<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
( X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended OCTOBER 31, 1998
-----------------------------
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 0-12226
-----------
CALIFORNIA BEACH RESTAURANTS, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-2693503
- ------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
17383 SUNSET BOULEVARD, SUITE 140, PACIFIC PALISADES, CA 90272
--------------------------------------------------------------
(Address and zip code of Principal executive offices)
(310) 459-9676
----------------------------------------------------
(Registrant's 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 the filing
requirements for at least the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
Number of Shares Outstanding
Class at December 11, 1998
- ---------------------------- ----------------------------
Common Stock, $.01 par value 3,400,931
<PAGE> 2
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
OCTOBER 31, 1998
INDEX
<TABLE>
<CAPTION>
Part I - FINANCIAL INFORMATION Page Number
-----------
<S> <C> <C>
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets at October 31, 1998
and April 30, 1998..........................................................3
Consolidated Statements of Operations for the
Three Months Ended and Six Months Ended
October 31, 1998 and 1997...................................................5
Consolidated Statements of Cash Flows for the
Six Months Ended October 31, 1998 and 1997..................................6
Notes to Consolidated Financial Statements..................................7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.........................................9
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.................13
Part II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS..........................................................13
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS..................................13
Item 3. DEFAULTS UPON SENIOR SECURITIES............................................13
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................13
Item 5. OTHER INFORMATION..........................................................13
Item 6. EXHIBITS AND REPORTS ON FORM 8-K...........................................13
Signature Page........................................................................14
</TABLE>
2
<PAGE> 3
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
October 31, 1998 April 30, 1998
---------------- --------------
(Unaudited) (1)
<S> <C> <C>
Current Assets:
Cash $ 227,000 $ 252,000
Trade and other receivables 45,000 39,000
Inventories 150,000 162,000
Prepaid expenses 212,000 321,000
--------- ---------
Total current assets 634,000 774,000
Fixed Assets (at cost) - net of accumulated
depreciation and amortization (Note C ) 1,014,000 946,000
Other Assets:
Goodwill, net of accumulated amortization
of $4,913,000 at October 31, 1998 and
$4,584,000 at April 30, 1998 1,098,000 1,427,000
Other 174,000 174,000
-------- --------
$2,920,000 $3,321,000
========= ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
(1) The April 30, 1998 amounts have been extracted from the Company's Annual
Report on Form 10-K for the year ended April 30, 1998.
3
<PAGE> 4
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
October 31, 1998 April 30, 1998
---------------- --------------
(Unaudited) (1)
<S> <C> <C>
Current Liabilities:
Accounts payable $ 494,000 $ 568,000
Accrued liabilities 620,000 895,000
Revolving line of credit (Note D) 500,000 700,000
----------- -----------
Total current liabilities 1,614,000 2,163,000
Deferred rent 197,000 207,000
Other liabilities 171,000 167,000
Stockholders' Equity:
Common stock, $.01 par value, authorized 25,000,000 shares, issued and
outstanding, 3,401,000 shares at October 31, 1998 and
at April 30, 1998 34,000 34,000
Additional paid-in capital 13,175,000 13,175,000
Deficit in retained earnings (12,271,000) (12,425,000)
----------- ----------
Total stockholders' equity 938,000 784,000
----------- ----------
$ 2,920,000 $3,321,000
=========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
(1) The April 30, 1998 amounts have been extracted from the Company's Annual
Report on Form 10-K for the year ended April 30, 1998.
