must be modified,
whereupon Landlord and Tenant shall meet and confer so as to modify the plans to
be acceptable to both Landlord and tenant. Upon approval of the Plans by
Landlord and Tenant, Tenant shall submit the Plans to the City and all other
necessary governmental authorities and shall proceed diligently to obtain all
requisite governmental approvals. If modifications are required to obtain such
governmental approvals, Tenant shall prepare such modifications and the Plans
shall be resubmitted for governmental approval.
2.3 Construction. Tenant shall cause construction of any modification or
alteration of the Improvements to be commenced as soon as possible after the
obtaining of governmental approval. Tenant shall undertake such construction in
a manner that does not adversely effect the operation OF THE ADJACENT OFFICE
WILDING, or impede or restrict access and traffic flow to and from the Premises.
2
<PAGE>
2.4 Construction Costs.Tenant shall pay any and all cost associated with
--------------------
the improvement, modification ' or alteration of the Premises, and shall keep
the Premises free of mechanics' and materialmens' liens. Landlord is not, nor
shall Landlord be construed to be, the agent of Tenant for any purpose
whatsoever. At its expense, Tenant shall have the right at any time to post the
Prernises with appropriate notices of liquor license application, other notices
as Tenant may deem appropriate, and lawful signs in size, content and at such
locations as tenant may deem appropriate to advertise the pending opening of the
restaurant. During construction, Landlord shall have the right to conduct
inspections and review construction progress."
D). Late Charges,Section 3 of the Assignment Consent dated December 3, 1993 is
--------------
hereby stricken in it's entirety, and replaced with the following:
"3. Late Charges. Tenant hereby acknowledges that late payment by Lessee to
Lessor of Base Rent, or other sums due hereunder will cause Lessor to incur
costs not contemplated by tl-~s Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Lessor by the terms of any mortgage or trust deed covering the Office Building
Project. Accordingly, if any installment of Base Rent, or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten (10) days
after written notice such amount is past due, then, without any further
requirement for notice to Lessee, Lessee shall pay to Lessor a late charge equal
to 6% of such overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will incur by
reason of late payment by Lessee. Acceptance of such late charge by Lessor shall
in no event constitute a waiver of Lessee's default with respect to such overdue
amount, nor prevent Lessor from exercising any of the other rights and remedies
granted hereunder."
E) Parking,Section 5 (Termination Provisions) (including subsections 5.1 through
--------
5.10) of the Lease dated September 16, 1983, is hereby stricken in it's
entirety, and replaced with the following:
"5. Parking.
--------
5.1 Parking During Daytime OperationsDuring Daytime Operations (11:00 AM through
---------------------------------
3:00 PM, Monday through Friday) Tenant shall have the exclusive right to use the
parking spaces around the Restaurant within the area depicted in green on the
revised ExIdbit "N'. During Daytime Operations, Tenant shall engage the services
of a qualified valet service to park the cars of restaurant patrons in said
parking spaces on a "mandatory valet" basis.
3
<PAGE>
5.2 Parking During Evening and Weekend OperationsDuring Evening and Weekend
-------------------------------------------------
Operations (5:30 PM through Midnight Monday through Friday and on weekends),
Tenant shall have the exclusive right of use the parking spaces around the
Restaurant within the area depicted in green on the revised Exhibit "N', and the
non-exclusive right to use no less than 150 parking spaces within the adjacent
office parking area depicted in yellow on the revised Exhibit "A". During
Evening and Weekend Operations, Tenant shall engage the services of a qualified
valet service to park the cars of restaurant patrons in said parking spaces on a
"non-mandatory valet" basis, whereby restaurant patrons would have the option of
either valet parking, or "self parking" their vehicles. However, in the event
that Landlord determines in it's sole discretion that "self parking' by
restaurant patrons is creating operational problems, increases insurance rates,
or other problems as Landlord may perceive, then Landlord shall have the right
to require Tenant to eliminate patron "self parking", and require mandatory
valet service during Evening and Weekend Operations as well as during Daytime
Operations.
5.3 Valet Parking Service QualificationsTenant shall engage the services of an
-------------------------------------
experienced and reputable valet parking service who shall thereafter be the
subcontractor of Tenant. Prior to the commencement of operations, Tenant shall
secure from the valet parking service sub-contractor evidence of Comprehensive
General Liability Insurance with a Broad Form Liability Endorsement in an amount
of not less than $1,000,000 per occurrence of bodily injury and property damage,
Workers Compensation and Employer Liability Coverage at statutory limits, and
other insurance coverage as may be reasonably required by Landlord naming
Landlord as an additional insured, and valet parking service sub-contractor
shall keep such insurance coverage in full force and effect throughout the term
of this Lease, Further. Tenant shall ensure that valet parking service
sub-contractor complies with any and all reasonable rules and regulation issued
by Landlord."
F). Use,Section 6 of the Lease dated September 16, 1983, is hereby stricken in
----
it's entirety, and replaced with the following:
" 6. Use Tenant may use the Premises for the operation of a restaurant, micro
brewery, cocktail lounge and other uses incidental thereto. After the
Commencement date, Tenant shall keep the Premises open for business not less
than 350 days each calendar year, from 11:00 am to 11:00 PM, however tenant may,
at Tenants option, extend its hours past 11: 00 PM but in no event shall Tenant
remain open past 2: 00 AM. This provision shall not apply if the Premises shall
be closed and the business temporarily discontinued on account of strikes,
walkouts, damage to building or equipment, the suspension or loss of the liquor
or other governmental permits or licenses or any other cause beyond the
reasonable control of Tenant, whether permit of the same or any other nature.
Tenant may close for any reasonable period to remodel or renovate the premises.
Tenant shall not use or permit the use of the Premises in any manner that will
create waste or violate applicable law."
4
<PAGE>
G). Minimum Annual Rent,Section 7.1 of the Lease dated September 16, 1983, is
----------------------
hereby stricken in it's entirety, and replaced with the following:
7.1 Minimum Annual RentTenant shall pay to Landlord, at Landlord's address,
-----------------------
a minimum annual rent of $210,000.00, payable in twelve equal monthly
installments of $17,500.00 each, on the first day of each month of the lease
term. Such Minimum Annual Rent shall be paid by Assignor through the Assignment
Date, and shall be paid by Tenant thereafter."
H). Gross SalesDefined, Sub-section 7.2.2 of the Lease dated September 16, 1983,
-----------
is hereby stricken in it's entirety, and replaced with the following:
'72.2 Gross Sales DefinedThe term "Gross Sales" shall mean the aggregate
---------------------
amount of all sales, whether for cash, credit, or otherwise, of food, beverages,
goods, articles, any other merchandise and all charges for services performed,
made and rendered in, about or in connection with the Premises by Tenant,
including off-Premises sales and moneys derived at or away from the Premises
made in connection with the operation thereof, plus the net amount of all
receipts by Tenant from all sales made or performed by means of mechanical or
other vending devices except tobacco vending machines and pay telephones. Gross
sales shall be reduced by uncollectable accounts previously included in Gross
sales, but not to exceed one percent (1%) of sales, per year. Gross Sales shall
not include any federal, state, municipal or other sales, value added, retail,
excise or similar taxes paid or incurred by Tenant whether such taxes are
collected from customers or absorbed by Tenant; discounts from sales to
employees; complimentary meals; tips or gratuities; proceeds of insurance
policies received by Tenant; condemnation awards; bulk and intercompany
transfers of food or inventory; proceeds from the sale of used restaurant
equipment, fixtures or any other property that is not merchandise; or payments
for gift certificates or like vouchers."
1) Sales Statements and Adjustments,Sub-section 7.2.3 of the Lease dated
------------------------------------
September 16, 1983, is hereby stricken in it's entirety, and replaced with the
----
following:
"7.2.3 Sales Statements and AdjustmentsWithin 45 days after the end of each
-----------------------------------
threemonth period of each Lease Year (a "Lease Quarter"), Tenant shall deliver
to Landlord a statement signed by an officer or manager of Tenant setting forth
Tenant's Gross Sales for the prior Lease Quarter and Tenant shall pay to
Landlord the percentage rent due for that Lease Quarter as provided in Paragraph
7.2. 1. In calculating the percentage rent that is due, tenant shall base such
calculations on Tenant's accumulated business volume and accumulated rental
payments from the beginning of each Lease year. If such calculations shall show
a percentage rental owing for the preceding Lease Quarter, then Tenant shall pay
such amount with the statement of Tenant's Gross
5
<PAGE>
Sales. If such accumulated rent calculation shall show a credit due tenant on
account of percentage rent paid for preceding Lease Quarters of the Lease Year,
then Landlord shall reimburse Tenant for such amounts due and if Landlord shall
fail to make such reimbursement forthwith, then without limitation upon any of
the rights that Tenant may have, Tenant shall have the right to deduct the
amounts from the next rental payments of any kind due to Landlord as they shall
fall due. Within 60 days after the close of each lease Year, Tenant shall
furnish to Landlord a statement of Tenant's Gross Sales for such entire Lease
Year and a computation of the rent previously remitted to Landlord for such
Lease Year. If the rent theretofore paid by Tenant for such Lease Year shall be
less than the total amount of rent so computed to be due, Tenant shall pay the
difference to Landlord at that time. If such cumulative calculations shall show
a credit due tenant on account of percentage rent paid for preceding Lease
Quarters of the Lease Year, then Landlord shall reimburse Tenant for such
amounts due, and if landlord shall fail to make such reimbursement forthwith,
then without limitation to any other rights which Tenant may have, Tenant shall
have the right to deduct the amounts from the next rental payments due to
Landlord as they shall fall due. Notwithstanding the forgoing, during the first
Lease year, the last year of the Lease Term, or during any other partial Lease
Year, including any year after a period in which the Restaurant facility has
been closed, the Percentage Rent due shall be calculated based upon a partial
year basis, whereby the Percentage Rent due shall be equal to the amount by
which six percent (6%) of Tenants monthly Gross Sales exceed the Tenant's
Minimum Monthly Rent due for the same period. Tenant shall keep at the Premises,
or at the p~incipal offices of Tenant full and accurate books of account,
records, cash receipts, and other pertinent data showing its Gross Sales. Such
books of account, records, cash receipts, and other pertinent data shall be kept
for a period of two years after the end of the Lease Year to which such items
are applicable. Landlord shall be entitled during the term of this Lease to
inspect and examine other pertinent data so that Landlord can ascertain Tenant's
Gross Sales. Tenant shall cooperate fully with Landlord in making the
inspection. Landlord shall also be entitled; once during each Lease year and
once within 60 days after expiration or termination of this Lease, to an
independent audit of Tenant's books of account, records, cash receipts, and
other pertinent data to determine Tenant's Gross Sales, by a certified public
accountant to be designated by Landlord. The audit shall be limited to the
determination of Gross sales, shall be conducted at the place at which the
aforesaid books are usually kept, and shall be paid for by Landlord, except in
any case when Tenant has understated sales by three percent or more, in which
case, Tenant shall pay Landlord's reasonable costs of audit. If the audit shows
that there is any deficiency in the payment of any percentage rent, the
deficiency, plus interest thereon at the rate of ten percent per annum from the
due date to the date of payment, shall become immediately due and payable unless
the deficiency is 10 percent or more, in which event, unless it is the result of
an unavoidable error, Tenant shall pay Landlord twice the amount, of the
deficiency. Landlord shall keep any information gained from such statement,
inspection or audit confidential and shall not disclose such information to any
other person.
6
<PAGE>
J). Common Areas,Sub-section 8.4 of the Lease dated September 16, 1983, is
--------------
hereby stricken in it's entirety, and replaced with the following:
-
"8.4 Common AreasExcept as provided in Paragraphs 8.2 and 8.4, there shall be no
------------
charge, fee, or special assessment imposed on or payable by Tenant in regard to
the common areas of the Commercial Complex provided, however, that at its cost,
Tenant shall keep the Premises and grounds (as outlined red on the revised
Exhibit "A") clean, well kept and well landscaped, and shall keep its exclusive
Parking Area outlined in green on Exhibit "A" in a clean and swept condition and
Landlord shall remove debris and bottles from the nonexclusive Parking Area for
which Tenant shall pay to Landlord a fee of $250.00 per month. Such fee shall be
paid with Rent."
K). Notice,Section 19 of the Lease dated September 16, 1983, is hereby stricken
-------
in it's entirety, and replaced with the following:
"19. Notice Any notice, demand, request, consent, approval or communication that
either party desires or is required to give the other party or any other person
in connection herewith shall be in writing and either served personally or sent
by certified mail, with return receipt requested or by a nationally recognized
overnight delivery service. Any notice, demand, request, consent, approval or
communication that either party desires or is required to give to the other
party shall be addressed to the other party at the address set forth herein.
Either party may change its address by notifying the other party of the change
address.
Tenant: Landlord:
Chicago Pizza & Brewery, Inc. C & P Properties #1, a California
A California Corporation limited liability company
26131 Marguerita Pkwy, Ste. A 101 South First Street #400
Mission Viejo, California 92692 Burbank, CA 91502
Attn: President Attn: Michael Cusumano
Notice shall be deemed communicated upon the firstto occur of (i) actual receipt
of the notice, or (ii) 24 hours after the time of mailing, if mailed as provided
in this paragraph."
L). Surrender ofPremises, Sub-section 25.1 of the Lease dated September 16,
-------------
1983, is hereby stricken in it's entirety, and replaced with the following:
"25.1 Surrender of PremisesOn expiration or termination of the term, Tenant
-----------------------
shall surrender to Landlord the Premises and all of Tenant's improvements and
alterations in good condition (except for ordinary wear and tear occurring after
the last necessary maintenance made by Tenant and destruction to the Premises as
discussed herein), and, except for alterations or improvements that Tenant has
the right to remove under any provisions of this Lease. Tenant may remove all
its Trade Fixtures within a thirty (30)
7
<PAGE>
day period prior to the above-stated time. Tenant shall perform all restorations
made necessary by the removal of any alterations, improvements, or Trade
Fixtures within the time periods stated in this paragraph."
M). Common AreaSub-section 26.1 of the Lease dated September 16, 1983, is hereby
-----------
stricken in it's entirety, and replaced with the following:
"26.1 Commercial Complex.The Premises is located within and is part of the
--------------------
Commercial Complex as described in Recital A. The Commercial Complex shall
include the Premises, the Parking Area, additional parking, an office building,
driveways, sidewalks and other common area as depicted on revised Exhibit A.
Tenant shall have the right to use the driveways, sidewalks and other common
area (collectively, "Common Area") jointly with other tenants of the Commercial
Complex during the lease terms without any additional charge or fee."
N). Exhibit A Exhibit A is hereby deleted in it's entirety, and replaced with
the revised Exhibit 'A' and attached hereto.
0). Exhibit C Exhibit C is hereby deleted in its entirety.
P). Section 30, Transfer Costs.The following Section 30 is added to the Lease.
---------------
"30. Transfer CostsThe assignment, assumption and transfer of this Lease from
---------------
Assignor to Tenant and the related modification of this Lease is being
undertaken by Landlord as an accommodation to Assignor and Tenant, and Landlord
shall assume no cost associated herewith. Further, any and all direct third
party costs incurred by Landlord associated with the assignment, assumption and
transfer of this Lease to Tenant, or t1iis Lease Assignment and Assumption
Agreement and Third Amendment of Lease, (such as fee charged by Landlord's
Lender, legal fees, etc.) shall, be reimbursed to Landlord equally by Assignor
and Tenant. In addition to any such fees which shall be reimbursed from Assignor
and Tenant to Landlord, Assignor shall pay to Landlord a "Transfer Fee" in the
amount of $5,000.00 to reimburse Landlord for it's internal costs and expenses
associated with drafting this Lease Assignment and Assumption Agreement and
Third Amendment of Lease, and in consideration of the modifications made to this
Lease. Said Transfer Fee shall be paid concurrently with the execution of this
Agreement."
P). Section 3 1. Headings. The following Section 31 is added to Lease.
8
<PAGE>
"3 1. Headings. The headings for paragraphs, article and sections of this
Agreement are inserted for convenience only and do not constitute part of this
Agreement and shall not be used in it's construction."
Q). Section 32. Mutual Contribution. The following Section 32 is added to Lease.
"32. Mutual Contribution. This Agreement has been drafted on the basis of the
parties Mutual contributions of language and it is not to be construed against
any party as being the drafter (or causing the drafting) of this Agreement."
Except as modified herein, the provisions of the Lease shall remain in full
force and effect in accordance with the terms provided therein.
Landlord
C & P Properties #1, a California limited partnership
by Charles Cusumano Corporation, a California corporation
it's general partner
by Charles P.Cusumano
President
Assignor
Performance Restaurant Group, Inc. an Az corporation
by_
it's President
----------
Tenant
Chicago Pizza & Brewery, INC., A CALIFORNIA CORPORATION
by /s/Ernest T. Klinger
--------------------
it's President
---------
<PAGE>
2
3
LEASE AGREEMENT
---------------
4
5
6
7
CHARLES P. CUSUMANO and DIANNA J. CUSUMANO,
8 husband and wife,
9 collectively, Landlord
11
12
13
14
15
BOBBY MCGEEIS CONGLOMERATION OF LONG BEACH, INC.,
16 a California corporation, Tenant
<PAGE>
LEASE INDEX
- -----------
2
Paragraph Description Page
3
Premises 1
4
2. Construction 1
5
2.1 Plans 1
6
2.2 Approval of Plans 2
7
2.3 Construction 2
8
2.4 Construction Costs 3
9
2.5 Warranty 3
10
3. Term 3
11
3.1 Primary Term 3
12
3.2 Lease Year 3
13
3.3 Commencement Date 3
14
3.4 Extension Term 4
15
4. Guaranty 4
16
5. Termination conditions 4
17
5.1 Zoning 4
18
5.2 Approvals 4
19
5.3 Parking 4
20
5.4 Licenses 5
21
5.5 Title 5
22
5.6 Tests 5
23
5.7 Utilities 5
24
5.8 construction 5
25
5.9 Access 5
26
5.10 signs 5
27
28 6. Use 5
29 7. Rent 6
7.1 Minimum Annual Rent 1 6
30
31
32
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<PAGE>
7.2 PERCENTAGE RENT 6
7.3 PREPAID Rent a
2
8. Taxes; Assessments 8
3
8.1 Personal Property Taxes 8
4
8.2 Real Property Taxes 8
5
8.3 Substitute Taxes 9
6
8.4 Common Areas 9
7
9. utilities and services 9
8
10. Trade Fixtures 9
9
11. Alterations 9
10
12. Maintenance and Repair 10
11 1 '
13. Exculpation; Indemnity; Insurance 10
12
13.1 Exculpation of Landlord 10
13
13.2 Indemnity 10
14
13.3 Public Liability and Property
15
Damage Insurance 10
16
13.4 Tenant's Fire Insurance 11
17
13.5 Fire Insurance for Improvements 11
18
i3.6 Payment of Premiums 11
19
13.7 Waiver of Subrogation 11
20
13.8 other Insurance Matters 12
21
14. Destruction of Premises 12
22
23 14.1 Risk Covered by Insurance 12
14.2 Risk Not Covered by Insurance . 12
24
14.3 Termination 12
25
26 14.4 Proration 13
14.5 Restoration of Premises 13
27
28 14.6 Procedure for Restoring
Premises 14
29
30
31
32
<PAGE>
15. Condemnation 15
15.1 Definitions 15
2
15.2 Parties' Rights and obligations
3
to be Governed by Lease 15
4
15.3 Total Taking 15
5 1
15.4 Partial Taking 16
6
15.5 Restoration of and Addition to
7
Premises and other Areas 17
8
15.6 Award - Distribution 17
9
16. Assignment 17
10
16.1 Voluntary 17
11 n
16.2 Involuntary is
12
17. Default 18
13
17.1 Tenant's Default 18
14
17.2 Landlord's Remedies 19
15
17.3 Appointment of Receiver 19
16
17.4 Landlord's Default 19
18. Subordination; Estoppel; Quiet
18
Enjoyment 19
19
18.1 Subordination 19
20
18.2 Estoppel Certificates 20
21
18.3 Quiet Enjoyment 20
22
19. Notice 20
23
20. waiver 21
24
21. Quitclaim Deed 21
25
22. Sale or Transfer of Premises 21
26
23. Attorneys' Fees 21
27
28 24. Waiver of Landlord's Lien - Tenant's
29 Property 21
30
31
32
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<PAGE>
25. Surrender of Premises; Holding
Over 22
2
25.1 Surrender of Premises 22
3
25.2 Holding over 22
4
26. Common Area 22
5 1
26.1 Commercial Complex 22
6
26.2 Maintenance 23
7
27. Memorandum of Lease 23
8
28. Miscellaneous Provisions 23
9
28.1 Time of Essence 23
10
28.2 Consent of Parties 23
11
28.3 Corporate Authority 23
12
28.4 Successors 23
13
28.5 Rent Payable in United States
14
Currency 24
15
28.6 Status of Parties on
1'
Termination of Lease 24
17
28.7' Exhibits 24
18
28.8 Negation of Partnership 24
19
20 28.9 Brokerage 24
29. Interpretation of Lease 24
21
29.1 State Law 24
22
23 29.2 integrated Agreement;
modification 24
24
29.3 Provisions are Covenants and
25
Conditions 24
26
29.4 Definitions 24
27
28 29.5 Captions 25
29 29.6 Singular and Plural 25
30 29.7 Joint and Several Obligations- 25
29.8 Serveability 25
31
32 30. Addresses of Landlord and Tenant 26
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<PAGE>
I LEASE AGREEMENT
2 THIS LEASE IS EXECUTED AS of the L day of
September, 1983, by and between CHARLES P. CUSUMANO and
3 DIANNA J. CUSUMANO, husband and wife, dealing with their
community property, collectively as the "Landlord," and BOBBY
4 McGEE'S CONGLOMERATION OF LONG BEACH, INC., a California
corporation, as the "Tenant."