4
<PAGE> 5
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
---------------------- ---------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $3,584,000 $3,798,000 $7,138,000 $7,798,000
Costs and expenses:
Cost of goods sold 2,968,000 3,010,000 5,905,000 6,192,000
Selling, general and administrative 211,000 658,000 423,000 872,000
Legal and litigation settlement 34,000 276,000 50,000 361,000
Depreciation 63,000 69,000 124,000 138,000
--------- --------- --------- ---------
Operating income (loss) 308,000 (215,000) 636,000 235,000
Other income (expenses):
Interest expense - (67,000) - (144,000) (1,000)
Amortization of intangible assets (168,000) (166,000) (329,000) (332,000)
Other, net - 9,000 - 17,000
--------- --------- ---------- ---------
Income (loss) before income taxes 73,000 (372,000) 163,000 (81,000)
Provision for income taxes 4,000 - 9,000 7,000
--------- --------- ---------- ----------
Net income (loss) $69,000 ($372,000) $154,000 ($88,000)
========= ========= ======== ========
Net income (loss) per
common share (basic and diluted): $ .02 ($ .11) $ .05 ($ .03)
====== ========== ===== ========
Weighted average number of
common shares outstanding: 3,401,000 3,401,000 3,401,000 3,401,000
========= ========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
5
<PAGE> 6
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $154,000 ($88,000)
Adjustments to reconcile net income (loss) to cash provided by operations:
Depreciation and amortization 453,000 470,000
Changes in operating assets and liabilities:
Restricted cash - 475,000
Trade and other receivables (6,000) 3,000
Inventories 12,000 (2,000)
Prepaid expenses 109,000 18,000
Accounts payable (74,000) 104,000
Accrued liabilities (275,000) 105,000
Deferred rent (10,000) -
Other liabilities 4,000 273,000
--------- ----------
Cash provided by operations 367,000 1,358,000
--------- ----------
Investing activities:
Additions to fixed assets (192,000) (103,000)
--------- ----------
Net cash used in investing activities (192,000) (103,000)
--------- ----------
Financing activities:
Principal payments on borrowings (200,000) (1,488,000)
--------- ----------
Net cash used in financing activities (200,000) (1,488,000)
--------- ----------
Net decrease in cash (25,000) (233,000)
Cash at beginning of period 252,000 626,000
--------- ----------
Cash at end of period $ 227,000 $393,000
========= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 144,000 1,000
========= ==========
Income taxes $ - $ 12,000
========= ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement
6
<PAGE> 7
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The unaudited consolidated financial statements presented herein include the
accounts of California Beach Restaurants, Inc., and its wholly-owned
subsidiaries (the "Company"). All significant intercompany accounts and
transactions have been eliminated.
The unaudited consolidated financial statements presented herein have been
prepared in accordance with generally accepted accounting principles and the
instructions to Form 10-Q and article 10 of Regulation S-X and do not include
all of the information and footnote disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the accompanying financial statements include all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
the Company's financial position and results of operations. The results of
operations for the six month period ended October 31, 1998 may not be indicative
of the results that may be expected for the year ending April 30, 1999. These
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-K for the year-ended April 30, 1998.
Certain amounts have been reclassified in the Fiscal 1998 financial statements
to conform to the Registrant's 1999 presentation.
NOTE B - ACCOUNTING PERIODS
The Company's restaurant operations are conducted through its wholly-owned
subsidiary, Sea View Restaurants, Inc. ("Sea View"). The Company's consolidated
financial statements for the three months and six months ended October 31, 1998
and 1997 include Sea View's operations for the twelve weeks and twenty-four
weeks ended October 15, 1998 and October 16, 1997, respectively.
NOTE C - FIXED ASSETS
<TABLE>
<CAPTION>
October 31, 1998 April 30, 1998
---------------- --------------
<S> <C> <C>
Construction in progress $ 207,000 $ 74,000
Leasehold improvements 2,747,000 2,732,000
Furniture and equipment 1,046,000 1,003,000
---------- ------------
4,000,000 3,809,000
Less accumulated depreciation and amortization (2,986,000) (2,863,000)
---------- ------------
$1,014,000 $ 946,000
========== ============
</TABLE>
7
<PAGE> 8
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
NOTE D - REVOLVING LINE OF CREDIT - RELATED PARTY
On November 24, 1997 Sea View entered into a one year, $1,000,000 unsecured line
of credit agreement with Outside LLC, an entity affiliated with one of the
Registrant's principal shareholders and with a member of its board of directors.
This agreement provides for interest of 10% on all amounts borrowed, requires a
commitment fee of 1.25% of the total line and is guaranteed by the Registrant.