5
RECITALS:
6
A. Landlord is negotiating with the. Redevelopment
7 Agency of the City of Burbank (the "Agency") to enable
Landlord to serve as the developer of a commercial office,
8 restaurant and parking complex (the "Commercial Complex") to
be construct6d on approximately 88,000 sq. ft. of land within
9 the City Centre Redevelopment Project (the "Centre") of the
City of Burbank,. California. The Commercial Complex is
10 depicted in the site plan attached hereto as Exhibit "All and
11 incorporated herein by this reference.
B. Landlord anticipates and shall exercise their
12 best efforts and due diligence to cause a Disposition and
Development Agreement and all other requisite instruments
13 (collectively "Agency Development Agreements") to be entered
into between Landlord and the Agency within 120 days of this
14 date and by which Landlord shall acquire fee title to and
shall be allowed to commence the construction of the
15 commercial complex.
16 C. Tenant has agreed to construct and operate the
restaurant portion of the Commercial Complex in accordance
17 with the-provisions of this Lease.
1
18 THEREFORE, in consideration of the Recitals and the
mutual' covenants herein contained, Landlord leases to Tenant
19 the Premises (hereinafter described) for the purposes and
20 pursuant to the provisions herein set forth.
AGREEMENTS:
- -----------
21
1. Premises.
22
The Premises consists of the following: approx--
23 imately 21,000 sq. ft. of land as more particularly described
in Exhibit "B" attached hereto and incorporated herein by
24 this reference and depicted in red on Exhibit "All; the
Improvements (hereinafter defined) which shall be constructed
25 thereon as herein provided; an exclusive right of use and easement in the
75 parking spaces to be constructed by Land
26 lord as closely to the Premises as is feasible approximately within the
area depicted in green on Exhibit "All; and a non
27 exclusive right of use and easement in the 135 parking spaces to be
constructed by Landlord approximately within the area
28 depicted in blue on Exhibit "A".
29 2. Construction.
30 2.1 Plans. Subject to Landlord's obligation
to pay its portion of the Improvements Cost as defined in
31 Exhibit "C" attached hereto and incorporated herein by this reference,
Tenant shall construct, or cause to be
32 constructed, a building, landscaping and related improvements
(collectively the "Improvements") for the Premises according
<PAGE>
I to plans and specifications (the "Plans") to be prepared by
Tenant at its expense and to be submitted to Landlord within
2 30 days of this date. The Improvements shall be designed so
as to accommodate the operation of a restaurant, cocktail
3 lounge and discotheque in a building containing approximately
11,000 sq. ft. In addition, in the areas depicted in green
4 and blue on Exhibit "All (the "Parking Area"), at their
expense, Landlord shall construct a parking area sufficient
5 to accommodate at least 210 automobiles, 76 within the area
depicted in green (for the exclusive use of Tenant) and 135
6 within the area depicted in blue (for the nonexclusive,
shared use of Tenant). The Parking Area and necessary
7 paving, striping, driveways and landscaping shall be built in
a manner satisfactory to Tenant, in accordance with the
8 requirements of the Agency and the standards generally
applicable to the Centre and shall be completed on or before
9 the completion of the Improvements. Landlord shall
bear all of the costs of constructing the Parking Area and
10 none of those costs shall be included within the Improvements
Cost.
2.2 Approval of Plans. Landlord shall have
12 15 days after receipt of the Plans from Tenant within which
to review and approve them. If Landlord fails to notify
13 Tenant in writing within such 15-day period of Landlord's
disapproval of the Plans, the Plans shall be deemed approved.
14 If Landlord notifies Tenant of Landlord's disapproval of the
Plans within such 15-day period, then Landlord shall advise
15 Tenant of the reasons for the disapproval and the items that
must be modified, whereupon Landlord and Tenant shall meet
16 and confer so as to modify the plans to be acceptable to both
Landlord and Tenant. If for any reason Landlord and Tenant
17 are unable to agree upon the Plans within 60 days of this
date, then upon written notice issued by either party to the
18 other at any time thereafter and prior to the approval of the
Plans by both Landlord and Tenant, this Lease shall terminate
19 without further liability to either party. Upon approval of
the Plans by Landlord and Tenant, Landlord promptly shall
20 submit the Plans to the Agency and all other necessary
governmental authorities and shall proceed diligently to
21 obtain all requisite governmental approvals. If modifica-tions are
22 required to obtain such governmental approvals, and
22 if such modifications are acceptable to Tenant, Tenant shall
prepare such modifications and the Plans shall be resubmitted
23 by Landlord for governmental approval. If Tenant does not
approve the modifications required for governmental approval
24 or such approval is not obtained within 90 days of this date,
then at any time thereafter and prior to such approval, by
25 written notice to Landlord, Tenant may terminate this Lease.
Tenant shall not unreasonably withhold its approval of such
26 modifications, albeit if the aggregate cost of the
modifications required for governmental approval exceeds
27 $50,000.00, Tenant may approve or disapprove them in
28 its sole discretion.
2.3 Construction. Tenant shall cause
29 construction of the Improvements to be commenced as soon as
possible after the obtaining of governmental approval.
30 subject to extension for causes beyond Tenant's control, if
construction of the Improvements does not commence within 130
31 days of this date, or if construction is not completed within
six months after the date of commencement of construction,
32 Landlord shall have the right at any time thereafter, so long
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<PAGE>
I as the construction has not been commenced or completed, as applicable,
within the time specified, either (a) to
2 terminate this Lease upon 30 days' written notice to Tenant, whereupon, if
the failure is that of commencement, Tenant and
3 Landlord shall be released of all obligations hereunder, or if the failure
is that of completion, Landlord shall
4 reimburse Tenant in cash for the Tenant's Improvements Costs (as defined
in Exhibit previously paid by Tenant, if
5 any, and upon Tenant's receipt of such payment, this Lease shall terminate
and the parties shall be -released of all
6 further obligations hereunder; or (b) as an alternative to termination,
upon written notice to Tenant, Landlord may
7 extend Tenant's time for commencement or completion, as applicable,
whereupon Tenant shall pay $250.00 for each day
8 of such delay in commencement or completion, as applicable. The
improvements shall be deemed to have been completed when
9 Tenant's- architect has certified that the Improvements have been
substantially completed in accordance with the Plans.
10
2.4 Construction Costs.Upon the condition
------
11 that Landlord timely pays its portion of the Improvements Cost as
provided in Exhibit "C", Tenant shall keep the
12 Premises free of mechanics' and materialmens' liens. Landlord is not, nor
shall Landlord be construed to be, the
13 agent of Tenant for any purpose whatsoever. At its expense, Tenant shall
have the right at any time to post the Premises
14 with appropriate notices of liquor license application, other notices as
Tenant may deem appropriate, and lawful signs in
15 size, content and at such locations as Tenant may deem appropriate to
advertise the pending opening of the
16 restaurant. During construction, Landlord shall have the right to conduct
inspections, review construction progress
17 and otherwise proceed as provided in Exhibit "C".
18 2.5 Warranty. Tenant shall cause the
Improvements to be constructed in a good and workmanlike
19 manner in compliance with the Plans and all applicable laws, regulations
and permits. Tenant's contractor shall fully and
20 unconditionally guarantee for one year following the date of completion
all materials and workmanship involved in
21 constructing the Improvements. Any repairs to or reconstruction of the
Improvements during that one-year
22 period shall be at the sole cost of Tenant or Tenant's
23 contractor, unless caused by the negligence of Landlord.
3. Term.
-----
24
3.1 Primary Term.This Lease shall be for a
-------------
25 primary term of twenty-five years, beginning on the Commencement Date and
ending on the last day of the twenty-fifth
26 consecutive Lease Year thereafter.
27 3.2 Lease Year. The term "Lease Year" shall
mean the fiscal year employed by Tenant for accounting
28 purposes, except that the first Lease Year shall begin on the
Commencement Date and expire on the expiration of the next
29 succeeding complete fiscal year of Tenant.
30 3.3 Commencement Date. The Commencement Date
of this Lease shall be the first to occur of the following:
31
3.3.1 the date on which Tenant shall
32 open the Premises fqr business to the public; or,
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<PAGE>
1 3.3.2 the date which is 30 days follow-
ing the date of the completion of the Improvements and the
2 Parking Area and the issuance of certificates of occupancy
therefor by all applicable governmental authorities in form
3 acceptable to Tenant.
4 In order to avoid any subsequent controversy as to
the exact "Commencement Date," the parties hereto agree,
5 within 30 days after the Commencement Date, to execute a
declaration in recordable form confirming the commencement
6 and expiration dates of the primary term.
7 3.4 Extension Term. Landlord grants to
Tenant the option to extend the primary term for one
8 additional term of five years following expiration of the
primary term by giving notice of exercise of the option at
9 least six months, but not more than one year, prior to the
expiration of the primary term. The extension shall be upon
10 the same terms and conditions herein contained except the
minimum annual rent shall be the "market"* rate then
11 prevailing in comparable facilities within the Centre,
however, if Landlord and Tenant cannot agree as to such rate,
12 it shall be established by a mutually acceptable appraiser
and, provided further, if Landlord and Tenant cannot agree as
13 to an appraiser, then they each shall select an appraiser
who, in turn, shall select a third appraiser, which third
14 appraiser's decision shall be binding. The minimum annual
rent for the extension term shall not be less than
15 $240,000.00 per year.
16 4. Guaranty. Tenant's obligations under this
Lease shall be guaranteed by Bobby McGee's, U.S.A., Inc., an
17 Arizona corporation, through its execution below as
guarantor. However, the guaranty shall cease and be of no
18 further force or effect if at any time on or after 7;j
years
from this date, Tenant's net worth exceeds $3 million, as
19 established pursuant to generally accepted accounting
20 principles.
5. Termination Conditions. Tenant shall be
21 entitled to terminate this Lease by notice to Landlord
unless, prior to the expiration of 120 days from this date,
22 Tenant shall have received evidence satisfactory to it that
each of the following conditions precedent has been
23 satisfied:
24 5.1 Zoning. The Premises are zoned for use
25 as a restaurant, discotheque and cocktail lounge;
5.2 Approvals. All permits and licenses
26 necessary for the construction and contemplated operation and
use of the Improvements have been obtained from the requisite
27 governmental authorities;
28 5.3 Parkinq. At least 75 exclusive and 135
nonexclusive parking spaces within the Parking Area will be
29 available for use by Tenant, its employees, agents, customers
and guests, on or before the time the Improvements are
30 scheduled to be completed (albeit as to the 135
nonexclusive
parking spaces, they need only be available from 5:00 p.m. to
31 2:00 a.m. each day);
32
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<PAGE>
5.4 Licenses. Tenant will be able timely to obtain from appropriate
governmental authorities all permits
2 and licenses for the on-premises sale and consumption of wine, beer,
cocktails and other alcoholic beverages and for
3 the operation and use of the Premises as a restaurant,
4 discotheque and cocktail lounge;
5.5 Title. Landlord shall have executed the
5 Agency Development Agreements and shall have acquired fee title to the
Premises subject only to such exceptions as are
6 satisfactory to Tenant and, in that regard, at its cost, Landlord shall
deliver a preliminary or condition of title
7 report for the Premises to Tenant within 15 days of the date hereof and
shall provide Tenant with a complete copy of the
8 Agency Redevelopment Agreements within 10 days of their execution;
9
5.6 Tests. The results of soil and
10 engineering tests to be obtained by Landlord at its expense are
acceptable to Tenant for the construction of the
11 Improvements;
12 5.7 Utilities. Gas, electricity, sewer,
water and other utilities connections will be available
13 within 5 feet of the Premises at no cost to Tenant and with
14 capacity and supply sufficient for Tenant's intended use;
5.8 Construction. Tenant has approved the
15 cost of constructing the Improvements as estimated in writing by the
contractor and Tenant has confirmed that Landlord has
16 funds sufficient to pay Landlord's $970,000.00 portion of the
17 Improvements Cost as required by Exhibit "C";
5.9 Access. The City of Burbank shall
18 provide or certify in writing to Tenant, that it shall provide ingress to
and egress from the Premises, satisfactory
19 to Tenant;
20 5.10 Signs. The City shall certify in writing
to Tenant, in a form satisfactory to Tenant, that Tenant may
21 construct: (i) a 36-foot billboard sign; and, (ii) a monument sign on the
Premises, which signs shall be located
22 at sites mutually agreeable to Landlord, Tenant and the City, and shall
have a top elevation not less then that of the
23 signs on the adjacent properties known as "Restaurant Row".
24 In the event that Tenant terminates this Lease for
failure of any of the foregoing conditions, the parties shall
25 be released of all further obligations hereunder and all funds, if any,
paid by Tenant immediately shall be refunded
26 to Tenant. The foregoing conditions are for the benefit of
27 Tenant and may be waived in writing by Tenant at any time.
28 6. Use. Tenant may use the Premises for the
operation of a restaurant, discotheque, cocktail lounge and
29 other uses incidental thereto. After the Commencement Date, Tenant shall
keep the Premises open for business not less than 350 days each calendar year,
from 11:00 a.m. to 2:00
30 p.m. during the days that luncheon is served and from 5:00 p.m. to 2:00
a.m. when luncheon is not served. Tenant shall
31 be open for lunch Monday through Friday and may be open for
32 lunch or brunch on Saturday and Sunday. This provision shall not apply if
the Premises shall be closed and the business
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<PAGE>
temporarily discontinued on account of strikes, walkouts,
damage to building or equipment, the suspension or loss of
2 the liquor or other governmental permits or licenses or any
other cause beyond the reasonable control of Tenant, whether
3 of the same or any other nature. Tenant shall not use or
permit the use of the Premises in any manner that will create
4 waste or violate applicable law.
5 7. Rent.
6 7.1 Minimum Annual Rent. Tenant shall pay to
Landlord, at Landlord's address, a minimum annual rent of
7 $160,000.00, payable in twelve equal monthly installments of
$13,333.34 each, on the first day of each month of the lease
8 term. If the Commencement Date is the first day of the
month, then Tenant shall pay the first monthly installment of
9 rent on-the Commencement Date. Otherwise, the first monthly
installment of rent shall be due on the first day of the
10 month following the Commencement Date and shall include
additional rent for the period between the Commencement Date
11 and the first day of the following month based on the amount
of the monthly installment of the minimum rent and a 30-day
12 month. Upon the termination of this Lease, the minimum
annual rent shall be prorated to the date of termination and
13 Landlord shall repay immediately to Tenant all minimum annual
14 rent prepaid and unearned.
7.2 Percentage Rent.
15
7.2.1 Percentage Rent Rate. In addition
16 to minimum annual rent, Tenant shall pay to Landlord as
percentage rent, a sum equal to the amount by which six
17 percent of Tenant's Gross Sales made from or upon the
Premises 'during each Lease Year exceeds the minimum annual
18 rent for such Lease Year. The percentage rent shall be
payable quarterly, 45 days after the end of each three-month
19 period during the lease term, subject to adjustment at the
20 end of each Lease Year as provided in Paragraph 7.2.3.
7.2.2 Gross Sales Defined. The term
21 "Gross Sales" shall mean the aggregate amount of all sales,
whether for cash, credit or otherwise, of food, beverages,
22 goods, articles, any other merchandise and all charges for
services performed, made and rendered in, about or in
23 connection with the Premises by Tenant, including
off-Premises sales and monies derived at or away from the
24 Premises made in connection with the operation thereof, plus
25 the net amount of all receipts by Tenant from all sales made
or performed by means of mechanical or other vending devices
except tobacco vending machines and pay telephones. Gross
26 Sales shall not include any federal, state, municipal or
other sales, value added, retail, excise or similar taxes
27 paid or incurred by Tenant whether such taxes are collected
from customers or absorbed by Tenant; discounts from sales to
28 employees; complimentary meals; tips or gratuities; proceeds
of insurance policies received by Tenant; condemnation
29 awards; bulk and intercompany transfers of food or inventory;
proceeds from the sale of used restaurant equipment, fixtures
30 or any other property that is not merchandise; or payments
31 for gift certificates or like vouchers.
7.2.3 Sales Statements and Adjustments.
---------------------------------
32 Within 45 days after the end of each three-month period of
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<PAGE>
1 each Lease Year (a "Lease Quarter"), Tenant shall deliver to
Landlord a statement signed by an officer or manager of
2 Tenant setting forth Tenant's Gross sales for the prior Lease
Quarter and Tenant shall pay to Landlord the percentage rent
3 due for that Lease Quarter as provided in Paragraph 7.2.1.
In calculating the percentage rent that is due, Tenant shall
4 base such calculation on Tenant's accumulated business volume
and accumulated rental payments from the beginning of each
5 Lease Year. If such calculations shall show a percentage
rental owing for the preceding Lease Quarter, then Tenant
6 shall pay such amount with the statement of Tenant's Gross
Sales. If such accumulated rent calculation shall show a
7 credit due Tenant on account of percentage rent paid for
preceding Lease Quarters of the Lease Year, then Landlord
8 shall reimburse Tenant for such amounts due and if Landlord
shall fail to make such reimbursement forthwith, then without
9 limitation upon any of the rights that Tenant may have,
Tenant shall have the right to deduct the amounts from the
10 next rental payments of any kind due to Landlord as they
shall fall due. Within 45 days after the close of each Lease
11 Year, Tenant shall furnish to Landlord a statement of
Tenant's Gross Sales for such entire Lease Year and a
12 computation of the rent previously remitted to Landlord for
such Lease Year. If the rent theretofore paid by Tenant for
13 such Lease Year shall be less than the total amount of rent
so computed to be due , Tenant shall pay the difference to
14 Landlord at that time if such cumulative calculations shall
show a credit due Tenant on account of percentage rent paid
15 for preceding Lease Quarters of the Lease Year, then Landlord
shall reimburse Tenant for such amounts due, and if Landlord
16 shall fail to make such reimbursement forthwith, then without
limitation to any other rights which Tenant may have, Tenant
17 shall have the right to deduct the amounts from the next
rental payments due to Landlord as they shall fall due.
18 Tenant, shall keep at the Premises, or at the principal
offices of BOBBY McGEE'S U.S.A., INC., full and accurate
19 books of account, records, cash receipts, and other pertinent
data showing its Gross Sales. Such books of account,
20 records, cash receipts, and other pertinent data shall be
kept for a period of two years after the end of the Lease
21 Year to which such items are applicable. Landlord shall be
entitled during the term of this Lease to inspect and examine
22 all Tenant's books of account, records, cash receipts, and
other pertinent data so that Landlord can ascertain Tenant's
23 Gross Sales. Tenant shall cooperate fully with Landlord in
making the inspection. Landlord shall also be entitled, once
24 during each Lease Year and once within 60 days after
expiration or termination of this Lease, to an independent
25 audit of Tenant's books of account, records, cash receipts,
and other pertinent data to determine Tenant's Gross Sales,
26 by a certified public accountant to be designated by
Landlord. The audit shall be limited to the determination of
27 Gross Sales, shall be conducted at the place at which the
aforesaid books are usually kept, and shall be paid for by
28 Landlord, except in any case when Tenant has understated
sales by three percent or more, in which case, Tenant shall
29 pay Landlord's reasonable costs of audit. If the audit shows
that there is any deficiency in the payment of any percentage
30 rent, the deficiency, plus interest thereon at the rate of
ten percent per annum from the due date to the date of
31 payment, shall become immediately due and payable unless the
deficiency is 10 percent or more, in which event, unless it
32 is the result of unavoidable error, Tenant shall pay Landlord
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<PAGE>
twice the amount of the deficiency. Landlord shall keep any information gained
from such statements, inspection or audit
2 confidential and shall not disclose such information to any
other person.
3
7.3 Prepaid Rent.
4
7.3.1 Tenant shall deposit with Landlord
5 the sum of $33,325.00 upon the execution of this Lease by
Landlord (the "Initial Deposit"). Upon the commencement of
6 the construction of the Improvements, Tenant shall deposit with Landlord
the sum of $33,325.00 (the "Additional
7 Deposit"). Landlord and Tenant agree that the initial and
Additional Deposits automatically shall be applied by
8 Landlord and credited to Tenant in payment of the initial minimum-annual
rents as they become due hereunder.
9
7.3.2 In the event this Lease is
10 cancelled because the contingencies set forth herein are not satisfied or
for any other reason other than the default of
11 Tenant, the Initial and the Additional Deposits less such amounts as
previously have been applied pursuant hereto, if
12 any, shall be refunded and paid by Landlord to Tenant within 10 days of
Landlord's receipt of a written demand therefore
13 from Tenant and Landlord shall have no further right or
14 interest in the Deposits.
8. Taxes; Assessments.
-------------------
15
8.1 Personal Property Taxes.Tenant shall
------------------------
16 pay before delinquency all taxes, assessments, license fees and other
charges ("taxes") that are levied and assessed
17 against Tenant's Trade Fixtures installed or located in or on the
Premises and that become payable during the Lease term.
18 on demand by Landlord, Tenant shall furnish Landlord with
19 satisfactory evidence of such payments.
8.2 Real PropertyTaxes. Tenant shall pay
-------------
20 before delinquency any and all real property taxes that become due during
the Lease term with respect to the
21 Premises, 50 percent of such taxes on the Parking structure within the
Commercial Complex and 50 percent of such taxes on
22 the land within the Commercial Complex (excluding the Premises). If any
tax bill or statement is received by
23 Landlord, Landlord shall forward a copy thereof to Tenant and Landlord's
failure to do so shall excuse Tenant from the
24 obligation of payment thereof until Tenant receives such statement.
Landlord shall forward such statement within the
25 time required for Tenant to contest any increase in taxes and to avoid
penalties and late charges and, if Landlord fails to
26 do so, Landlord shall pay such increase, penalty or late charge, as
applicable. Landlord agrees to attempt to have
27 the Premises assessed separately from other property not covered by this
Lease, but in the event the Premises are not
28 so separately assessed, then and in such event, the taxes on the Premises
shall be apportioned on the basis of the ratio
29 between the square footage of the land within the Premises and the total
square footage of all land within the parcel
30 assessed. Tenant shall have the right to seek a reduction of, or contest,
any taxes that are to be paid by Tenant
31 hereunder. Tenant shall bear the cost of such actions or
32 proceedings, shall. hold Landlord harmless from any damage
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<PAGE>
arising therefrom and shall pay any final judgment that may be rendered therein.
2
8.3 Substitute Taxes. Tenant shall not be
3 required to pay any municipal, county, state or federal income or
franchise taxes of Landlord, or any municipal,
4 county, state or federal estate, succession, inheritance or transfer taxes
of Landlord. If, at any time during the term,
5 the laws concerning the methods of real property taxation prevailing on
the effective date hereof are changed so that a
6 tax or excise on rents or any other such tax, however described, is levied
or assessed against Landlord as a direct
.7 substitution, in whole or in part, for any real property taxes or
assessments otherwise due, Tenant shall pay before
8 delinquency (but only to the extent that it can be ascertained that there
has been a substitution and that, as a
9 result, Tenant has been relieved from the payment of real property taxes
which Tenant would otherwise have been
10 obligated to pay), the substitute tax, assessment, or excise on rents.
11
8.4 Common Areas.Except as provided in
-------------
12 Paragraph 8.2, there shall be no charge, fee, or special assessment
imposed on or payable by Tenant in regard to the
13 common areas of the Commercial Complex provided, however, that at its
cost, Tenant shall keep its exclusive Parking
14 Area outlined in green on Exhibit "All in a clean and swept condition and
shall remove debris and bottles from the
15 nonexclusive Parking Area outlined in blue on Exhibit "A".
16 9. Utilities and Services. Tenant shall pay for
all utilities and services furnished to or used by it on the
17 Premises', including, without limitation, gas, electricity, water.,
telephone service, trash collection and sewer service.
18 At it~s expense, Landlord shall provide the necessary mains and conduits
for gas, electricity, sewer, water and telephone
19 to within five feet of the Premises.
20 10. Trade Fixtures. Tenant shall have the right
to erect, install, maintain and operate on the Premises such
21 improvements, equipment, trade and business fixtures, signs and other
personal property (collectively "Trade Fixtures")
22 as Tenant may deem appropriate for the operation of the Premises. The
Trade Fixtures shall remain the property of
23 Tenant. Tenant shall provide Landlord with a written description of such
Trade Fixtures at the Commencement Date and
24 thereafter within a reasonable time after the installation of additional
Trade Fixtures.
25
11. Alterations. At its sole cost and expense,
26 Tenant shall have the right to make any nonstructural alterations,
additions or improvements to the Premises
27 (collectively "Alterations") it deems necessary or appropriate in
connection with the requirements of its
28 business, without the necessity of obtaining the written consent of
Landlord and without the payment of any additional
29 rent, provided that any such Alterations shall not materially injure,
deface or impair the value of the Premises. Tenant
30 shall not make any material or structural Alterations without the prior
written consent of Landlord. Any Alterations made
31 by Tenant to the Premises shall remain on and be surrendered with the
Premises. upon expiration or termination of the
32 Lease, except such Alterations as may be removed without
- -9-
<PAGE>
1 substantial damage to the Premises, which may be removed by Tenant within
30 days following the termination of this
2 Lease. If Tenant makes any Alterations to the Premises, they shall not be
commenced until 10 days after Landlord has
3 received notice from Tenant stating the date of commencement of the
installation of the Alterations so that Landlord can
4 post and record an appropriate notice of non-responsibility. Tenant shall
be solely responsible, at Tenant's expense, for
5 any and all Alterations to the Premises. Any such Alterations shall be
made in compliance with-applicable law.
6
12. Maintenance and Repair.
-----------------------
7
Except as provided in Paragraphs 14, 15 and 26,
8 during the term hereof, at its sole cost and expense, Tenant shall
maintain or cause to be maintained and kept in good
9 state of -repair and in a clean and sanitary condition, the
Premises and the -exclusive Parking Area outlined in green on
10 Exhibit "All including the paving, striping and lighting for the latter.
11
13. Exculpation; Indemnity; Insurance.
----------------------------------
12
13.1 Exculpation of Landlord.Except for
------------------------
13 damage caused by the acts or omissions of Landlord, its agents,
contractors or others for whom Landlord is
14 responsible, Landlord shall not be liable to Tenant for any damage
resulting from any fire or casualty; or the plumbing,
15 gas, water, steam, sprinklers or other pipe and sewage system; or the
bursting, running, or leaking of any tank,
16 washstand, closet, or waste, or other pipes, in or about the Premises;
water being upon or coming through any roof,
17 skylight,, vent, trap door or otherwise; or for any damage arising from
the acts of neglect of occupants of the
18 Premises, of adjacent property, or of the public. Landlord shall not be
liable in damages or otherwise for any
19 interruption of service of any water, gas, electricity, heated water,
steam or chilled water, or of any other service
20 to the Premises, caused by fire, accident, riot, strike, labor disputes,
acts of God, the making of repairs or
21 improvements, or any other causes beyond the control or
22 responsibility of Landlord.
13.2 Indemnity.Tenant shall indemnify and
----------
23 hold harmless Landlord from any and all claims arising out of the
negligence of Tenant, or its contractors, licensees,
24 agents, servants or employees, and from and against all costs, expenses,
and liabilities incurred in connection with
25 any claims or proceedings brought thereon; provided, however, that
Landlord shall be liable for such damage if it results
26 from the negligence or misconduct of Landlord or those for whom it is
responsible, and Landlord shall hold Tenant
27 harmless from all damages resulting from any such negligence ?r
misconduct. A party's obligation under this paragraph to
28 indemnify and hold the other party harmless shall be limited to the sum
that exceeds the amount of insurance proceeds, if
29 any, received by the party being indemnified.
30 13.3 Public Liability and Property Damage
------------------------------------
Insurance. At its sole cost, Tenant shall maintain public
---------
31 liability and property damage insurance with liability limits
of Two Million Dollars ($2,000,000.00) per occurrence, and
32 property damage limits of not less than one HurAred Thousand
_10-
<PAGE>
Dollars ($100,000.00) per occurrence, against all liability of Tenant and its
representatives arising out of, or in connection with, Tenant's use or occupancy
of the Premises. ~11 public liability and property damage insurance shall
3 insure performance by Tenant of the indemnity provisions of Paragraph
13.2. Both parties shall be named as ccoinsureds,
4 and the policy shall contain cross-liability endorsements.
5 13.4 Tenant's Fire Insurance; At its sole
cost, Tenant shall maintain on all its Trade Fixtures in, on,
6 or about the Premises, a policy of standard fire and extended coverage
insurance, with vandalism and malicious mischief
7 endorsements, to the extent of at least 80 percent of their
8 replacement value.
13.5 Fire Insurance for Improvements.At its
--------------------------------
9 sole cost, Tenant shall maintain on the building and improvements that are
a part of the Premises, a policy or
10 policies of standard fire and extended coverage insurance, with vandalism
and malicious mischief endorsements, to the
11 extent of one hundred percent of replacement value excluding the cost of
excavations, foundations, footings, and
12 underground tanks, conduits, pipes, pilings and other underground items.
The insurance policy or policies, or a
13 certificate of insurance evidencing such policy or policies,
14 shall be issued in the names of Tenant and Landlord as their interests
appear. The insurance policy or policies, or the certificate of insurance, shall
provide that any proceeds
15 shall be made payable as stipulated herein.
16 13.6 Payment of Premiums. Tenant shall pay
the premiums for maintaining any and all of the insurance
17 required by this Lease. Tenant's obligation to pay the insurance costs
shall be prorated for any partial year at the
18 commencement and expiration or termination of the term.
19 13.7 Waiver of Subrogation. To the extent of
the insurance proceeds paid with respect thereto, the parties
20 release each other and each other's respective authorized representatives
from any claims for injury to any person or
21 damage to the Premises and to the fixtures, personal property,
improvements and alterations of either Landlord or
22 Tenant in or on the Premises, that are caused by or result from risks
insured against under any insurance policies
23 carried by the parties and in force at the time of any such damage. Each
party shall cause each insurance policy
24 obtained by it to provide that the insurance company waives all right of
recovery by way of subrogation against either
25 party in connection with any damage covered by any policy. To the extent
of the insurance proceeds paid with respect
26 thereto, neither party shall be liable to the other for any damage caused
by fire or any other risks insured against
27 under any insurance policy required by this Lease. If any
28 insurance policy cannot be obtained with a waiver of subrogation, the
party undertaking to obtain the insurance
29 Shall notify the other party and the other party shall have a period of
10 days after receiving the notice to locate a company that is reasonably
satisfactory to the other party
30 and that will issue the insurance with a waiver of
31 subrogation. If the insurance cannot be obtained, the other party is
relieved of the obligation to obtain a waiver of subrogation rights with respect
to the particular insurance
32
<PAGE>
I involved and this paragraph shall have no application
thereto.
2
13.8 Other Insurance Matters. All the insur-
3 ance required under this Lease shall:
4 13.8.1 Be issued by insurance companies
authorized to do business in the State where the Premises are
5 located, with a financial rating of at least B-11 status as
rated in the most recent edition of Best's Insurance Reports.
6
13.8.2 Be issued as a primary policy or,
7 in the alternative, be issued as a part of a -so-called
"blanket policy."
8
13.8.3 Contain an endorsement requiring
9 10 days' written notice from the insurance company to both
parties before cancellation or change in the coverage, scope
10 or amount of any policy.
11 Each policy, or a certificate of the policy,
together with evidence of payment of premiums, shall be
12 deposited with the other party at the commencement of the
term and, on renewal of the policy, not less than 20 days
13 before expiration of the term of the policy.
14 14. Destruction of Premises.
15 14.1 Risk Covered by Insurance. Subject to
the provisions of Paragraph 14.3 below, if, during the term,
16 the Improvements are totally or partially destroyed by a
casualty covered and proceeds paid under the insurance
17 described in Paragraph 13, Tenant shall at its expense (not
to exceed the insurance proceeds received by Tenant) repair
18 such destruction as soon as reasonably possible and this
Lease shall continue in full force and effect.
19
14.2 Risk Not Covered by Insurance. Subject
20 to the provisions of Paragraph 14.3 below, if during the
term, the Improvements are totally or partially destroyed by
21 a casualty not covered by the insurance described in
paragraph 13 or the proceeds of applicable insurance are
22 insufficient to pay all the costs of restoration, at its
option, Tenant may either (a) repair such damage as soon as
23 reasonably possible at its expense, in which event this Lease
shall continue in full force and effect, or (b) give written
24 notice to Landlord within 30 days after the date of the
occurrence of such destruction of Tenant's intention to
25 cancel and terminate this Lease as of the date of the
occurrence of such destruction. If Tenant elects to cancel
26 and terminate this Lease, Landlord shall have the right
within ten days after the receipt of such notice to give
27 written notice to Tenant of Landlord's intention to effect
restoration at Landlord's expense, in which event, this Lease
28 shall continue in full force and effect and Landlord shall
complete such restoration forthwith. If Landlord does not
29 give such notice within such ten-day period, this Lease shall
be cancelled and terminated effective as of the date of the
30 occurrence of such destruction.
31 14.3 Termination. In addition to and
independent of the provisions of Paragraphs 14.1 and 14.2
32 above, in the event of a destruction of the Premises, by
- -12-
<PAGE>
1 written notice to Landlord, Tenant may terminate this Lease
2 if any of the following events occur:
14.3.1 applicable laws do not permit
3 restoration to substantially the condition existing prior to the
destruction; or,
4
14.3.2 the restoration cannot be
5 completed within 280 days after the date of destruction; or,
6 -14.3.3 Landlord fails to complete
restoration within ninety days after it elects to do so
7 pursuant to Paragraph 14.2 above (by notice 'E-o"Landlord at
8 any time prior to the completion of restoration).
14.4 Proration.Upon termination of this
----------
9 Lease pursuant to the provisions of this paragraph, any advance rental or
other advance payments made by Tenant to
10 Landlord shall be prorated as of the termination date with the unearned
portion returned to Tenant in cash; the
11 insurance proceeds applicable to the Improvements constructed and paid
for by Landlord shall be paid to Landlord; the
12 insurance proceeds applicable to the Trade Fixtures and other property of
Tenant shall be paid to Tenant; and the insurance
13 proceeds derived from policies not required by this Lease shall be paid
to the party that procured the policies and
14 paid the premiums.
15 14.5 Restoration of Premises.
16 14.5.1 Adjustment of Minor Loss. If,
during the term, the Premises are destroyed by a risk covered
17 by the insurance described in Paragraph 13 and this Lease is not
terminated, provided the total amount of loss does not
18 exceed One Hundred Thousand Dollars ($100,000.00), Tenant shall make the
loss adjustment with the insurance company
19 insuring the loss. The proceeds shall be paid directly to Tenant for the
purpose of making the restoration of the
20 Premises.
21 14.5.2 Adjustment of Major Loss. If,
during the term, the Premises are destroyed by a risk covered
22 by the insurance described in Paragraph 13, and the total amount of loss
exceeds One Hundred Thousand Dollars
23 ($100,000.00), if this Lease is not terminated, Tenant shall make the
loss adjustment with the insurance company insuring
24 the loss and on receipt of the proceeds shall immediately pay them to any
appropriate institution (Insurance Trustee) named
25 by Landlord and Tenant. If the Premises are destroyed by a risk not
covered by the insurance described in Paragraph 13
26 or such insurance proceeds are insufficient to pay all the costs of
restoration, if this Lease is not terminated, then
27 the party or parties that have the obligation to restore the Premises (as
provided in Paragraph 14.2 above), shall deposit
28 with the Insurance Trustee their respective contributions toward the cost
of restoration. All sums deposited with the
29 Insurance Trustee shall be held for the following purposes and the
Insurance Trustee shall have the following powers and
30 duties:
31 The sums shall be paid in installments by the
Insurance Trustee to the contractor as construction
32 progresses, for payment of the cost of restoration. A ten
- -13-
<PAGE>
percent retention fund shall be established that will be paid to the contractor
on completion of restoration, payment of
2 all costs, expiration of. all applicable lien periods, and proof that the
Premises are free of all mechanics' liens and
3 lienable claims.
4 Payments shall be made on presentation of
certificates or vouchers from the architect or engineer
5 showing the amount due. If the Insurance Trustee, in its reasonable
discretion, retains an architeat or engineer to
6 supervise construction and to authorize progress payments, the reasonable
expenses and charges of the architect or
7 engineer retained by the Insurance Trustee shall be paid by the Insurance
Trustee out of the trust fund.
8
If the sums held by the Insurance Trustee are not
9 sufficient to pay the actual cost of restoration, the party or parties
obligated to fund the restoration shall deposit
10 the amount of the deficiency with the Insurance Trustee within 20 days
after request by the insurance Trustee
11 indicating the amount of the deficiency.
12 Any sums not disbursed by the Insurance Trustee
after restoration has been completed and final payment has
13 been made to the contractor shall be delivered to Landlord in proportion
to Landlord's contribution to the trust fund, and
14 the balance, if any, shall be paid to Tenant.
15 All actual costs and charges of the Insurance
Trustee shall be paid proportionately by the party or parties
16 obligated to fund the restoration.
17 ! if the Insurance Trustee resigns or for any reason
is unwilling to act or continue to act, Landlord and Tenant
18 promptly shall substitute a new trustee in the place of the designated
Insurance Trustee. The new Trustee must be an
19 institutional lender or title company doing business in the
20 city where the Premises are located.
Both parties promptly shall execute all documents
21 and perform all acts reasonably required by the Insurance
22 Trustee to perform its obligations under this paragraph.
14.6 Procedure for Restoring Premises.within
-------------------
23 30 days after the date that it is obligated to restore the Premises, the
party obligated to fund the restoration, at its
24 cost, shall prepare final plans and specifications and working drawings
complying with laws that will be applicable
25 to the restoration of the Premises. The plans and specifications and
working drawings must be approved by
26 Landlord and Tenant. Each party shall have 30 days after receipt of the
plans and specifications and working drawings
27 either to approve or disapprove the plans and specifications and working
drawings and shall notify the other of its
28 objections and proposed solution to each objection. The plans and
specifications and working drawings shall be
29 subject to approval of the appropriate governmental bodies and they will
be prepared in such a manner as to obtain that
30 approval. The restoration shall be accomplished as follows:
31 14.6.1 Unless otherwise provided above,
the party obligated to restore shall complete the restoration
32 within 90 days after final plans and specifications and
- -14-
<PAGE>
1 working drawings have been approved by the appropriate
governmental authorities and all required permits have been
2 obtained (subject to extension for delays resulting from
3 causes beyond reasonable control).
14.6.2 The party obligated to restore
4 shall retain a licensed contractor who is bondable. The
contractor shall be required to carry public liability and
5 property damage insurance, standard fire, and extended
coverage insurance with vandalism and malicious mischief
6 endorsements, during the period of construction in accordance
with Paragraph 13. Such insurance shall contain waiver of
7 subrogation clauses in favor of Landlord and Tenant in
8 accordance with the provisions of Paragraph 13.
14.6.3 The party obligated to restore
9 shall notify the other of the date of commencement of the
restoration not later than ten days before commencement to
10 enable the posting and recording of notices of
11 non-responsibility.
14.6.4 The restoration shall be
12 accomplished in a manner that will cause the least
13 inconvenience, annoyance and disruption at the Premises.
14.6.5 On completion of the restoration,
14 a notice of completion shall be recorded in the county in which the
Premises is located (if permitted by applicable
15 law).
16 15. Condemnation.
17 15.1 Definitions.
18 15.1.1 "Condemnation" means (a) the
exercise of any governmental power, whether by legal
19 proceedings or otherwise by a condemnor, and (b) a voluntary
sale or transfer to any condemnor, either under threat of
20 condemnation or while legal proceedings for condemnation are
21 pending.
15.1.2 "Date of taking" means the date
22 the condemnor has the right to possession of the property
23 being condemned.
15.1.3 "Award" means all compensation,
24 sums or anything of value awarded, paid or received on a
25 total of partial condemnation.
15.1.4 "Condemnor" means any public or
26 quasi-public authority, private corporation or individual
27 having the power of condemnation.
15.2 Parties' Rights and obligations to be
28 Governed by Lease. If during the term of this Lease, there
~s any taking of all or any part of the Premises or any
29 interest in this lease by condemnation, the rights and
obligations of the parties shall be determined pursuant to
30 this Paragraph 15.