The expiration date of the line of credit agreement was extended to February 28,
1999, on November 30, 1998. The line will be used by Sea View for seasonal
working capital needs as well as for certain renovations to Gladstone's. At
October 31, 1998, $500,000 was borrowed and outstanding under the line of
credit. The line of credit restricts any distribution to the Registrant except
for distributions for taxes paid or for repayment of intercompany loans.
8
<PAGE> 9
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
RESTAURANT REVENUES
Restaurant operations include the results of Gladstone's 4 Fish ("Gladstone's")
in Pacific Palisades, California and RJ's - Beverly Hills in Beverly Hills,
California.
Total sales for the three months ended October 31, 1998 were $3,584,000 compared
with $3,798,000 for the same period last year, a decrease of $214,000 or 5.6%.
For the six months ended October 31, 1998, total sales were $7,138,000 compared
with $7,798,000 for the same period last year, a decrease of $660,000 or 8.5%.
Gladstone's is located on the beach in Pacific Palisades, California and is
dependent, to a certain extent, on favorable weather and tourism. Gladstone's
has a large outside deck overlooking the Pacific ocean which is a very popular
destination but is only open as weather permits. Severe storms generated by the
"El Nino" weather phenomenon concluded during the six months ended October 31,
1998; however, the effects of such storms, including road closures and reduced
tourism, continued to adversely affect revenues through the three and six month
periods ended October 31, 1998, as compared to the same periods last year.
As a result of typically more favorable weather and higher tourism during the
summer months from May through September, the Registrant's sales and operating
profits have historically been higher in the first and second quarters of its
fiscal year.
COST OF GOODS SOLD
Cost of goods sold includes all food, beverages, liquor, direct labor and other
operating expenses, including rent, of the Registrant's restaurant operations.
Cost of goods sold for the three months ended October 31, 1998 was $2,968,000,
or, as a percentage of sales, 82.8% compared with $3,010,000, or, as a
percentage of sales, 79.3% during the same period last year. Cost of goods sold
for the six months ended October 31, 1998 was $5,905,000, or, as a percentage of
sales, 82.7% compared with $6,192,000, or, as a percentage of sales, 79.4%
during the same period last year.
The increase in cost of goods sold as a percentage of sales is primarily
attributable to increases in the minimum wage and increases in minimum rent
required by Sea View's new, twenty-year concession agreement with the County of
Los Angeles. The minimum wage in the State of California increased by $.15 per
hour on September 1, 1997, and $.60 per hour on March 1, 1998. At present, the
state of California, unlike most states, does not allow any adjustment of
minimum wage for employees that receive tips.
9
<PAGE> 10
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
Cost of goods sold will typically be slightly lower during the first and second
quarters due to additional economies of scale that can be achieved with labor
and certain other costs when sales levels are higher. For the fiscal year ended
April 30, 1998, cost of goods sold, as a percentage of sales, was 87.4%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
For the three months ended October 31, 1998, selling, general and administrative
expenses were $211,000 compared with $658,000 for the same period last year, a
decrease of $447,000 or 67.9%. For the six months ended October 31, 1998,
selling, general and administrative expenses were $423,000, compared with
$872,000 for the same period last year, a decrease of $449,000 or 51.5%. The
decrease is primarily due to the inclusion of a $339,000 bonus for two senior
executives and $79,000 in consulting fees relating to the new Gladstone's
concession agreement in the operating results for the three and six month
periods ended October 31, 1997. These costs did not recur in the three and six
month periods ended October 31, 1998.
LEGAL AND LITIGATION SETTLEMENT
For the three months ended October 31, 1998, legal and litigation settlement
expenses were $34,000, compared with $276,000 for the same period in the prior
year, a decrease of $242,000 or 87.7%. For the six months ended October 31,
1998, legal and litigation settlement expenses were $50,000, compared with
$361,000 for the same period in the prior year, a decrease of $311,000, or
86.1%.
The respective decreases are primarily due to the inclusion in the prior year
period operating results of legal expenses and settlement costs involving an
employment-related litigation matter and legal expenses associated with the
negotiation of Gladstone's twenty-year concession agreement.
OTHER INCOME AND EXPENSES
For the three and six months ended October 31, 1998, amortization expense was
$168,000 and $329,000, respectively. Amortization expense relates to the
Registrant's Goodwill and will approximate $714,000 per year.
For the three and six months ended October 31, 1998, interest expense was
$67,000 and $144,000, respectively. Interest expense for the three and six
months ended October 31, 1997 was $0 and $1,000, respectively. The increase in
interest expense for the three and six month periods ended October 31, 1998,
respectively, as compared to the comparable periods in the prior year, is
primarily attributable to maintenance of a $2,000,000 letter of credit pursuant
to the Gladstone's concession agreement that became effective November 1, 1997.
Additionally, the Registrant incurred interest expense in connection with Sea
View's line of credit agreement; the outstanding balance of such line of credit
at October 31, 1998 is $500,000. Sea View did not have a line of credit during
the comparable periods in the prior year.
IMPACT OF YEAR 2000
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Registrant's
computer programs that have
10
<PAGE> 11
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities.
The Registrant has determined that it will be required to modify or replace
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. The Registrant also has
initiated formal communications with its significant suppliers and large
customers to determine the extent to which the Registrant's interface systems
are vulnerable to those third parties' failure to remediate their own year 2000
Issues. The Registrant presently believes that with modifications to existing
software and conversion to new software, the cost of which is not expected to be
material to the Registrant's results of operation or financial position, the
Year 2000 Issue will not pose significant operational problems for its computer
systems. The Registrant will use both internal and external resources to
reprogram, or replace, and test the software for Year 2000 modifications. The
Registrant anticipates completing the Year 2000 project prior to any anticipated
impact on its operating systems, and, accordingly, the Registrant has not
developed a Year 2000 contingency plan. However, if such modifications and
conversions are not made, or are not completed timely, the year 2000 Issue could
have a material adverse effect on the operations of the Registrant. Likewise,
there can be no assurance that the systems of other companies on which the
Registrant's systems rely will be timely converted and would not have a material
adverse effect on the Registrant.
LIQUIDITY AND CAPITAL RESOURCES
Sea View and the County executed a twenty year concession agreement for
Gladstone's that commenced on November 1, 1997 ("Agreement"). The terms of the
Agreement required Sea View post a $2,000,000 letter of credit as a security
deposit for rental payments due to the County. In the event that rents are not
paid when due, the County may draw upon the letter of credit. The letter of
credit will be reduced to an amount equal to three months minimum rent upon Sea
View's satisfaction of certain conditions, including completion of the required
capital improvements and maintenance of certain net worth levels. The Agreement
requires that Sea View complete at least $2,700,000 in capital improvements to
the restaurant facility by April, 1999.
The Registrant posted the letter of credit by utilizing cash collateral provided
by Overhead Partners, L.P. ("Overhead"), an entity affiliated with one of the
Registrant's principal shareholders and with a member of its board of directors.
The letter of credit, which previously was to expire on October 31, 1998, now
expires on December 31, 1998, unless extended prior to expiration. In
consideration of providing the cash collateral, the Registrant paid a fee to
Overhead of $100,000 for the period May 1, 1998 through October 31, 1998, and
will continue to pay $16,667 per month until the letter of credit is reduced,
terminated, or expires. In the event that any amounts are drawn down on the
letter of credit, such amounts will automatically convert into a debt obligation
of the Registrant, payable with interest ninety days (or earlier under certain
circumstances) from the date of such conversion.
On November 24, 1997 Sea View entered into a one year, $1,000,000 unsecured line
of credit agreement with Outside LLC, an entity affiliated with one of the
Registrant's principal shareholders and with a member of its board of directors.
This agreement provides for interest of 10% on all amounts borrowed, requires a
commitment fee of 1.25% of the total line and is guaranteed by the Registrant.
The expiration date of the line of credit agreement was extended to February 28,
1999, on November 30, 1998. The line will be used by Sea View for seasonal
working capital needs as well as for certain renovations to Gladstone's. At
October 31, 1998,
11
<PAGE> 12
$500,000 was borrowed and outstanding under the line of credit. The line of
credit restricts any distribution to the Registrant except for distributions for
taxes paid or for repayment of intercompany loans.