31 15.3 Total Taking. If the Premises is totally
------------
taken by condemnation, this Lease shall terminate on the date
32 of taking, subject to the provisions of this Paragraph 15.
- -15-
<PAGE>
1 15.4 Partial Taking.
2 15.4.1 Effect on Lease.
3 a. Taking of Improvements.
If any portion (but less than all) of the building or other
4 Improvements on the Premises is taken by condemnation, this Lease shall
remain in effect, except that Tenant can elect to
5 terminate this Lease if in its opinion the remaining portion of the
Premises is rendered unsuitable for Tenant's continued
6 use of the Premises. If Tenant elects to , terminate this
Lease, Tenant must exercise its right to terminate pursuant
7 'to this paragraph by giving notice to Landlord within 30 days after the
nature and the extent of the taking have been
8 finally determined. If Tenant elects to terminate this Lease, as provided
in this paragraph, Tenant also shall
9 notify Landlord of the date of termination, which date shall not be
earlier than 30 days, nor later than 90 days, after
10 Tenant has notified Landlord of its election to terminate; except that
this Lease shall terminate on the date of the
11 taking if the date of taking falls on a date before the date of
termination as designated by Tenant. If Tenant does not
12 terminate this Lease within the 30-day period, this Lease shall continue
in full force and effect, except that the
13 minimum annual rent shall be reduced according to Paragraph 15.4.2.
14
b. Taking of Parking. If the
------------------
15 Parking Area is taken by condemnation, this Lease shall remain in full
force and effect, except that, if ten percent
16 or more of the Parking Area of the Premises is taken by condemnation,
Tenant shall have the election to terminate
17 this Lease. If Tenant elects to terminate this Lease, it shall give
notice to the Landlord within 30 days after the
18 nature and extent of the taking have been finally determined. Tenant,
shall notify Landlord of the date of termination,
19 which date shall not be earlier than 30 days or later than 90 days after
Tenant has notified Landlord of its election to
20 terminate; except that this Lease shall terminate on the date of taking
if the date of taking falls on a date before the
21 date of termination designated in the notice from Tenant. if this Lease
is not terminated within the 30-day period, it
22 shall continue in full force and effect, except that the minimum annual
rent shall be reduced according to Paragraph
23 15.4.2.
24 15.4.2 Effect on Rent. If any portion
of the Improvements is taken by condemnation and this Lease
25 remains in full force and effect, on the date of the taking, the minimum
annual rent shall be reduced by an amount that is
26 in the same ratio to minimum annual rent as the total number of square
feet in the Improvements taken bears to the total
27 number of square feet therein immediately before the date of taking. If
any portion of the Parking Area is taken by
28 condemnation and this Lease remains in full force and effect, on the date
of taking the minimum annual rent shall be
29 reduced by the amount that is in the same ratio as the total number of
parking spaces taken bears to the total number of
30 such spaces immediately before the date of taking.
31
32
- -16-
<PAGE>
15.5 Restoration of and Addition to Premises
and Other Areas.
2
15.5.1 Landlord's Election to Prevent
------------------------------
3 Lease Termination. If, within 30 days after the date that
- -----------------
the nature and extent of the taking are finally determined,
4 Landlord notifies Tenant that Landlord, at its cost, will add
on to the remaining Premises (including parking) so that the
5 area and approximate layout of the Premises (including
parking) will be substantially the same after the date of
6 taking as they were before the date of taking, and Landlord
commences the restoration immediately and completes the
7 restoration within 90 days after Landlord notifies Tenant,
this Lease shall continue in full force and effect without
8 any reduction in minimum annual rent, except the abatement or
9 reduction made pursuant to Paragraphs 15.4.2 and 15.5.3.
15.5.2 Restoration of Premises. if
-----------------------
10 there is a partial taking of the Premises and this Lease
remains in full force and effect pursuant to Paragraph 15.4,
11 Tenant shall accomplish all necessary restoration under the
same procedures specified' in Paragraph 14.6, except that
12 Tenant or the Insurance Trustee, as applicable, shall receive
from Landlord in cash at the time of the award an amount
13 equal to all of the costs of the restoration of the Premises.
14 15.5.3 Temporary Abatement or Reduc-
tion of Rent. Except for any percentage rent, rent shall be
15 abated or reduced during the period from the date of taking
until the completion of restoration, but all other
16 obligations of Tenant under the Lease shall remain in full
force and effect. The abatement or reduction of rent shall
17 be for such time and in proportion to the extent to which
Tenant's use of the Premises is impaired.
18
' 1 15.6 Award Distribution. The award shall
------------------
19 belong to and be paid to the parties as their interests
20 appear in accordance with applicable law.
16. Assignment.
21
16.1 Voluntary. Tenant shall not voluntarily
---------
22 sell or assign its interest in this Lease or in the Premises,
or sublease all or any part of the Premises, or allow any
23 other person or entity (except Tenant's authorized
representatives) to occupy or use all or any part of the
24 Premises, without first obtaining Landlord's prior written
consent, which consent shall not be unreasonably withheld.
25 Any sale, assignment or sublease to a party of equal or
better financial standing than Tenant would be one which
26 Landlord would, be expected to approve. Any
sale,
assignment
or sublease which requires but does not receive Landlord's
27 prior written consent shall be voidable by Landlord and, at
Landlord's election, shall constitute a default. No such
28 consent to any sale, assignment or sublease shall constitute
29 a further waiver of the provisions of this paragraph.
Landlord's consent to a sublease shall not relieve Tenant
from liability under this Lease. Any sale or assignment with
30 Landlord's consent shall relieve Tenant from liability
hereunder, otherwise a sale or assignment shall not relieve
31 Tenant from liability hereunder.
32
- -17-
<PAGE>
16.2 Involuntary. No interest of Tenant in
this Lease shall be assignable by operation of law. Each of
2 the following acts shall be considered an involuntary
3 assignment:
16-2.1 If Tenant is or becomes bankrupt
4 or insolvent, makes an assignment for the benefit of
creditors, or institutes a proceeding under the Bankruptcy
5 Act in which Tenant is the bankrupt; or,
6 16.2.2 If a writ of attachment or
execution is levied on this Lease, provided that-Tenant shall
7 have 60 days in which to cause the writ of attachment or
execution to be removed; or,
8
16.2.3 If, in any proceeding or action
9 to which Tenant is a party, a receiver is appointed with
authority to take possession of the Premises, provided that,
10 if any involuntary proceeding in bankruptcy is brought
against Tenant or if a receiver is appointed, Tenant shall
11 have 60 days in which to have the involuntary proceedings
dismissed or the receiver removed.
12
Any involuntary assignment not cured within 30 days
13 after notice to Tenant by Landlord shall constitute a default
by Tenant and Landlord shall have the right to elect to
14 terminate this Lease, in which case this Lease shall not be
treated as an asset of Tenant.
15
17. Default.
16
17.1 Tenant's Default.The occurrence of any
-----------------
17 of the following events shall constitute a default by Tenant:
18 17.1.1 The failure to pay rent when due
if such failure continues for 10 days after written notice by
19 Landlord to Tenant;
20 17.1.2 The failure to perform any other
provision of this Lease, if the failure to perform is not
21 cured within 20 days after written notice by Landlord to
Tenant. If the default cannot reasonably be cured within 20
22 days, Tenant shall not be in default of this Lease if Tenant
commences to cure the default within the 20-day period and
23 diligently and in good faith continues to cure the default;
24 or,
17.1.3 The abandonment of the Premises
25 (failure to occupy and operate the Premises for any 15
consecutive day period shall be deemed an abandonment if
26 without Landlord's written consent; provided, however, that
failure to occupy and operate the Premises due to the
27 suspension or loss of the liquor license or other requisite
permit or license or other prohibition or governmental
28 regulation [including, without limitation, energy
conservation or shortage) for a period of less than six
29 months in any one Lease Year shall not be an abandonment).
The failure to occupy or operate the Premises as a result of
30 a destruction or condemnation shall not be an abandonment.
31 Notices given under this paragraph shall specify
the alleged default and the applicable Lease provisions, and
32 shall demand that Tenant perform the provisions of this Lease
- -18-
<PAGE>
and pay the rent that is in arrears, as the case may be,
2 within the applicable period of time, or quit the Premises.
17.2 Landlord's Remedies. In the event of a
3 default by Tenant, Landlord may at any time thereafter: (a)
choose not to re-enter but to hold Tenant responsible for all
4 terms of this Lease; (b) re-enter the Premises, terminate
this Lease and hold Tenant responsible for all actual (but
5 not any consequential or punitive) damages resulting from the
default; or (c) re-enter the Premises, keep this Lease
6 intact, and attempt to relet the Premises on behalf of Tenant
as Tenant's agent. Upon re-entering the Premises, Landlord
7 may relet the Premises or any part thereof for-such term and
at such rental as Landlord may deem advisable with the right
8 to make alterations and repairs to the Premises. Landlord
may remove therefrom all persons and property. Should
9 Landlord elect to re-enter as herein provided, rentals
received by Landlord shall be applied against the rental and
10 other indebtedness due from Tenant hereunder. Should rentals
received from such reletting during any month be less than
11 that agreed to be paid during that month by Tenant, then
Tenant shall immediately pay and be liable for such
12 deficiency to Landlord. Should Landlord at any time
terminate this Lease for any default, Landlord may recover
13 from Tenant the reasonable cost of recovering the Premises
and the worth at the time of such termination of the rent
14 reserved in this Lease for the remainder of the term over the
then reasonable rental value of the Premises for the
15 remainder of the term.
16 17.3 Appointment of Receiver. If Tenant is in
default of this Lease, Landlord shall have the right to have
17 a receiver appointed to collect rent. Neither the filing of
a petition for the appointment of a receiver, nor the
18 appointment itself, shall constitute an election by Landlord
to terminate this Lease.
19
20 17.4 Landlord's Default. If Landlord shall
fail to observe or perform any of the provisions of this see
21 Lease to be performed by Landlord and such failure is not
cured within 10 days after notice has been given by Tenant to
Landlord, then Landlord shall be in default and without
22 further notice, Tenant may at any time thereafter: recover
all damageS resulting from the default whether by offset or
23 against rental or otherwise; effect a cure on Landlord's
behalf and all costs and expenses so incurred by Tenant
24 together with interest at the rate of ten percent per annum
shall be due and payable by Landlord on demand by Tenant; or
25 pursue any other right or remedy provided by law.
,
26 18. Subordination; Estoppel; Quiet Enjoyment
27 18.1 Subordination. Subject to the provisions
of paragraph 18.3, this Lease is and shall be subordinate to
28 any encumbrance now of record or recorded after the date of
29 this Lease affecting the Premises, provided such encumbrance
evidences the non-disturbance protections of Tenant set forth
below. Such subordination shall be effective without any
30 further act of Tenant. Tenant shall, from time to time on
request from Landlord, execute and deliver any documents or
31 instruments that may be required by a lender to effectuate
32 any subordination. As long as Tenant performs its
obligations under -this Lease, and is not in default
_19-
<PAGE>
4
hereunder, no foreclosure of, deed given in lieu of
foreclosure of, or sale under the encumbrance, and no other
2 steps or procedures taken under the encumbrance, shall affect
Tenant's rights under this Lease, and this Lease shall
3 continue in full force and effect as a direct Lease between
Tenant and any person succeeding to Landlord's interest
4 hereunder (and such successor shall be deemed to have assumed
all of Landlord's obligations hereunder).
5
18.2 Estoppel Certificates. Each party,
6 within 10 days after notice from the other party, shall
execute and deliver to the other party, in recordable form, a
7 certificate stating that this Lease is unmodified and in full
force and effect, or in full force and effect as modified,
8 and stating the modifications. The certificate shall also
state the amount of minimum annual rent, the dates to which
9 the rent-has been paid in advance, and the amount of any
prepaid rent. Failure to deliver the certificate within the
10 10 days shall be conclusive upon the party failing to deliver
the certificate for the benefit of the party requesting the
11 certificate and any successor to the party requesting a
certificate, that this Lease is in full force and effect and
12 has not been modified, except as may be represented by the
party requesting the certificate.
13
18.3 Quiet Enjoyment. Landlord represents and
14 warrants that within 120 days of this date, they will be the
owner in fee simple of the Premises, that they alone have the
15 full right to lease the Premises, and that Tenant, on paying
the rent and performing the obligations hereunder, shall
16 peaceably and quietly hold and enjoy the Premises during the
term without any hindrance, molestation or ejection by
17 Landlord. During the term, Landlord shall not grant, create
or suffer to exist any claim, lien, encumbrance, easement,
18 restriction or other charge or exception to the title to the
Premises without the prior written consent of Tenant.
19 Further, Landlord warrants that the Premises does not violate
any applicable building code, zoning ordinance or other
20 applicable law at the time this Lease is executed. If it is
determined that this warranty has been violated, then
21 Landlord promptly shall rectify such violation at its sole
cost and expense.
22
19. Notice.
23
Any notice, demand, request, consent, approval or
24 communication that either party desires or is required to
give the other party or any other person in connection
25 herewith shall be in writing and either served personally or
sent by certified mail, with return receipt requested. Any
26 notice, demand, request, consent, approval or communication
that either party desires or is required to give to the other
27 party shall be addressed to the other party at the address
set forth herein in Paragraph 30. Either party may change
28 its address by notifying the other party of the change of
address. Notice shall be deemed communicated upon the first
29 to occur of (i) actual receipt of the notice, or (ii) 48
hours after the time of mailing, if mailed as provided in
30 this paragraph.
31
32
20-
<PAGE>
20. Waiver.
-------
2 No delay or omission in the exercise of any right
or remedy by either party hereto on any default by the other
3 party hereto shall impair such a right or remedy or be construed as a
waiver. The receipt and acceptance by
4 Landlord of delinquent rent shall not constitute a waiver of any other
default; it shall constitute only a waiver of
5 timely payment for the particular rent payment involved. Landlord's
consent to or approval of any act by Tenant
6 requiring Landlord's consent or approval shall not be deemed to waive or
render unnecessary Landlord's con-sent to or
7 approval of any subsequent act by Tenant. Any waiver by Landlord or Tenant
of any default must be in writing and
8 shall not be a waiver of any other default concerning the
9 same or any other provision of this Lease.
10 21. Quitclaim Deed.
Tenant shall execute and deliver to Landlord on the
11 expiration or termination of this Lease, immediately on Landlord's
request, a quitclaim deed to the Premises, in
12 recordable form, designating Landlord as transferee.
13 22. Sale or Transfer of Premises. If Landlord
sells or transfers all or any portion of the Premises, on the
14 consummation of the sale or transfer, Landlord shall be released from any
liability with respect to the sold or
15 transferred property thereafter (but not previously) accruing under this
Lease. Any such sale or transfer of the Premises
16 by Landlord, except to Tenant, shall be conditioned upon and subject to
Landlord's successor assuming this Lease in its
17 entirety, In the event of any such sale, Tenant and Landlord's successor
shall execute in recordable form a
18 declaration and amendment to this Lease, whereby Landlord's successor
will assume all of Landlord's position, benefits,
19 rights, obligations, and duties under this Lease and whereby Landlord's
successor and Tenant shall be in privity of
20 contract under this Lease.
21 23. Attorneys' Fees.
22 If either party becomes a party to any litigation
concerning this Lease or the Premises by reason of any act or
23 omission of the other party or its authorized representatives, and not by
any act or omission of the party
24 that becomes a party to that litigation or any act or omission of its
authorized representatives, the party that
25 causes the other party to become involved in the litigation shall be
liable to that party for reasonable attorneys' fees
26 and court costs incurred by it in the litigation. if either party
commences an action against the other party out of or
27 in connection with this Lease, the prevailing party shall be
28 entitled to have and recover from the losing party reasonable attorneys'
fees and costs of suit.
29 24. waiver of Landlord's Lien - Tenant's Property.
30
Within ten days after receipt of a written demand
31 from Tenant, Landlord shall execute and deliver any document required by
any supplier, lessor or lender in connection with
32 the installation on the Premises of Tenant's Trade Fixtures and by which
Landlord waives any rights it may have or
- -21-
<PAGE>
acquire with respect to that property, provided the supplier,
lessor or lender agrees, in writing, that, upon expiration or
2 termination of this Lease, it will remove that property from
the Premises within 10 days of the expiration of the term or
3 within 30 days after termination of the term, but, if it does
not so remove the property, it shall have waived any rights
4 it may have to the property.
5 25.-. Surrender of Premises; Holding over.
6 25.1 Surrender of Premises.
7 25.1.1 On expiration or termination of
the term, Tenant shall surrender to Landlord the Premises and
8 all of Tenant's improvements and alterations in good
condition (except for ordinary wear and tear occurring after
9 the last necessary maintenance made by Tenant and destruction
to the Premises. as discussed herein), and, except for
10 alterations or improvements that Tenant has the right to
remove under any provisions of this Lease. Tenant may remove
11 all its Trade Fixtures within the above-stated time. Tenant
shall perform all restorations made necessary by the removal
12 of any alterations, improvements, or Trade Fixtures within
the time periods stated in this paragraph.
13
25.1.2 Landlord can elect to retain or
14 dispose of, in any manner, any alteration, improvement or
Trade Fixtures that Tenant does not remove from the Premises
15 on expiration or termination of the term as allowed or
required by this Lease by giving at least 10 days' notice to
16 Tenant. Title to any such alterations, improvements or
Tenant's Trade Fixtures that Landlord elects to retain or
17 dispose of on expiration of the ten-day period shall vest in
Landlord. Tenant waives all claims against Landlord for any
18 damage to Tenant resulting from Landlord's retention or
disposition of any such alterations, improvements or Trade
19 Fixtures.
20 25.2 Holding Over. If Tenant remains in
possession of the Premises after expiration or termination of
21 the term, such possession by Tenant shall be deemed to be a
month-to-month tenancy terminable on 30 days' notice given at
22 any time by either party. During any such month-to-month
tenancy, Tenant shall pay all rent required by this Lease,
23 and, if percentage rent is required by this Lease, it shall
be paid monthly on or before the 15th day of each month for
24 Gross Sales during the preceding month. All provisions of
this Lease, except those pertaining to term and options to
25 extend, if any, shall apply to the month-to-month tenancy.
26 26. 'Common Area.
27 26.1 Commercial Complex. The Premises is
located within and is to be a part of the Commercial Complex
28 as described in Recital A. The Commercial Complex shall
include the Premises, the Parking Area, additional parking,
29 an office building, driveways, lanes, sidewalks and other
common areas substantially as shown on Exhibit "A". Tenant
30 shall have a right of use and easement in the Parking Area,
additional parking, driveways, lanes, sidewalks and other
31 common areas (collectively the "Common Area") jointly with
the other tenants -of the Commercial Complex at all times
32 during the lease term without any additional charge or fee of
-22-
<PAGE>
1 any kind to be paid by Tenant. In addition, as provided in
Paragraphs 1 and 2.1, the area depicted in green on Exhibit
2 "All shall contain not less than 75 parking spaces for the exclusive use
of Tenant, its employees, agents, customers and
3 guests, and the area depicted in blue on Exhibit "All shall contain not
less than 135 parking spaces for use by Tenant,
4 its employees, agents, customers and guests, in common with the other
tenants of the Commercial Complex. Landlord shall
5 bear the cost of the construction of the Common Area and Tenant shall have
no obligation to contribute thereto.
6
26.2 Maintenance. Except as provided in
7 Paragraph 8.4, and except for repairs resulting from the negligence of
Tenant, its employees or customers, Tenant
8 shall have no responsibility to maintain or repair the Common Area.
Landlord shall maintain the common Area in a neat,
9 clean and orderly condition, properly surfaced, striped, lighted and
landscaped with adequate security and sufficient
10 casualty and liability insurance naming Tenant as an additional insured.
Landlord shall repair any damage to the
11 Common Area promptly, such that at all times the Common Area shall be in
good, first-class working order, condition and
12 repair and available for use by Tenant. Landlord shall not alter or
modify the Common Area so as to impair Tenant's
13 access to the Premises or the Parking Area and, without Tenant's prior
written consent, Landlord shall not
14 substantially modify the Commercial Complex from that depicted in Exhibit
"A".
15
27. Memorandum of Lease.
--------------------
16
A Memorandum of Lease shall, upon the request of
17 either Landlord or Tenant, be executed by the parties and recorded in the
Office of the appropriate County Recorder.
18 The Memorandum of Lease shall expressly state that it is executed
pursuant to the provisions contained in this Lease
19 and is not intended to vary the terms and conditions of this Lease. in
the event that Landlord or Tenant shall terminate
20 this Lease pursuant to the provisions contained herein for any cause
other than Landlord's breach thereof, Tenant shall
21 forthwith prepare, execute, acknowledge and deliver to
22 Landlord a Release and Cancellation of this Lease.
23 28. Miscellaneous Provisions.
28.1 Time of Essence.Time is of the essence
-----------
24 of each provision of this Lease.
25 28.2 Consent of Parties. Whenever consent or
approval of either party is required, other than as specifi-
26 cally set forth to the contrary herein, that party shall not
27 unreasonably withhold such consent or approval.
28 28.3 Corporate Authority. If either party or
a guarantor is a corporation, that party or guarantor shall
29 deliver to the other party on the execution of this Lease, a certified
copy of a resolution of its board of directors authorizing the execution of this
Lease and naming the
30 officers that are authorized to execute this Lease on behalf
31 of the corporation.
28.4 Successors. This Lease shall be binding
32 on and inure to the benefit of the parties and their successors, except as
provided otherwise in this Lease. -23
<PAGE>
28.5 Rent Payable inUnited States Currency.
---------- ----------------
Rent and all other sums payable under this Lease must be paid
2 in lawful currency of the United States of America.
3 28.6 Status of Parties on Termination of Lease
Except as provided otherwise in this Lease, if a party elects
4 to terminate this Lease as allowed in this Lease, on the date this Lease
is terminated, the parties shall be released from
5 further liabilities and obligations and Landlord shall return to Tenant
any unearned rent, as long as Tenant is not in
6 default an the date the Lease terminates.
7 28.7 Exhibits. All exhibits referred to
herein, whether or not attached to this Lease, are
8 incorporated herein by reference.
9 28.8 Negation of Partnership. Nothing in this
Lease shall be construed to render the Landlord in any way,
10 or for any purpose, a partner, joint venturer, or associate with Tenant,
nor shall this Lease be construed to authorize
11 either Landlord or Tenant to act for the other, except as expressly
stated herein. The only relationship between the
12 parties hereto is that of Landlord and Tenant.
13 28.9 Brokerage. Tenant has not employed a
finder or broker in connection with this Lease and agrees to
14 indemnify and hold Landlord harmless from any brokerage commission or
finder's fee arising as a result of the
15 employment of any finder or broker by Tenant. Similarly,
Landlord shall pay and be responsible for any finder's fee or
16 brokerage commission arising as a result of the employment of such finder
or broker by Landlord and agrees to indemnify and
17 hold Tenant harmless with respect thereto.
18 29. Interpretation of Lease.
19 29.1 State Law. This Lease shall be construed
and interpreted in accordance with the laws of the state of
20 California.
21 29.2 Integrated Agreement; Modification. This
Lease contains all the agreements of the parties concerning
22 the Premises and cannot be amended or modified, except by a
23 written agreement.
29.3 Provisions are Covenantsand Conditions.
------------------------ -----------
24 All provisions, whether covenants or conditions, on the part of Landlord
and Tenant shall be deemed to be both covenants
25 and conditions.
26 29.4 Definitions. As used in this Lease, the
following words and phrases shall have the following
27 meanings:
28 a. Authorized Representative. Any
officer, agent, employee or independent contract- retained.
29 or employed by either party, acting within authority given him by that
party.
30
b. CommencementDate. The date the
------------
31 lease term commences as described in Paragraph 3.3.
32
- -24-
<PAGE>
1 C. Damage. Any material injury,
deterioration or loss to a person or property caused by
2 another's acts or omissions. Damage includes death.
3 d. Destruction. Any material damage to
4 or disfigurement of the premises.
e. Encumbrance.Any deed of trust,
------------
5 mortgage or other written security device or agreement affecting the
Premises, and the note or ather obligation
6 secured by it, that constitutes security for the payment of a
7 debt or performance of an obligation.
f. Hold Harmless.To defend and indem-
--------------
8 nify from all liability,- losses, penalties, damages as defined herein,
costs, expenses (including, without
9 limitation, attorneys' fees), causes of action, claims or
judgments arising out of or related to any damage to any
10 person or property.
11 9- Lease Year. Except for the first
Lease Year, a period of twelve consecutive calendar months as
12 described in Paragraph 3.2.
13 h. Person. One or more human beings,
legal entities, or other artificial persons, including,
14 without limitation, partnerships, corporations, trusts, estates,
associations and any combination of human beings,
15 legal entities, or other artificial persons.
16 i. Restoration. The reconstruction,
rebuilding, rehabilitation and repairs that are necessary to
17 return destroyed portions of the Premises and other property to a
complete architectural unit in substantially equal or
18 better physical condition than as immediately before the destruction.
19
j. Successor.Assignee, transferee,
----------
20 personal representative, heir, or other person or entity
.succeeding lawfully and pursuant to the provisions of this
21 Lease to the rights or obligations of either party.
22 k. Tenant's Trade Fixtures. Tenant's
equipment, furniture, merchandise and all other property.-
23 placed in the Premises by Tenant, including without limitation, any
property installed in or on the Premises by
24 Tenant for purposes of trade, merchandise or related use.
25 29.5 Captions. The captions in this Lease
shall have no effect on its interpretation.
26
29.6 Singular and Plural.When required by
--------------------
27 the context of this Lease, the singular shall include the
28 plural and the plural shall include the singular.
29.7 Joint and Several obligations. "Party"
------------------------------
29 shall mean Landlord or Tenant; and, if more than one person or entity is
Landlord or Tenant, the obligations imposed on
30 that party shall be joint and several.
31 29.8 Severability. The unenforceability,
32 invalidity or illegality of any provision hereof shall not
- -25-
<PAGE>
render the other provisions unenforceable, invalid or illegal.
2
30. Addresses of Landlord andTenant:
-------------------------
3
Landlord Tenant
4
1723 West Magnolia Boulevard Suite 500
5 Burbank, California 91506 2701 East Camelback
Phoenix,,-Arizona 85016
6
Executed by the parties hereto effective on the
7 date first above written.
8 LANDLORD: TENANT:
--------- -------
9 BOBBY McGEE'S CONGLOMERATION
OF LONG BEACH, INC.
10 CHARLES P. CUSUMANO
11
By
12 DIANNA J. CUSUMANO
13 It's President
GUARANTOR:
----------
14
BOBBY McGEE'S, U.S.A., INC.
15
16 By
Robert F. Sikora
17 President
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
- -26-
<PAGE>
EXHIBIT B
LEGAL DESCRIPTION
Beginning at the most northerly corner of Lot 2 6f Block 68 of the Town of
Burbank Tract in the City of Burbank, County-of Los Angeles, State of
California, as per map recorded in Book 17f Pages 19 to 22, et seq. of
Miscellaneous Records in the office of the County Recorder of said county, said
corner being the southerly corner of the intersection of Olive Avenue, 100 feet
wide, and First Street, 80 feet wide, as said intersection is shown on said map;
thence South 410 16' 02' West along the southeasterly line of said Olive Avenue
a distance of 6 feet to the TRUE POINT OF BEGINNING, thence North 480 41' 53"
West a distance of 28.00 feet7,to a, point on a line 28.00 feet northwesterly of
and parallel with the southeasterly line of said Olive Avenue; thence South 410
16' 02" West along said parallel line
- - distance of 262.97 feet to a point; thence South 520 261 53" East
- - distance of 335.23 feet to a point of tangency of a curve concave
northerly having a radius of 40 feet; thence southeasterly, easterly
and northeasterly along said curve a distance of 60.23 feet to a point
of tangency on a line that is 19 feet southeasterly of and parallel
with the north , westerly line of Angeleno Avenue, 80.00 feet wide, as
shown on said map; thence North 410 16' 48" East along said parallel
line a distance of 171.12 feet to a point of tangency of a curve
concave westerly having a radius of 30 feet; thence northeasterly,
northerly and.northwesterly along said curve a distance of 47.11 feet
to a point of tangency on a line 6.00 feet southwesterly of and
parallel with the southwesterly line of said First Street; thence
North 480 411 53" West along said parallel line a distance of 313.99
feet to the True Point of Beginning.
Checked by
Approved by
- -----------
<PAGE>
- ------
FIRST ADDENDUM TO LEASE AGREEMENT
- --------------
DATE: September 16. , 1983.
PARTIES: (1) CHARLES p. CUSUMANO and DIANNA J. CUSUMANO,
husband and wife (collectively the "Landlord").
(2) BOBBY MCGEE'S CONGLOMERATION OF LONG BEACH, INC.,
a California corporation (the "Tenant").
RECITALS: Landlord and Tenant are parties to that certain
A.
Lease Agreement, dated September 16, 1983,
concerning the premises therein described situate
in Burbank, California.
- B. Landlord and Tenant wish to amend the Lease
Agreement so as to confirm certain assurances
that were provided by Landlord as an inducement
for Tenant to enter into the Lease Agreement.
AGREEMENTS: Landlord and Tenant agree as follows:
1. The following new Paragraph 3.5 is added to the Lease Agreement:
"3.5 Termination for Insufficient Sales.
---------------------------- ------
If at the end of the 84th month of the lease
term, Tenant's annual Gross Sales from the
Premises (as defined in Paragraph 7.2.2) for
the immediately preceding 12 months are less
than $4.5 million, then upon written notice
issued by Tenant to Landlord on or before
the last day of the 85th month of the lease
term, this Lease shall terminate on the last
day of the 90th month of the lease term, at
which time, in addition to removing its
Trade Fixtures and exercising such other
rights as are provided to Tenant by the terms
of this Lease, Landlord shall pay to Tenant
a cash termination payment of $200,000.00.
In order to assure Tenant's receipt of the
termination payment, within 15 days after
Landlord receives Tenant's notice of the
termination of this Lease as herein provided,
Landlord shall deliver to Tenant a $200,000.00
unconditional, irrevocable letter of credit
issued to Tenant by a state or national bank
acceptable to Tenant. If Landlord fails to
provide the letter of credit within the time
required, Tenant's obligation to pay minimum
annual rent, percentage rent, taxes and any
other sums (collectively "Rent required
by this Lease shall cease and abate, and
Tenant shall not be required to pay any
such Rent for the remainder of the lease term.
<PAGE>
SECOND AMENDMENT OF LEASE
This SECOND AMENDMENT TO LEASE, dated September 20, 1995 and herewith made a
part of that certain LEASE and FIRST ADDENDUM TO LEASE AGREEMENT dated September
16,1983, the SECOND ADDENDUM TO LEASE AGREEMENT dated February 20, 1984 the
AMENDMENT TO LEASE dated July 16, 1992, the EXHIBIT A, PROMISSORY NOTE dated
July 16, 1992, for the Premises located at 107 South First Street, Burbank,
California, by and between Charles P. Cusumano (Landlord") and Performance
Restaurant Group, Inc. ("Tenant") which has been assigned the above referenced
Lease, Addendums, Amendments and Promissory Note from BOBBY MCGEE'S
CONGLOMERATION OF LONG BEACH, INC., a California corporation by order of the
U.S. Bankruptcy Court for the District of Arizona in Case #9303092PHXGBN.
It is agreed that should there be any conflict between the provisions of this
SECOND AMENDMENT TO LEASE, and the provisions of this Lease, FIRST or SECOND
ADDENDUMS TO LEASE, the AMENDMENT TO LEASE or the EXHIBIT A, PROMISSORY NOTE,
the provisions of this SECOND AMENDMENT TO LEASE shall prevail.
Whereas a dispute had arisen between the parties to the lease concerning the
effectiveness of the provisions of the FIRST ADDENDUM to LEASE AGREEMENT dated
September 16, 1983; and whereas in consideration of this Amendment all claims
and disputes have been resolved including any claim for back rent except as set
forth in paragraph 2 hereof.
IT IS FURTHER AGREED:
1. Minimum Annual Rent:The Minimum Annual Rent for the Premises required under
--------------------
Paragraph 7.1 of the Lease shall be $210,000.00 per year, payable at $17,500.00
per month commencing January 1, 1995.
2. Additional Rent: Tenant shall pay to Landlord on or before October 1, 1995,
$25,534.97 as additional rent for the months of January through September of
1995 giving
full credit for base and percentage rent paid by Tenant in 1995.
3. Assumption and Consent:Tenant hereby agrees to the assumption of all
-----------------------
obligations under the Lease as modified by this Second Amendment to Lease, as of
-----
December 15, 1993 (the date of the United States Bankruptcy Court Order
approving assignment of the Lease to Tenant); and Landlord hereby consents to
the assignment of the Lease to Tenant on said terms and conditions.
<PAGE>
LANDLORD TENANT
Performance Restaurant Group, Inc.
Charles P. Cusumano John R. Radonovich
Chief Financial Officer
Dated: 10-3-95 Dated: 10-2-95
------- -------
BUSINESS LOAN AGREEMENT
Borrower: Chicago Pizza & Brewery, Inc.
26131 Marguerite Parkway, Suite A
Mission Viejo, CA 92692
Lender: Washington Mutual Bank dba WM Business Bank
Los Angeles Business Banking Center
1000 Wilshire Boulevard, Suite 100
Los Angeles, CA 90017
THIS BUSINESS LOAN AGREEMENT dated February 15, 2000, Is made and executed
between Chicago Pizza & Brewery, Inc. ("Borrower") and Washington Mutual Bank
dba WM Business Bank ("Lender") on the following terms and conditions. Borrower
has received prior commercial loans from Lender or has applied to Lender for a
commercial loan or loans or other financial accommodations, including those
which may be described an any exhibit or schedule attached to this Agreement
("Loan"). Borrower understands and agrees that: (A) In granting, renewing, or
extending any Loan, Lender is relying upon Borrower's representations,
warranties, and agreements as set forth In this Agreement, and (B) all such
Loans shall be and remain subject to the terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of February 15, 2000. and shall
continue in full force and effect until such time as all of Borrower's Loans in
favor of Lender have been paid in full, in principal, interest, costs, expenses,
attorneys' fees, and other fees and charges, or until February 15, 2001.
Collateral Records. Borrower does now, and at all times hereafter shall, keep
correct and accurate records of the Collateral, all of which records shall be
available to Lender or Lender's representative upon demand for inspection and
copying at any reasonable lime.The above is an accurate and complete list of all
locations at which Borrower keeps or maintains business records concerning
Borrower's collateral.
Collateral Schedules. Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender schedules of in form and
substance satisfactory to the Lender. Thereafter supplemental schedules shall be
delivered according to the following schedule:
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender's satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender the following documents for the
Loan: (1) the Note; (2) Security Agreements granting to Lender security
interests in the Collateral; (3) financing statements perfecting Lender's
Security Interests; (4) evidence of insurance as required below; (5) together
with all such Related Documents as Lender may require for the Loan; all in form
and substance satisfactory to Lender and Lender's counsel.
Borrower's Authorization. Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related Documents, In
addition, Borrower shall have provided such other resolutions, authorizations,
documents and instruments as Lender or its counsel, may require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in this
Agreement or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in
this Agreement, in the Related Documents, and in any document or certificate
delivered to Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under this Agreement or
under any Related Document.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation for profit which is, and at all times
shall be, duly organized, validly existing, and in good standing under and by
virtue of the laws of the State of California. Borrower is duly authorized to
transact business in all other states in which Borrower is doing business,
having obtained all necessary filings, governmental licenses and approvals for
each state in which Borrower is doing business. Specifically, Borrower is, and
at all times shall be, duly qualified as a foreign corporation in all states in
which the failure to so qualify would have a material adverse effect on its
business or financial condition. Borrower has the full power and authority to
own its properties and to transact the business in which it is presently engaged
or presently proposes to engage. Borrower maintains an office at 26131
Marguerite Parkway, Suite A, Mission Viejo, CA 92692, Unless Borrower has
designated otherwise in writing, the principal office is the office at which
Borrower keeps its books and records including its records concerning the
Collateral. Borrower will notify Lender of any change in the location of
Borrower's principal office. Borrower shall do all things necessary to preserve
and to keep in full force and effect its existence, rights and privileges, and
shall comply with all regulations, rules, ordinances, statutes, orders and
decrees of any governmental or quasi-governmental authority or court applicable
to Borrower and Borrower's business activities.
ASSUMED BUSINESS NAMES. Borrower has filed or recorded all documents or filings
required by law relating to all assumed business names used by Borrower.
Excluding the name of Borrower, the following is a complete list of all assumed
business names under which Borrower does business: None.
Authorization. Borrower's execution, delivery, and performance of this Agreement
and all the Related Documents have been duly authorized by all necessary action
by Borrower and do not conflict with, result in a violation of, or constitute a
default under (1) any provision of Borrower's articles of incorporation or
organization, or bylaws, or any agreement or other instrument binding upon
Borrower or (2) any law, governmental regulation, court decree, or order
applicable to Borrower or to Borrower's properties.
Financial Information. Each of Borrower's financial statements supplied to
Lender truly and completely disclosed Borrower's financial condition as of the
date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
Borrower is required to give under this Agreement when delivered will
constitute, legal, valid, and binding obligations of Borrower enforceable
against Borrower in accordance with their respective term.
Hazardous Substances. Except as disclosed to and acknowledged by Lender in
writing, Borrower represents and warrants that: (1) During the period of
Borrower's ownership of Borrower's Collateral, there has been no use,
generation, manufacture, storage, treatment, disposal, releaseor threatened
release of any Hazardous Substance by any person on, Linder, about or from any
of the Collateral. (2) Borrower has no knowledge of, or reason to believe that
there has been (a) any breach or violation of any Environmental Laws; (b) any
use, generation, manufacture, storage, treatment, disposal, release or
threatened release of any Hazardous Substance on, under, about or from the
Collateral by any prior owners or occupants of any of the Collateral; or (c) any
actual or threatened litigation or claims of any kind by any person relating to
such matters. (3) Neither Borrower nor any tenant, contractor, agent or other a
uthorized user of any of the Collateral shall use, generate, manufacture, store,
treat, dispose of or release any Hazardous Substance on, under, about or from
any of the Collateral; and any such activity shall be conducted in compliance
with all applicable federal, state, and local laws, regulations, and ordinances,
including without limitation all Environmental Laws. Borrower authorizes Lender
and its agents to enter upon the Collateral to make such inspections and tests
as Lender may deem appropriate to determine compliance of the Collateral with
this section of the Agreement. Any inspections or tests made by Lender shall be
at Borrower's expense and for Lender's purposes only and shall not be construed
to create any responsibility or liability on the part of Lender to Borrower or
to any other person. The representations and warranties contained herein are
based on Botrower's due diligence in investigating the Collateral for hazardous
waste and hazardous substances. Borrower hereby (1) releases and waives any
future claims against Lender for indemnity or contribution in the event Borrower
becomes liable for cleanup or other costs under any such laws, and (2) agrees to
indemnify and hold harmless Lender against any and all claims, losses,
liabilities, damages, penalties, and expenses which Lender may directly or
indirectly sustain or sutler resulting from a breach of this section of the
Agreement or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release of a hazardous waste or substance on the
properties. The provisions of this section of the Agreement, including the
obligation to indemnify, shall survive the payment of the Indebtedness and the
termination, expiration or satisfaction of this Agreement and shall not be
affected by Lender's acquisition of any interest in any of the Collateral,
whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may mateiially
adversely affect Borrower's financial condition or properties, other than
litigation, claims, or other events, if any, that have been disclosed to and
acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all of Borrower's tax returns and
reports that are or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith in the ordinary
course of business and for which adequate reserves have been provided.
Information. All information heretofore or contemporaneously herewith furnished
by Borrower to Lender for the purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all information hereafter
furnished by or on behalf of Borrower to Lender will be,
<PAGE>
BUSINESS LOAN AGREEMENT
(Continued)
Page 2
true and accurate in every material respect on the date as of which such
information is dated or certified; and none of such information is or will be
incomplete by omitting to state any material fact necessary to make such
information not misleading.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or permitted
the filing or attachment of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of Borrower's Loan and
Note, that would be prior or that may in any way be superior to Lender's
Security Interests and rights in and to such Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements (if any), and
all Related Documents are binding Upon the signers thereof, as well as upon
their successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms,
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect, Borrower will:
NOTICES OF CLAIMS AND LITIGATION. Promptly inform Lender in writing of (1) all
material adverse changes in Borrower's financial condition, and (2) all existing
and all threatened litigation, claims, investigations, administrative
proceedings or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial condition
of any Guarantor.
Financial Records. Maintain its books and records in accordance with GAAP,
applied on a consistent basis, and permit Lender to examine and audit Borrower's
books and records at all reasonable times.
Financial Statements. Furnish Lender with the following:
(1) Annual Statements. As soon as available, but in no event later than
one-hundred-twenty (120) days after the end of each fiscal year, Borrower's
balance sheet and income statement for the year ended, audited by a certified
public accountant satisfactory to Lender.
(2) INTERIM STATEMENTS. As soon as available, but in no event later than 45 days
after the end of each fiscal quarter, Borrower's balance sheet and profit and
loss statement for the period ended, prepared by Borrower.
All financial reports required to be provided under this Agreement shall be
prepared in accordance with GAAP, applied on a consistent basis, and certified
by Borrower as being true and correct.
ADDITIONAL INFORMATION. Furnish such additional information and statements, as
Lender may request from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants and ratios:
TANGIBLE NET WORTH REQUIREMENTS. Maintain a minimum Tangible Net Worth of not
less than: $8,000,000.00. Other Net
Worth
requirements are as follows: starting with the December 31, 1999 accounting
period.
Except as provided above, all computations made to determine compliance with the
requirements contained in this paragraph shall be made in accordance with
generally accepted accounting principles, applied on a consistent basis, and
certified by Borrower as being true and correct.
Insurance. Maintain fire and other risk insurance, public liability insurance,
and such other insurance as Lender may require with respect to Borrower's
properties and operations, in form, amounts, coverages and with insurance
companies acceptable to Lender. Borrower, upon request of Lender, will deliver
to Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least ten (10) days prior written notice to
Lender. Each insurance policy also shall include an endorsement providing that
coverage in favor of Lender will not be impaired in any way by any act, omission
or default of Borrower or any other person. In connection with all policies
covering assets in which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such lender's loss payable or other
endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (1) the name of the
insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties
insured; (5) the then current properly values on the basis of which insurance
has been obtained, and the manner of determining those values; and (6) the
expiration date of the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.
Other Agreements. Comply with all terms and conditions of all other agreements,
whether now or hereafter existing, between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business operations,
unless specifically consented to the contrary by Lender in writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its indebtedness and
obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, it unpaid, might become a lien or charge
upon any of Borrower's properties, income, or profits.
PERFORMANCE. Perform and comply, in a timely manner, with all terms, conditions,
and provisions set forth in this Agreement, in the
Relate
Documents, and in all other instruments and agreements between Borrower and
Lender. Borrower shall notify Lender immediately in writing of any default in
connection with any agreement.
Operations. Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its businesh affairs in a reasonable and prudent
manner.
Compliance with Governmental Requirements. Comply with all laws, ordinances, and
regulations, now or hereafter in effect, of all governmental authorities
applicable to the conduct of Borrower's properties, businesses and operations,
and to the use or occupancy of the Collateral, including without limitation, the
Americans With Disabilities Act. Borrower may contest in good faith any such
law, ordinance, or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Borrower has notified Lender In
writing prior to doing so and so long as, in Lender's sole opinion, Lender's
interests in the Collateral ate riot jeopardized. Lender may require Borrower to
post adequate security or a surety bond, reasonably satisfactory to Lender, to
protect Lender's interest.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records and
to make copies and memoranda of Borrower's books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it may request, all at Borrower's expense.
COMPLIANCE CERTIFICATES. Unless waived in writing by Lender, provide Lender at
least annually and at the time of each disbursement of Loan proceeds, with a
cerlificate executed by Borrower's chief financial officer, or other officer or
person acceptable to Lender, certifying that the representations and warranties
set forth in this Agreement are true and correct as of the date of the
certificate and further certifying that, as of the date of the certificate, no
Event of Default exists under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects with
any and all Environmental Laws; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on Borrower's part or on the
part of any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, Unless such
environmental activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower's part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources,
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, 'security agreements, assignments, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to perfect
all Security Interests.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower's failure to discharge or pay when dLIG any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Borrower. All Such expenses will become a
part of the Indebtedness and, at Lender's option, will (A) be payable on demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment
<PAGE>
BUSINESS LOAN AGREEMENT
(Continued)
Page 3
payments to become due during either (1) the term of any applicable insurance
policy; or (2) the remaining term of the Note; or (C) be treated as a balloon
payment which will be due and payable at the Note's maturity. Any Collateral
also will secure payment of these amounts. Such right shall be in addition to
all other rights and remedies to which Lender may be entitled upon Default.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens: (1) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this wed money,
including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease,
grant a security interest in, or enccumber any of Borrower's assets (except as
allowed as permitted liens),, or (3) sell with recourse any of Borrower's
accounts, except to Lender.
Transfer and Liens. Fail to continue to own all of Borrower's assets, except for
routine transfers, use or depletion in the ordinary course of Borrower's
business. Borrower agrees not to create or grant to any person, except Lender,
any lion, SOCurity interest, encumbrance, cloud on title, mortgage, pledge or
similar interest in any of Borrower's property, even in the ordinary course of
Borrower's business. Borrower agrees not to sell, convoy, grant, lease, give,
contribute, assign, or otherwise transfer any of Borrower's assets, except for
sales of inventory or leases of goods in the ordinary course of Borrower's
business.
CONTINUITY OF OPERATIONS. (1) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (2) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change its name, dissolve or transfer or sell Collateral out of the
ordinary course of business, or (3) pay any dividends on Borrower's stock (other
than dividends payable in its stock), provided, however that notwithstanding the
foregoing, but only so long as no Event of Default has occurred and is
continuing or would result from the payment of dividends, it Borrower is a
"Subchapter S Corporation" (as defined in the Internal Revenue Code of 1986, as
amended), Borrower may pay cash' dividends on its stock to its shareholders from
time to time in amounts necessary to enable the shareholders to pay income taxes
and make estimated income tax payments to satisfy their liabilities under
federal and state law which arise solely from their status as Shareholders of a
Subchapter 3 Corporation because of their ownership of shares of Borrower's
stock, or purchase or retire any of Borrower's outstanding shares or alter or
amend Borrower's capital structure.
LOANS, ACQUISITIONS AND GUARANTIES. (1) Loan, invest in or advance money or
assets, (2) purchase, create or acquire any interest in any other enterprise or
entity, or (3) incur any obligation as surely or guarantor other than in the
ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(1) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (2) Borrower or any Guarantor dies, becomes
incompetent or becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (3) there occurs a material adverse
change in Borrower's financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; or (4) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender; or (5) Lender in
good faith deems itself insecure, even though no Event of Default shall have
occurred.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
PAYMENT DEFAULT. Borrower fails to make any payment when due under the Loan.
OTHER DEFAULTS. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or In any of the
Related Documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.
FALSE STATEMENTS. Any warranty, representation or statement made or furnished to
Lender by Borrower or on Borrower's behalf under this Agreement, the Note, or
the Related Documents is false or misleading in any material respect, either now
or at the time made or furnished or becomes false or misleading at any time
thereafter.
INSOLVENCY. The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
DEFECTIVE COLLATERALZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any time
arid for any reason.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the Loan. This includes a garnishment of any of
Borrower's accounts, including deposit accounts, with Lender. However, this
Event of Default shall not hpply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and it Borrower gives Lender wrinen notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surely bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness . In the event of a death, Lender, at its option,
may, but shall not be required to, permit the Guarantor's estate to assume
unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure any Event of Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the Loan
is impaired.
INSECURITY. Lender in good faith believes itself insecure.
Right to Cure. If any default, other than a default on Indebtedness, is curable
and if Borrower or Grantor, as the case may be, has not been given a notice of a
similar default within the preceding twelve (12) months, it may be cured (and no
Event of Default will have occurred) if Borrower or Grantor, as the case may be,
after receiving written notice from Lender demanding cure of such default: (1)
cure the default within fifteen (15) days; or (2) if the cure requires more than
fifteen (15) days, immediately initiate steps which Lender deems in Lender's
sole discretion to be sufficient to cure the default and thereafter continue and
complete all reasonable and necessary steps sufficient to produce compliance as
soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies.
YEAR 2000. Unless Lender has provided Borrower with a written waiver of the
following "Year 2000" provisions, the following provisions shall apply:
Borrower represents, warrants and covenants that it has, or will have by a date
that is acceptable to Lender: (i) undertaken a detailed inventory, review, arid
assessment of all areas within its business and operations that could be
adversely affected by the failure of Borrower to be Year 2000 compliant on a
timely basis, (ii) developed a detailed plan and timeline and committed adequate
resources for becoming Year 2000 compliant on a timely basis, and (iii)
implemented that plan in accordance with that timetable in all material
respects. Borrower covenants and agrees that Borrower shall from time to time
upon Lender's request furnish periodic updates to Lender regarding Borrower's
progress on its Year 2000 compliance efforts, and provide copies to Lender of
any internal and third-parly assessments of Borrower's Year 2000 compliance
efforts. Borrower covenants to be and reasonably anticipates that it will be
Year 2000 compliant on a timely basis.
I
<PAGE>
BUSINESS LOAN AGREEMENT
(CONTINUED)
PAGE 4
Borrower has made (or will make, by a date acceptable to Lender) written inquiry
(or, if acceptable to Lender, oral Inquiry) of each of its key suppliers,
vendors, and customers as to whether such persons will be Year 2000 compliant in
all material respects on a timely basis. Based on that inquiry, and to the best
of Borrower's knowledge only, Borrower believes that all such persons will be
Year 2000 compliant in all material respects on a timely basis. For purposes of
this provision, "key suppliers, vendors, and customers" refers to those
suppliers, vendors, and customers of Borrower whose business failure would, with
reasonable probability, result in a material adverse change in the business,
properties, condition (financial or otherwise), or prospects of Borrower, or
Borrower's ability to repay the indebtedness evidenced by this Note.
"Year 2000 compliant" means, with regard to any entity, that all software,
embedded microchips, and other processing capabilities utilized by, and material
to the business operations or financial condition of, such entity are able to
interpret and manipulate data on and involving all calendar dates correctly and
without causing any abnormal ending scenario, including in relation to dates in
and after the Year 2000.
It shall be an event of default under this Note if (x) any of Borrower's
representations and warranties regarding Year 2000 shall cease to be true
(whether or not true when made) and, as a result, Lender reasonably believes
that Borrower's financial condition or its ability to pay its debts as they
become due will thereby be materially impaired, (y) Borrower fails to comply
with any of its Year 2000 covenants, or (z) Borrower fails to be Year 2000
compliant in any material respect on a timely basis.
DEBT COVERAGE RATIO. Debt Coverage Ratio to be at least 2.00 to 1.00, tested on
a quarterly basis. "Debt Coverage Ratio" shall mean the ratio of Cash Flow to
Debt Service. "Cash Flo\&?'shall mean all revenues after taxes, plus
depreciation and amortization. "Debt Service" shall mean the current portion due
on all indebtedness.
ADDITIONAL FINANCIAL PROVISIONS. Borrower agrees that while this Agreement is in
effect, Borrower shall comply with the following:
Annual submission of SEC form 10K due within 120 days of each Year end and
Quarterly submission of SEC 10Q form due within 60 days of quarter end.
Submission of quarterly and year end operating statements for each location
within 45 days of period end.
Annual projection for the following twelve month period, will be due by January
31, 2001 for the period starling January 1, 2001 hrough December 31, 2001.
Quarterly Mystery Shopping Report due within 45 days of quarter end.
ADDITIONAL FINANCIAL COVENANTS. Borrower agrees that while this Agreement is in
effect, Borrower shall comply with the following:
Maximum Dividends/Distributions shall not be more than 10% of Net Profit on the
December 31, 1999 fiscal year end Certified Public Accountant audited statement,
No additional third party debt above $160,000.00 without Lender approval.
Net Profit re-capture is to be applied to the final year of proposed term loan
it fiscal year end 2000 profits exceed $2,000,000.0o. The projected annual Net
Profit amount for determining the following year's re-capture base is to be set
by Lender within 30 days of receipt of Borrower prepared projections. Net Profit
in excess of $2,000,000.00 is to be applied to Lender debt obligations. Covenant
adjusted annually based on Borrower projections.
Sale of selected Pietro's locations is allowed.
FEES. A commitment fee of 1.00% (40,000.00) is to be paid on the date of the
first advance.
LEVERAGE RATIO. Maintain a maximum Leverage Ratio of 1.00 to 1.00. This Leverage
Ratio will be evaluated as of quarter end. "Leverage Ratio" shall mean total
liabilites less subordinated debt divided by Net Worth less intangible assets
plus subordinated debt.
CAPITAL EXPENDITURES. Make or contract to make capital expenditures, including
leasehold improvements, and any fiscal year in excess of $5,500,000.00.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
ATTORNEYS' FEES; EXPENSES. Borrower agrees to pay upon demand all of Lender's
costs and expenses, including Lender's attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement. Lender
may hire or pay someone else to help enforce this Agreement, and Borrower shall
pay the costs and expenses of such enforcement. Costs and expenses include
Lender's attorneys' fees and legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated POSt-jUdgment collection services. Borrower also
shall pay all court costs and such additional fees as may be directed by the
Court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's sale or
transfer, whether now or later, of one or more participation interests in the
Loan to one or more purchasers, whether related or unrelated to ~.ender. Lender
may provide, without any limitation whatsoever, to any one or more purchasers,
or potential purchasers, any information or knowl4dge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower hereby
waives any rights to privacy Borrowe~ may have with respect to such matters.
Borrower additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such participation
interests. Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the
Loan and will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loan irrespective of the failure or insolvency
of any holder of any interest in the Loan. Borrower further agrees that the
purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have against
Lender.
GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF CALIFORNIA. THIS
AGREEMENT HAS BEEN ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA.
NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall constitute a
waiver of any of Lender's rights or of any of Borrower's or any Grantor's,
obligations as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent to subsequent instances where
such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
Notices. Any notice required to be given under this Agreement shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this Agreement.
Any party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of the
notice is to change the party's address. For notice purposes, Borrower agrees to
keep Lender informed at all times of Borrower's current address. Unless
otherwise provided or required by law, if there is more than one Borrower, any
notice given by Lender to any Borrower is deemed to be notice given to all
Borrowers.
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be illegal, invalid, or unenforceable as to any circumstance, that
finding shall not make the offending provision illegal, invalid, or
unenforceable as to any other circumstance. If feasible, the offending provision
shall be considered modified so that it becomes legal, valid and enforceable. If
the offending provision cannot be so modified, it shall be considered deleted
from this Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement shall not
affect the legality, validity or enforceability of any other provision of this
Agreement.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word "Borrower" as used in this
Agreement shall include all of Borrower's subsidiaries and affiliates.
Notwithstanding the foregoing however, under no circumstances shall this
Agreer-nent be construed to require Lender to make any Loan or other financial
accommodation to any of Borrower's subsidiaries or affiliates.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on behalf
of Borrower shall bind Borrower's successors and assigns and shall inure to the
benefit of Lender, its successors and assigns. Borrower shall not, however, have
the right to assign Borrower's rights under
<PAGE>
BUSINESS LOAN AGREEMENT
(Continued)
PAGE 5
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees that
in extending Loan Advances, Lender is relying on all representations,
warranties, and covenants made by Borrower in this Agreement or in any
certificate or other instrument delivered by Borrower to Lender under this
Agreement or the Related Documents. Borrower further agrees that regardless of
any investigation made by Lender, all such representations, warranties and
covenants will survive the extension of Loan Advances and delivery to Lender of
the Related Documents, shall be continuing in nature, shall be deemed made and
redated by Borrower at the time each Loan Advance is made, and shall remain in
full FORCE AND effect until such time as Borrower's Indebtedness shall be paid
in full, or until this Agreement shall be terminated in the manner provided
above, whichever is the last to occur.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this Agreement:
Advance. The word "Advance" means a disbursement of Loan funds made, or to be
made, to Borrower or on Borrower's behalf on a line of credit or multiple
advance basis under the terms and conditions of this Agreement.
Agreement. The word "Agreement" means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Business Loan Agreement from
time to time.
Borrower. The word "Borrower" means Chicago Pizza & Brewery, Inc., and all other
persons and entities signing the Note in whatever capacity.
Collateral. The word "Collateral" means all properly and assets granted as
collateral security for a Loan, whether real or personal property, whether
granted directly or indirectly, whether granted now or in the future, and
whether granted in the form of a security interest, mortgage, collateral
mortgage, deed of trust, assignment, pledge, chattel mortgage, crop pledge,
chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien,
equipment trust, conditional sale, trust receipt, lien, charge, lien or title
retention contract, lease or consignment intended as asecurity device, or any
other security or lien interest whatsoever, whether created by law, contract, or
otherwise,
Default. The word "Default" means the Default set forth in this Agreement in the
section titled "Default".
ENVIRONMENTAL LAWS. The words "Environmental Laws" mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5
through 7.7 of Division 20 of the California Health and Safety Code, Section
25100, et seq., or other applicable state or federal laws, rules, or regulations
adopted pursuant thereto.
Event of Default. The words "Event of Default" mean any of the Events of Default
set forth in this Agreement in the Default section of this Agreement.
GAAP. The word "GAAP" means generally accepted accounting principles.
GRANTOR. The word "Grantor" means each and all of the persons or entities
granting a Security Interest in any Collateral for the Loan, Including without
limitation all Borrowers granting such a Security Interest.
GUARANTOR. The word "Guarantor' means any guarantor, surety, or accommodation
party of any or all of the Loan.
GUARANTY. The word "Guaranty" means the guaranty from Guarantor to Lender,
including without limitation a guaranty of all or pan of the Note.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with
all other indebtedness and costs and expenses for which Borrower is responsible
under this Agreement or under any of the Related Documents.
LENDER. The word "Lender'means Washington Mutual Bank dba WM Business Bank, its
successors and assigns.
LOAN. The word "Loan" means any and all loans and financial accommodations from
Lender to Borrower whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations described
herein or described on any exhibit or schedule attached to this Agreement from
time to time.
NOTE. The word "Note" means the Note executed by Borrower in the principal
amount of $4,000,000.00 dated February 15, 2000, together with all renewals of,
extensions of, modifications of, refinancings of, consolidations of, and
substitutions for the note or credit agreement.
PERMITTED LIENS. The words "Permitted Liens" mean (1) liens and security
interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes,
assessments, or similar charges either not yet due or being contested in good
faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other
like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent; (4 purchase money liens or purchase money security
interests upon or in any property acquired or held by Borrower in the ordinary
course of business to secure indebtedness outstanding on the dale of this
Agreement or permitted to be incurred under the paragraph of this Agreement
titled "Indebtedness and Liens"; (5) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the Lender in
writing; and (6) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Loan.
SECURITY AGREEMENT. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements, understandings or
other agreements, whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating a Security Interest.
Security Interest. The words "Security Interest" mean, without limitation, any
and all types of collateral security, present and future, whether in the form of
a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment,
pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever whether created by law, contract,
or otherwise.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS
DATED FEBRUARY 15, 2000.
BORROWER:
CHICAGO PIZZA & BREWERY, INC.
By:
ERNEST T. KLINGER PRESIDENT OF CHICAGO PIZZA &
BREWERY, INC.
LENDER:
WASHINGTON MUTUAL BANK dba WM BUSINESS BANK
X
AUTHORIZED SIGNER
<PAGE>
PROMISSORY NOTE
Borrower: CHICAGO PIZZA & BREWERY, INC.
26131 MARGUERITE PARKWAY, SUITE A
MISSION VIEJO, CA 92692
Lender: WASHINGTON MUTUAL BANK DBA WM BUSINESS BANK
LOS ANGELES BUSINESS BANKING Center
1000 WILSHIRE BOULEVARD, SUITE 100
LOS ANGELES, CA 90017
Principal Amount: $4,000,000.00 Initial Rate: 10.750%
Date of Note: February 15, 2000
PROMISE TO PAY. Chicago Pizza & Brewery, Inc. ("Borrower") promises to pay to
Washington Mutual Bank dba WM Business Bank ("Lender"), or order, In lawful
money of the United States of America, the principal amount of Four Million &
00/100 Dollars ($4,000,000.00) or so much as may be outstanding, together with
interest on the unpaid outstanding principal balance of each advance. Interest
shall be calculated from the date of each advance until repayment of each
advance.
PAYMENT. Borrower will pay this loan In one payment of all outstanding principal
plus all accrued unpaid Interest on February 15, 2001. In addition, Borrower
will pay regular monthly payments of all accrued unpaid Interest due as of each
payment date, beginnin4 March 31, 2000, with all subsequent interest payments to
be due on the last day of each month after that. Unless otherwise agreed or
required by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid collection
costs and late charges. The annual interest rate for this Note is computed on a
365/360 basis; that is, by applying the ratio of the annual interest rate over a
year of 360 days, multiplied by the outstanding principal balance, multiplied by
the actual number of days the principal balance is outstanding. Borrower will
pay Lender at Lender's address shown above or at such other place as Lender may
designate in writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the annual
interest rate, adjusted daily, published from time to time in The Wall Street
Journal (Western Edition) as the "Prime Rate" in the "Money Rates" section, as
of any date of determination (the "Index"). The Index is not necessarily the
lowest rate charged by Lender on its loans. It the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current Index rate upon
Borrower's request. The interest rate change will not occur more often than each
day. Borrower understands that Lender may make loans based on other rates as
well. The Index currently is 8.750%. The interest rate to be applied to the
unpaid principal balance of this Note will be at a rate of 2.000 percentage
points over the Index, resulting In an initial rate of 10.750%. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the dale of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest,
Rather, early payments will reduce the principal balance due. Borrower agrees
not to send Lender payments marked "paid in full", "without recourse", or
similar language. If Borrower sends such a payment, Lender may accept it without
losing any of Lender's rights under this Note, and Borrower will remain
obligated to pay any further amount owed to Lender. All written communications
concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes "payment in full" of the amount owed
or that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: Washington Mutual Bank dba
WM Business Bank, Los Angeles Business Banking Center, 1000 Wilshire Boulevard,
Suite 100, Los Angeles, CA 90017.
LATE CHARGE. It a payment is 11 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment or $25.00,
whichever Is greater.
INTEREST AFTER DEFAULT. Upon Borrower's failure to pay all amounts declared due
pursuant to this section, including failure to pay upon final maturity, Lender,
at its option, may, if permitted under applicable law, increase the variable
interest rate on this Note to 8.000 percentage points over the Index.
DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:
PAYMENT DEFAULT. Borrower fails to make any payment when due under this Note.
OTHER DEFAULTS. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.
FALSE STATEMENTS. Any warranty, representation or statement made or furnished to
Lender by Borrower or on Borrower's behalf under this Note or the related
documents is false or misleading in any material respect, either now or at the
lime made or furnished or becomes false or misleading at any time thereafter.
INSOLVENCY. The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's properly, any assignment for the benefit of creditors, any type of
creditor wotkoul, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the loan. This includes a garnishment of any of
Borrower's accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and it Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forleiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to
any guarantor, endorser, surety, or accommodation party of any of the
indebtedness or any guarantor, endorser, surety, or accommodation party dies or
becomes incompetent, or revokes or disputes the validity of, or liability under,
any guaranty of the indebtedness . In the event of a death, Lender, at its
option, may, but shall not be required to, permit the guarantor's estate to
assume unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure any Event of Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or LENDER BELIEVES THE PROSPECT OF PAYMENT OR performance of this
Note is impaired.
INSECURITY. Lender in good faith believes itself insecure.
CURE PROVISIONS. If any default, other than a default in payment, is curable and
if Borrower has not been given a notice of a breach of the same provision of
this Note within the preceding twelve (12) mooths, it may be cured (and no event
of default will have occurred) if Borrower, after receiving written notice from
Lender demanding cure of such default: (1) cures the default within fifteen (15)
days; or (2) it the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be sufficient
to cure the default and thereafter continues and completes all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
the loan if Borrower does not pay. Borrower will
pay Lender
that amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses, whether or
not ther e is a
lawsuit, including attorneys' fees, expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or
injunction), and
appeals. Borrower also will pay any court costs, in addition to all other sums
provided by law.
GOVERNING LAW. THIS NOTE WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF CALIFORNIA. THIS NOTE
HAS BEEN ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $12.50 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the luture.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.
<PAGE>
PROMISSORY NOTE
(Continued)
PAGE 2
LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further loan
advances. Advances under this Note, as well as directions fbr payment from
Borrower's accounts, may be requested orally or in writing by Borrower or by an
authorized person. Lender may, but need not, require that all oral requests be
confirmed in writing. Borrower agrees to be liable for all sums either: (A)
advanced in accordance with the instructions of an authorized person or (B)
credited to any of Borrower's accounts with Lender. The unpaid principal balance
owing on this Note at any time may be evidenced by endorsements on this Note or
by Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Note it: (A) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (B) Borrower or any guarantor ceases
doing business or is insolvent; (C) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this Note or
any other loan with Lender; (D) Borrower has applied funds provided pursuant to
this Note for purposes other than those authorized by Lender; or (E) Lender in
good faith believes itself insecure.
YEAR 2000. Unless Lender has provided Borrower with a written waiver of the
following "Year 2000" provisions, the following provisions shall apply:
Borrower represents, warrants and covenants that it has, or will have by a date
that is acceptable to Lender: (i) undertaken a detailed inventory, review, and
assessment of all areas within its business and operations that could be
adversely affected by the failure of Borrower to be Year 2000 compliant on a
timely basis, (ii) developed a detailed plan and timeline and committed adequate
resources for becoming Year 2000 compliant on a timely basis, and (iii)
implemented that plan in accordance with that timetable in all material
respects, Borrower covenants and agrees that Borrower shall from time to time
upon Lender's request furnish periodic updates to Lender regarding Borrower's
progress on its Year 2000 compliance efforts, and provide copies to Lender of
any internal and third-party assessments of Borrower's Year 2000 compliance
efforts. Borrower covenants to be and reasonably anticipates that it will be
Year 2000 compliant on a timely basis.
Borrower has made (or will make, by a date acceptable to Lender) written inquiry
(or, if acceptable to Lender, oral inquiry) of each of its key suppliers,
vendors, and customers as to whether such persons will be Year 2000 compliant in
all material respects on a timely basis. Based on that inquiry, and to the best
of Borrower's knowledge only, Borrower believes that all such persons will be
Year 2000 compliant in all material respects on a timely basis. For purposes of
this provision, "key suppliers, vendors, and customers" refers to those
suppliers, vendors, and customers of Borrower whose business failure would, with
reasonable probability, result in a material adverse change in the business,
properties, condition (financial or otherwise), or prospects of Borrower, or
Borrower's ability to repay the indebtedness evidenced by this Note.
"Year 2000 compliant" means, with regard to any entity, that all software,
embedded microchips, and other processing capabilities utilized by, and material
to the business operations or financial condition of, such entity are able to
interpret and manipulate data on and involving all calendar dates correctly and
without causing any abnormal ending scenario, including in relation to dates in
and after the Year 2000.
It shall be an event of default under this Note if (x) any of Borrower's
representations and warranties regarding Year 2000 shall cease to be true
(whether or not true when made) and, as a result, Lender reasonably believes
that Borrower's financial condition or its ability to pay its debts as they
become due will thereby be materially impaired, (y) Borrower fails to comply
with any of its Year 2000 covenants, or (z) Borrower fails to be Year 2000
compliant in any material respect on a timely basis.
TERM OUT PERIOD. Borrower and Lender agree that at maturity any outstanding
balance on the non-revolving line of credit shall be converted to a term loan
for 36 months with a rate of Wall Street Journal Prime plus 3% floating on the
full amount or Wall Street Journal Prime plus 3% fixed on the full amount for
the first year, 2% for the second year, or a 1% prepayment penaly for the third
year.
PAYMENT ON DEMAND. Borrower will pay this loan on demand, if no demand is made,
in one payment of all outstanding principal plus all accrued interest unpaid on
February 15, 2001.
ADDENDUM "A". An exhibit, tilled "Addendum "A"," is attached to this Note and by
this reference is made a part of this Note just as If all the provisions, terms
and conditions of the Exhibit had been fully set forth in this Note.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and Lender's successors and assigns.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations, presentment, demand for payment, and notice
of dishonor. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of lime) this loan or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the party
with whom the modification is made. The obligations under this Note are joint
and several.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
CHICAGO PIZZA & BREWERY, INC.
ERNEST T. KLINGER, PRESIDENT OF CHICAGO PIZZA &
BREWERY, INC.
<PAGE>
ADDENDUM "A"
LIBOR/RATE ADDENDUM
This Addendum A is attached to and made a part of the Promissory Note (the
"Note") dated February 15, 2000, between Chicago Pizza & Brewery, Inc.
("Borrower") and Washington Mutual Bank, doing business as WM Business Bank
('Lender'). This Addendum is subject to all the terms and conditions of the
remainder of the Note.
LENDER AND BORROWER agree as follows:
I . Advances under the Note shall bear interest at the "Applicable Interest
Rate."The Applicable Interest Rate means, for the period from and including the
date hereof and including the Maturity Date, a rate per annum at Borrower's
option equal to one of the following:
a. PRIME RATE: the interest rate described in the "Variable
-----------
Interest Rate" section of the Note.
b. LIBOR RATE: an interest rate (rounded upward to the next 1/100 of
-----
1.0%) equal to the sum of (i) the LIBOR Base Rate, and (ii) the LIBOR Spread.
For purposes of this definition:
(1) "LIBOR BASE RATE" means, with respect to a particular LIBOR
Advance, the rate (expressed as a decimal) reported as the London Interbank
Offered Rate in the Money Rates section of the Wall Street Journal published on
the Business Day next preceding the date such LIBOR advance is made (which rate
may be reported as of an earlier date) for maturities equal to the requested
Interest Period. If the Wall Street Journal ceases reporting London Interbank
Offered Rates comparable to those currently reported, the LIBOR Base Rate
applicable hereunder shall be modified, and Lender shall select another
reasonably comparable rate or index.
(ii) "LIBOR SPREAD" means three point five percent (3.5%) per year.
2. Definitions: As used in this Addendum, the following terms shall have
------------
the meanings set forth below:
BUSINESS DAY: means a day on which banks are not required or authorized to
close in Los Angeles, California and on which dealings are carried on in the
London Interbank market.
<PAGE>
"INTEREST PERIOD" means, for each LIBOR Advance, the period beginning on
-----------------
the date such LIBOR Advance is made or continued as and ending on (but
excluding) the day which numerically corresponds to such date one, two, three
0r six months thereafter, (or, if such month has no numerically corresponding
day, on the last Business Day of such month), as the Borrower may select in its
relevant request pursuant to Section 3 or 4, below, provided, however, that i)
the Borrower shall not be permitted to select Interest Periods to be in effect
at any one time which have expiration dates occurring on more than six (6)
different date: ii) if such Interest Period would otherwise end on a day which
is not a business Day, such Interest Period shall end on the Next following
Business Day (less such next following Business Day is the first day of a
calendar month in which case such Interest Period shall end on the Business Day
next preceeding such numerically corresponding day); i1i) no Interest period
for any LIDOR advance may end later than the stated Maturity Date.
"LIBOR BORROWING REQUEST" means a request made by Borrower for a LIBOR
Advance pursuant to the provisions of this Addendum.
3. LIBOR BORROWING REQUEST. Each request by Borrower for a LIBOR Advance
------------------------
shall conform to the following:
a. Each request for a LIBOR Advance shall be made by Borrower in the
manner specified by Lender and shall be submitted to Lender so as to be received
by Lender not later than 11:00 a.m. on the third Business Day prior to the date
of the proposed borrowing.
b. Each LIBOR Advance shall be in the minimum amount of Two Hundred
Fifty Thousand and No/100 Dollars ($250,000.00) or multiples of ($250,000.000)
subject to the maximum amount available under the Note and the Loan Agreement.
C. Each LIBOR Borrowing Request shall specify the Interest Period for
the requested LIBOR Advance.
4. REPAYMENT/PREPAYMENT.Borrower shall repay the outstanding principal
---------------------
amount of each LIBOR Advance, together with any accrued and unpaid interest
thereon,
on the last day of the Interest Period for such LIBOR Advance, as the case
may be, unless
Borrower elects to continue/convert such Advance, and gives notice to Lender not
less
than three Business Days prior to the last day of the Interest Period that all
or any portion
greater than $250,000.00 of such Advance shall be converted into an Advance
bearing
interest under a different option hereunder, or continued as an Advance of
the same type
as that for which the Interest Period is then ending. Notwithstanding anything
to the contrary contained in the Note, including without limitation the Section
entitled "Prepayment," neither the principal balance of any LIBOR Advance may be
prepaid prior to the last day of the applicable Interest Period.
2.
<PAGE>
5. UNAVAILABILITY OF SELECTED RATE. Notwithstanding any election of a LIBOR
-------------------------------
Advance for an Interest Period pursuant to this Addendum, if-
a. on or prior to the determination OF THE APPLICABLE INTEREST RATE FOR
such Advance, the Lender determines (which determination shall be conclusive and
binding) that quotations of interest yates for the relevant deposits are not
being provided in the relevant market in the relevant amount and Interest
Period-, or
b. on or prior to the first day of an Interest Period, the Lender
determines (which determination shall be conclusive and binding) that, as a
result of conditions in or generally affecting the relevant market, the rates of
interest or the basis on which the applicable interest rate is to be computed do
not accurately reflect the cost to the Lender of making or maintaining such
Advance for such Interest Period; then Lender shall give the Borrower prompt
notice thereof by telephone and the reques by the Borrower for such Advance for
such Interest Period shall not be effective, and such Advance shall be made as
an Advance bearing interest at the most favorable rate available to Borrower
under either remaining interest rate option hereunder.
6. INCREASED COSTS. If, due to either (i) the introduction after the date
----------------
of this
Addendum of or any change after the date of this Addendum (including any change
by way of imposition or increase of reserve requirements or assessments) in or
in the interpretation of any law or regulation, or (ii) the compliance with any
guideline or request issued or made after the date of this Addendum by any
central bank- or other governmental authority (whether or not having the force
of law), there shall be any increase in the cost to the Lender of making, or
maintaining LIBOR Advances, then the Borrower shall from time to time, upon
demand by the Lender, pay to the Lender additional amounts sufficient to
reimburse the Lender for all such increased costs. A certificate as to the
amount of such increased costs, submitted to the borrower by the Lender, shall
be conclusive and binding absent manifest error.
7. INCREASED CAPITAL REQUIREMENTS. If either (1) the introduction after the
-------------------------------
date of
this Addendum of, or the application after the date of this Addendum as a result
of phase-
in or transitional rues of, or any change after the date of this Addendum in or
in the
interpretation of, any law or regulation or (ii) compliance by the Lender with
any
guideline or request issued or made after the date of this Addendum or deemed
applicable
after the date hereof as a result of phase-in or transitional rules by any
central bank or
other governmental authority (whether or not having the force of law) affects
the amount
of capital required to be based upon the making of LIBOR Advances pursuant to
this
Addendum, then, upon demand by the Lender, the Borrower shall immediately pay to
the
Lender, from time to time as specified by the Lender the costs of maintairu'nc,
such
increased capital. A certificate as to such amounts submitted to the Borrower by
the
Lender shall be conclusive and binding absent manifest error.
3.
<PAGE>
8. ILLEGALITY. Notwithstanding any other provision of this Addendum, if the
-----------
introduction of or any change in or in the interpretation of any law or
regulation shall
make it unlawful, or any central bank or other governmental authority shall
assert that it
is unlawful, for the Lender to make or maintain LIBOR Advances, Lender may, by
notice
to the Borrower, suspend the right of the borrower to elect such Advances and,
if
necessary in the reasonable opinion of the Lender to comply with such law or
regulation,
convert all outstanding LIBOR Advances (as the case may be) to Advances
bearing
interest at the most favorable rate available to Borrower under either
remaining interest
rate option hereunder.
9. DEFAULT RATE. Notwithstanding anything to the contrary contained in the
-------------
Note,
including without limitation the Section of the Note entitled "Lender's Rights,"
in the
event of any default under the Note, all outstanding LIBOR Advances shall
thereafter
during the continuance of such default bear interest at a rate equal to six
percent (6.000%)
in excess of the LIBOR Rate-
THIS ADDENDUM IS DATED this
17th day of February, 2000
Borrower:
Chicago Pizza & Brewery, Inc.
By -
Ernest T. Klinger.
Its:
President
LENDER:
WASHINGTON MUTUAL BANK, doing business as WM Business Bank
By:
Its: Vice President
<PAGE>
COMMERCIAL SECURITY AGREEMENT
Grantor: CHICAGO PIZZA & BREWERY, INC.
26131 Marguerite Parkway, Suite A
Mission Viejo, CA 92692
Lender: WASHINGTON MUTUAL BANK DBA WM BUSINESS BANK
LOS ANGELES BUSINESS BANKING CENTER
1000 WILSHIRE BOULEVARD, SUITE 100
LOS ANGELES, CA 90017
THIS COMMERCIAL SECURITY AGREEMENT dated February 15, 2000, Is made and executed
between Chicago Pizza & Brewery, Inc. ("Grantor") and Washington Mutual Bank dba
WM Business Bank ("Lender").
GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender
a security Interest In the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, In addition to all other rights which Lender may have by law.
COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means
the following described property, Whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which
Grantor is giving to Lender a security interest for the
payment of the Indebtedness and performance of all other obligations under the
Note and this Agreement:
ALL INVENTORY, CHATTEL PAPER, ACCOUNTS, EQUIPMENT AND GENERAL INTANGIBLES
In addition, the word "Collateral" also includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(A) All accessions, attachments, accessories, tools, parts, supplies,
replacements and additions to any of the collateral described herein, whether
added now or later.
(B) All products and produce of any of the property described in this Collateral
section.
(C) All accounts, general intangibles, instruments, rents, monies, payments, and
all other rights, arising out of a sale, lease, or other disposition of any of
the property described in this Collateral section.
(D) All proceeds (including insurance proceeds) from the sale, destruction,
loss, or other disposition of any of the property described in this Collateral
section, and sums due from a third party who has damaged or destroyed the
Collateral or from that party's insurer, whether due to judgment, settlement or
other process.
(E) All records and data relating to any of the property described in this
Collateral section, whether in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of Grantor's right, title,
and interest in and to all computer software required to utilize, create,
maintain, and process any Such records or data on electronic media.
Despite any other provision of this Agreement, Lender is not granted, and will
not have, a nonpurchase money security interest in household goods, to the
extent such a security interest would be prohibited by applicable law. In
addition, if because Of the type of any Property, Lender is required to give a
notice of the right to cancel under Truth in Lending for the Indebtedness, then
Lender will not have a security interest in such Property unless and until such
a notice is given.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or. some other account). This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and warrants to Lender that:
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute financing statements
and to take whatever other actions are requested by Lender to perfect and
continue Lender's security interest in the Collateral. Upon request of Lender,
Grantor will deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Grantor will note Lender's interest upon any
and all chattel paper If not delivered to Lender for possession by Lender.
NOTICES TO LENDER. Grantor will notify Lender in writing at Lender's address
shown above (or such other addresses as Lender may designate from time to time)
prior to any (1) change in Grantor's name, (2) change in Grantor's assumed
business name(s), (3) change in the management of Grantor, (4) change in the
authorized signer(s), (5) change in Grantor's principal office address, (6)
conversion of Grantor to a new or different type of business entity, or (7)
change in any other aspect of Grantor that directly or indirectly relates to any
agreements between Grantor and Lender. No change in Grantor's name will take
effect until after Lender has been notified.
NO VIOLATION. The execution and delivery of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of accounts,
chattel paper, or general intangibles, as defined by the Uniform Commercial
Code, the Collateral is enforceable in accordance with its terms, is genuine,
and fully complies with all applicable laws and regulations concerning form,
content and manner of preparation and execution, and all persons appearing to be
obligated on the Collateral have authority and capacity to contract and are in
fact obligated as they appear to be on the Collateral. At the time any Account
becomes subject to a security interest in favor of Lender, the Account shall be
a good and valid account representing an undisputed, bona fide indebtedness
incurred by the account debtor, for merchandise held subject to delivery
instructions or previously shipped or delivered pursuant to a contract of sale,
or for services previously performed by Grantor with or for the account debtor.
So long as this Agreement remains in effect, Grantor shall not, without Lender's
prior written consent, compromise, settle, adjust, or extend payment under or
with regard to any such Accounts. There shall be no setoffs or counterclaims
against any of the Collateral, and no agreement shall have been made under which
any deductions or discounts may be claimed concerning the Collateral except
those disclosed to Lender in writing.
LOCATION OF THE COLLATERAL. Except in the ordinary course of Grantor's business,
Grantor agrees to keep the Collateral (or to the extent the Collateral consists
of intangible property such as accounts or general intangibles, the records
concerning the Collateral) at Grantor's address shown above or at such other
locations as are acceptable to Lender. Upon Lender's request, Grantor will
deliver to Lender in form satisfactory to Lender a schedule of real properties
and Collateral locations relating to Grantor's operations, including without
limitation the following: (1) all real property Grantor owns or is purchasing;
(2) all real property Grantor is renting or leasing; (3) all storage facilities
Grantor owns, fents, leases, or uses; and (4) all other properties where
Collateral is or may be located.
REMOVAL OF THE COLLATERAL. Except in the ordinary course of Grantor's business,
including the sales of inventory, Grantor shall not remove the Collateral from
its existing location without Lender's prior written consent. Grantor shall,
whenever requested, advise Lender of the exact location of the Collateral.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not sell,
offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor
is not in default under this Agreement, Grantor may sell inventory, but only in
the ordinary course of its business and only to buyers who quality as a buyer in
the ordinary course of business. A sale in the ordinary course of Grantor's
business does not include a transfer in partial or total satisfaction of a debt
or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise
permit the Collateral to be Subject to any lien, security interest, encumbrance,
or charge, other than the security interest provided for in this Agreement,
without the prior written consent of Lender. This includes security interests
even if junior in right to the security interests granted under this Agreement.
Unless waived by Lender, all proceeds from any disposition of the Collateral
(for whatever reason) shall be held in trust for Lender and shall not be
commingled with any other funds; provided however, this requirement shall not
constitute consent by Lender to any sale or other disposition. Upon receipt,
Grantor shall immediately deliver any such proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that Grantor holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
REPAIRS AND MAINTENANCE. Grantor agrees to keep and maintain, and to cause
others to keep and maintain, the Collateral in good order, repair and condition
at all times while this Agreement remains in effect. Grantor further agrees to
pay when due all claims for work done on, or services rendered or material
furnished in connection with the Collateral so that no lien or encumbrance may
ever allach to or be filed against the Collateral.
INSPECTION OF COLLATERAL. Lender and Lender's designated representatives and
agents shall have the right at all reasonable times to examine and
<PAGE>
COMMERCIAL SECURITY AGREEMENT
(Continued)
PAGE 2
inspect the Collateral wherever located.
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the Indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized in Lender's sole opinion. It the Collateral is
subjected to a lien which is not discharged within fifteen (15) days, Grantor
shall deposit with Lender cash, a sufficient corporate surely bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys' fees or other charges
that could accrue as a result of foreclosure or sale of the Collateral, In any
contest Grantor shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral. Grantor shall name
Lender as an additional obligee under any surety bond furnished in the contest
proceedings. Grantor further agrees to furnish Lender with evidence that such
taxes, assessments, and governmental and other charges have been paid in full
and in a timely manner. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities, now
or hereafter in effect, applicable to the ownership, production, disposition, or
use of the Collateral. Grantor may contest in good faith any such law, ordinance
or regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Lender's interest in the Collateral, in Lender's
opinion, is not jeopardized.
HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral never
has been, and never will be so long as this Agreement remains a lien on the
Collateral, used in violation of any Environmental Laws or for the generation,
manufacture, storage, transportation, treatment, disposal, release or threatened
release of any Hazardous Substance. The representations and warranties contained
herein are based on Grantor's due diligence in investigating the Collateral for
Hazardous Substances. Grantor hereby (1) releases and waives any future claims
against Lender for indemnity or contribution in the event Grantor becomes liable
for cleanup or other costs under any Environmental Laws, and (2) agrees to
indemnify and hold harmless Lender against any and all claims and losses
resulting from a breach of this provision of this Agreement. This obligation to
indemnify shall survive the payment of the Indebtedness and the satisfaction of
this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all risks
insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages and basis reasonably acceptable to
Lender and issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at least
ten (10) days' prior written notice to Lender and not including any disclaimer
of the insurer's liability for failure to give such a notice. Each insurance
policy also shall include an endorsement providing that coverage in favor of
Lender will not be impaired in any way by any act, omission or default of
Grantor or any other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require. If
Grantor at any time fails to obtain or maintain any insurance as required under
this Agreement, Lender may (but shall not be obligated to) obtain such insurance
as Lender deems appropriate, including if Lender so chooses "single interest
insurance," which will cover only Lender's interest in the Collateral.
APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of any
loss or damage to the Collateral. Lender may make proof of loss it Grantor fails
to do so within fifteen (15) days of the casualty. All proceeds of any insurance
on the Collateral, including accrued proceeds thereon, shall be held by Lender
as part of the Collateral. It Lender consents to repair or replacement of the
damaged or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost
of repair or restoration. It Lender does not consent to repair or replacement of
the Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the indebtedness, and shall pay the balance to Grantor. Any proceeds
which have not been disbursed within six (6) months after their receipt and
which Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
INSURANCE RESERVES. Lender may require Grantor to maintain with Lender reserves
for payment of insurance premiums, which reserves shall be created by monthly
payments from Grantor of a sum estimated by Lender to be sufficient to produce,
at least fifteen (15) days before the premium due date, amounts at least equal
to the insurance premiums to be paid. It fifteen (15) days before payment is
due, the reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender. The reserve funds shall be held by Lender as a general
deposit and shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by Grantor as
they become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance premiums
required to be paid by Grantor. The responsibility for the payment of premiums
shall remain Grantor's sole responsibility.
INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as Lender
may reasonably request including the following: (1) the name of the insurer; (2)
the risks insured; (3) the amount of the policy; (4) the property insured; (5)
the then current value on the basis of which insurance has been obtained and the
manner of determining that value; and (6) the expiration date of the policy, In
addition, Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's Security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor failsto
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due
any amounts Grantor is required to discharge or pay under this Agreement or any
Related Documents, Lender on Grantor's behalf may (but shall not be obligated
to) take any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests,
encumbrances and other claims, at any time levied or placed on the Collateral
and paying all costs for insuring, maintaining and preserving the Collateral All
such expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses will become a part
of the indebtedness and, at Lender's option, will (A) be payable on demand; (B)
be added to the balance of the Note and be apportioned among and be payable with
any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity. The Collateral also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default.
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
PAYMENT DEFAULT. Grantor fails to make any payment when due under the
Indebtedness.
OTHER DEFAULTS. Grantor fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Grantor.
FALSE STATEMENTS. Any warranty, representation or statement made or furnished to
Lender by Grantor or on Grantor's behalf under this Agreement, the Note, or the
Related Documents is false or misleading in any material respect, either now or
at the time made or furnished or becomes false or misleading at any time
thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any time
and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
any collateral securing the Indebtedness. This includes a garnishment of any of
Grantor's accounts, including deposit accounts, with Lender. However, this Event
of Default shall not apply it there is a good faith dispute by Grantor as to the
validity or reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and it Grantor gives Lender written notice of the creditor
or forfeiture proceeding and deposits with Lender monies or a surety bond for
the creditor oi forfeiture proceeding, in an amount determined by Lender, in its
sole discretion, as being an adequate reserve or bond for the dispute.
<PAGE>
COMMERCIAL SECURITY AGREEMENT
(Continued)
Page 3
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to
guarantor, endorser, surety, or accommodation party of any at the Indebtedness
or guarantor, endorser, surety, or accommodation party dies or becomes
incompetent,
ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
INSECURITY. Lender in good faith believes itself insecure.
CURE PROVISIONS. If any default, other than a default in payment, is curable and
if Grantor has not been given a notice of a breach of the same provision of this
Agreement within the preceding twelve (12) months, it may be cured (and no event
of default will have occurred) if Grantor, after receiving written notice from
Lender demanding cure of such default: (1) cures the default within fifteen (15)
days; or (2) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sale discretion to be sufficient
to cure the default and thereafter continues and completes all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the California Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness, including
any prepayment penalty which Grantor would be required to pay, immediately due
and payable, without notice of any kind to Grantor.
Assemble Collateral. Lender may require Grantor to deliver to Lender all or any
portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender. Lender also shall have full power to enter upon the property of Grantor
to take possession of and remove the Collateral. If the Collateral contains
other goods not covered by this Agreement at the time of repossession, Grantor
agrees Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.
SELL THE COLLATERAL. Lender shall have full power to sell, lease, transfer, or
otherwise deal with the Collateral or proceeds thereof in Lender's own name or
that of Grantor. Lender may sell the Collateral at public auction or private
sale. Unless the Collateral threatens to decline speedily in value or is of a
type customarily sold on a recognized market, Lender will give Grantor
reasonable notice of the time after which any private sale or any other intended
disposition of the Collateral is to be made. The requirements of reasonable
notice shall be met if such notice is given at least fifteen (15) days, or such
lesser time as required by state law, before the time of the sale or
disposition. All expenses relating to the disposition of the Collateral,
including without limitation the expenses of retaking, holding, insuring,
preparing for sale and selling the Collateral, shall become a part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
APPOINT RECEIVER. Lender shall have the right to have a receiver appointed to
take possession of all or any part of the Collateral, with the power to protect
and preserve the Collateral, to operate the Collateral preceding foreclosure or
sale, and to collect the Rents from the Collateral and apply the proceeds, over
and above the cost of the receivership, against the Indebtedness. The receiver
may serve without bond if permitted by law. Lender's right to the appointment of
a receiver shall exist whether or not the apparent value of the Collateral
exceeds the Indebtedness by a substantial amount. Employment by Lender shall not
disqualify a person from serving as a receiver.
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a receiver,
may collect the payments, rents, income, and revenues from the Collateral.
Lender may at any lime in Lender's discretion transfer any Collateral into
Lender's own name or that of Lender's nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel paper,
chases in action, or similar properly, Lender may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as
Lender may determine, whether or not Indebtedness or Collateral is then due. For
these purposes, Lender may, on behalf of and in the name of Grantor, receive,
open and dispose of mail addressed to Grantor; change any address to which mail
and payments are to be sent; and endorse notes, checks, drafts, money orders,
documents of title, instruments and items pertaining to payment, shipment, or
storage of any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to Lender.
OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on the
Indebtedness due to Lender after application of all amounts received from the
exercise of the rights provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described in this subsection is a sale of
accounts or chattel paper.
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may be
amended from time to time. In addition, Lender shall have and may exercise any
or all other rights and remedies it may have available at law, in equity, or
otherwise.
ELECTION OF REMEDIES. Except as may be prohibited by applicable law, all of
Lender's rights and remedies, whether evidenced by this Agreement, the Related
Documents, or by any other writing, shall be cumulative and may be exercised
singularly or concurrently. Election by
Lender to pursue any remedy will not bar any other remedy, and an election to
make expenditures or to take action to perform an obligation of Grantor under
this Agreement, after Grantor's failure to perform, shall not affect Lender's
right to declare a default and exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parlies sought to
be charged or bound by the alteration or amendment.
ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of Lender's
costs and expenses, including Lender's attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement. Lender
may hire or pay someone else to help enforce this Agreement, and Grantor shall
pay the costs and expenses of such enforcement. Costs and expenses include
Lender's attorneys' fees and legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Grantor also
shall pay all court costs and such additional fees as may be directed by the
court.
CAPTION HEADINGS. Caption headings in this Agreement. are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF CALIFORNIA. THIS
AGREEMENT HAS BEEN ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA.
PREFERENCE PAYMENTS. Any monies Lender pays because of an asserted preference
claim in Grantor's bankruptcy will become a part of the Indebtedness and, at
Lender's option, shall be payable by Grantor as provided in this Agreement.
NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights or of
any of Grantor's obligations as to any future transactions. Whenever the consent
of Lender is required under this Agreement, the granting Of Such consent by
Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.
NOTICES. Any notice required to be given under this Agreement shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this Agreement.
Any party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of the
notice is to change the party's address. For notice purposes, Grantor agrees to
keep Lender informed at all times of Grantor's current address. Unless otherwise
provided or required by law, it there is more than one Grantor, any notice given
by Lender to any Grantor is deemed to be notice given to all Grantors.
POWER OF ATTORNEY. Grantor hereby appoints Lender as Grantor's irrevocable
attorney- i n-f act for the purpose of executing any documents necessary to
perfect or to continue the security interest granted in this Agreement. Lender
may at any time, and without further authorization from Grantor, file a carbon,
photographic or other reproduction of any financing statement of of this
Agreement for use as a financing statement. Grantor will reimburse Lender for
all expenses for the perfection and the continuation of the perfection of
Lender's security interest in the Collateral.
WAIVER OF CO-OBLIGOR'S RIGHTS. It more than one person is obligated for the
Indebtedness, Grantor irrevocably waives, disclaims and relinquishes all claims
against such other person which Grantor has or would otherwise have by virtue of
payment of the Indebtedness or any part thereof, specifically including but not
limited to all rights of indemnity, contribution or exoneration.
<PAGE>
COMMERCIAL SECURITY AGREEMENT
(Continued)
Page 4
SEVERABILITY. If a court of competent jurisdiction finds any provision of this
Agreement to be illegal, invalid, or unenforceable as to any circumstance, that
finding shall not make the offending provision illegal, invalid, or
unenforceable as to any other circumstance. If feasible, the offending provision
shall be considered modified so that it becomes legal, valid and enforceable. It
the offending provision cannot be so modified, it shall be considered deleted
from this Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement shall not
affect the legality, validity or enforceability of any other provision of this
Agreement.
SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on
transfer of Grantor's interest, this Agreement shall be binding upon and inure
to the benefit of the parties, their successors and assigns. If ownership of the
Collateral becomes vested in a person other than Grantor, Lender, without notice
to Grantor, may deal with Grantor's successors with reference to this Agreement
and the Indebtedness by way of forbearance or extension without releasing
Grantor from the obligations of this Agreement or liability under the
Indebtedness.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations, warranties, and
agreements made by Grantor in this Agreement shall survive the execution and
delivery of this Agreement, shall be continuing in nature, and shall remain in
full force and effect until such time as Grantor's Indebtedness shall be paid in
full.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code:
ACCOUNT. The word "Account" means a trade account, account receivable, other
receivable, or other right to payment for goods sold or services rendered owing
to Grantor (or to a third party grantor acceptable to Lender),
AGREEMENT. The word "Agreement" means this Commercial Security Agreement, as
this Commercial Security Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Commercial Security
Agreement from time to time.
BORROWER. The word "Borrower' means Chicago Pizza & Brewery, Inc., and all other
persons and entities signing the Note in whatever capacity.
COLLATERAL. The word "Collateral" means all of Grantor's right, title and
interest in and to all the Collateral as described in the Collateral Description
section of this Agreement.
DEFAULT. The word "Default" means the Default set forth in this Agreement in the
section titled "Default".
ENVIRONMENTAL LAWS. The words "Environmental Laws" mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. ("CERCLN'), the Superlund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, el seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5
through 7.7 of Division 20 of the California Health and Safety Code, Section
25100, et seq., or other applicable state or federal laws, rules, or regulations
adopted pursuant thereto.
EVENT OF DEFAULT. The words "Event of Default" mean any of the Events of Default
set forth in this Agreement in the Default section of this Agreement.
GRANTOR. The word "Grantor" means Chicago Pizza & Brewery, Inc.
HAZARDOUS SUBSTANCES. The words "Hazardous Substances" mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human health
or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled. The words "Hazardous
Substances" are used in their very broadest sense and include without limitation
any and all hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws. The term "Hazardous Substances" also
includes, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with
all other indebtedness and costs and expenses for which Grantor is responsible
under this Agreement or under any of the Related Documents.
LENDER. The word "Lender"means Washington Mutual Bank dba WM Business Bank, its
successors and assigns.
NOTE. The word "Note" means the Note executed by Grantor in the principal amount
of $4,000,000.00 dated February 15, 2000, together with all renewals of,
extensions of, modifications of, refinancings of, consolidations of, and
substitutions for the note or credit agreement.
RELATED DOCUMENTS. The words "Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness,
GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED FEBRUARY 15, 2000.
GRANTOR:
CHICAGO PIZZA & BREWERY, INC.
BY:
Ernest T. Klinger, President of Chicago Pizza &
Brewery, Inc.
.
<PAGE>
CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL
Corporation: Chicago Pizza & Brewery, Inc.
26131 Marguerite Parkway, Suite A
Mission Viejo, CA 92692
Lender: Washington Mutual Bank dba WM Business Bank
Los Angeles Business Banking Center
1000 Wilshire Boulevard, Suite 100
Los Angeles, CA 90017
1, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:
THE CORPORATION'S EXISTENCE. The complete and correct name of the Corporation is
Chicago Pizza & Brewery, Inc. ("Corporation"). The Corporation is a corporation
for profit which is, and at all times shall be, duly organized, validly
existing, and in good standing under and by virtue ofthe laws of the State of
California. The Corporation is duly authorized to transact business in all other
states in which the Corporation is doing business, having obtained all necessary
filings, governmental licenses and approvals for each state in which the
Corporation is doing business. Specifically, the Corporation is, and at all
times shall be, duly qualified as a foreign corporation in all states in which
the failure to so qualify would have a material adverse effect on its business
or financial condition. The Corporation has the full power and authority to own
its properties and to transact the business in which it is presently engaged or
presently proposes to engage. The Corporation maintains an office at 26131
Marguerite Parkway, Suite A, Mission Viejo, CA 92692. Unless the Corporation has
designated otherwise in writing, the principal office is the office at which the
Corporation keeps its books and records. The Corporation will notify Lender of
any change in the location of the Corporation's principal office. The
Corporation shall do all things necessary to preserve and to keep in full force
and effect its existence, rights and privileges, and shall comply with all
regulations, rules, ordinances, statutes, orders and decrees of any governmental
or quasi-governmental authority or court applicable to the Corporation and the
Corporation's business activities.
RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or it the
Corporation is a close corporation having no Board of Directors then at a
meeting of the Corporation's shareholders, duly called and hold on February 15,
2000, at which a quorum was present and voting, or by other duly authorized
action in lieu of a meeting, the resolutions set forth in this Resolution were
adopted.
OFFICERS. The following named persons are officers of Chicago Pizza & Brewery,
Inc.:
NAMES TITLES AUTHORIZED ACTUAL SIGNATURES
- ----- ------ ---------- -----------------
ERNEST T. KLINGER PRESIDENT Y /s/Ernest T. Klinger
PAUL A. MOTENKO COCHIEF EXECUTIVE OFFICER Y /s/Paul A. Motenko
JEREMIAH J. HENNESSY COCHIEF EXECUTIVE OFFICER Y /s/Jeremiah J. Hennessy
ACTIONS AUTHORIZED. Any one (1) of the authorized persons listed above to
any agreements of any nature with
Lender, and those agreements will bind the Corporation. Specifically, but
without limitation, any one (1) of such authorized persons are authorized,
empowered, and directed to do the following for and on behalf of the
Corporation:
BORROW MONEY. To borrow from time to time from Lender, on such terms as may be
agreed upon between the Corporation and Lender, such sum or sums of money as in
their judgment should be borrowed, without limitation.
EXECUTE NOTES. To execute and deliver to Lender the promissory note or notes, or
other evidence of the Corporation's credit accommodations, on Lender's forms, at
such rates of interest and on such terms as may be agreed upon, evidencing the
sums of money so borrowed or any of the Corporation's indebtedness to Lender,
and also to execute and deliver to Lender one or more renewals, extensions,
modifications, refinancings, consolidations, or substitutions for one or more of
the notes, any portion of the notes, or any other evidence of credit
accommodations.
GRANT SECURITY. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Corporation or in which the Corporation now or hereafter may have an
interest, including without limitation all real property and all personal
property (tangible or intangible) of the Corporation, as security for the
payment of any loans or credit accommodations so obtained, any promissory notes
so executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness of
the Corporation to Lender at any time owing, however the same may be evidenced.
Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered at the time such loans are obtained or such indebtedness is incurred,
or at any other time or times, and may be either in addition to or in lieu of
any properly theretofore mortgaged, pledged, transferred, endorsed, hypothecated
or encumbered.
EXECUTE SECURITY DOCUMENTS. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.
Notwithstanding the foregoing, any one of the above authorized persons may
execute, deliver, or record financing statements.
NEGOTIATE ITEMS. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the Corporation's account with Lender, or to cause such other disposition of
the proceeds derived therefrom as they may deem advisable.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the officers may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of this Resolution.
ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Corporation. Excluding the name of the Corporation, the following is a complete
list of all assumed business names under which the Corporation does business:
NONE.
NOTICES TO LENDER. The Corporation will notify Lender in writing at Lender's
address shown above (or such other addresses as Lender may designate from time
to time) prior to any (A) change in the Corporation's name, (8) change in the
Corporation's assumed business name(s), (C) change in the management of the
Corporation, (D) change in the authorized signer(s), (E) change in the
Corporation's principal office address, (F) conversion of the Corporation to a
now or different type of business entity, or (G) change in any other aspect of
the Corporation that directly or indirectly relates to any agreements between
the Corporation and Lender. No change in the Corporation's name will take effect
until after Lender has been notified.
CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officers named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set opposite their respective names. This
Resolution now stands of record on the books of the Corporation, is in full
force and effect, and has not been modified or revoked in any manner whatsoever.
NO CORPORATE SEAL. The Corporation has no corporate seal, and therefore, no seal
is affixed to this Resolution.
CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to and received by Lender at Lender's address shown above
(or such addresses as Lender may designate from time to time). Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
IN TESTIMONY WHEREOF, I have hereunto set my hand.
I have read all the provisions of this Resolution, and I personally and on
behalf of the Corporation certify that all statements and representations made
In this Resolution are true and correct. This Corporate Resolution to Borrow /
Grant Collateral Is dated February 15, 2000.
<PAGE>
CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL
(Continued)
Page 2
CERTIFIED TO AND ATTESTED BY:
X /s/Ernest T. Klinger
NOTE: If the officers signing this Resolution are designated by the foregoing
document as one of the officers authorized to act on the Corporation's behalf,
It is advisable to have this Resolution signed byat least one non-authorized
officer of the Corporation.