The Registrant is currently evaluating available options to raise the necessary
funds or receive appropriate commitments to complete the required renovations to
Gladstone's, and has had discussions with related parties and third parties in
this regard. The Registrant is seeking to procure funding prior to January,
1999, when the major renovations to Gladstone's are anticipated to begin. Such
renovations had been expected to begin by October, 1998, but were postponed by
delays in obtaining necessary architectural approvals and other factors inherent
in the development process. There can be no assurance that the Registrant will
be successful in completing the required equity or debt financing. Failure to
substantially commence construction, as defined in the concession agreement, is
an event of default under such agreement.
The Registrant is also exploring various opportunities to expand its operations.
The Registrant's ability to expand is subject to the availability of debt or
equity financing on terms that are acceptable to the Registrant.
There can be no assurance that such financing will be available.
Capital expenditures for the six months ended October 31, 1998 totaled
approximately $192,000. The terms of the concession Agreement between Sea View
and the County require Sea View to expend approximately $2,700,000 on
renovations to Gladstone's. The timing of such renovations is subject to the
receipt of all necessary permits.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, certain statements in
this Form 10-Q, including statements in this Item are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievement of the Registrant, or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: the Registrant's ability to secure adequate debt or equity
financing in order to comply with the terms of the Gladstone's concession
Agreement, including the maintenance of a $2,000,000 letter of credit, the
payment of significantly higher rental payments and completion of required
renovations; the Registrant's ability to generate an operating profit based on
the terms of the Gladstone's concession Agreement; the impact on the Registrant
of the Year 2000 Issue; that its principal source of cash is funds generated
from operations; that restaurants historically have represented a high risk
investment in a very competitive industry; general and local economic
conditions, which can, among other things, impact tourism, consumer spending and
restaurant revenues; weather and natural disasters, such as earthquakes and
fires, which can impact sales at the Registrant's restaurants; quality of
management; changes in, or the failure to comply with, governmental regulations;
unexpected increases in the cost of key food products, labor and other operating
expenses in connection with the Registrant's business; and other factors
referenced in this Form 10-Q and the Registrant's other filings with the SEC.
12
<PAGE> 13
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable as the Registrant is a small business issuer as defined
by SEC regulations.
PART II
OTHER INFORMATION
-----------------
Item 1. LEGAL PROCEEDINGS.
None
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.
Not applicable.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
10.65 - Letter of Credit Agreement, dated as of November
1, 1998, by and between California Beach
Restaurants, Inc., Sea View Restaurants, Inc., and
Overhead Partners L.P., a California Limited
Partnership
10.66 - Line of Credit Agreement, dated as of November 30,
1998, by and between Sea View Restaurants, Inc., and
Outside LLC, a California Limited Liability Company.
27 - Financial data schedule
REPORTS ON FORM 8-K
None
13
<PAGE> 14
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
SIGNATURE(S)
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
California Beach Restaurants, Inc. (Registrant)
Dated: December 11, 1998 By: /S/ ALAN REDHEAD
---------------------------
Alan Redhead
Chief Executive Officer
By: /S/ SAMUEL E. CHILAKOS
----------------------------
Samuel E. Chilakos
Chief Financial Officer
14
<PAGE> 15
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Item
Number Description
- ------ -----------
10.65 Letter of Credit Agreement, dated as of November 1, 1998,
by and between California Beach Restaurants, Inc., Sea View
Restaurants, Inc., and Overhead Partners L.P., a California Limited
Partnership (A)
10.66 Line of Credit Agreement, dated as of November 30, 1998, by and
between Sea View Restaurants, Inc., and Outside LLC, a California
Limited Liability Company. (A)
27 Financial data schedule (A)
(A) FILED HEREWITH ELECTRONICALLY
15
<PAGE> 1
EXHIBIT 10.65
LETTER OF CREDIT AGREEMENT
This Agreement is by and between CALIFORNIA BEACH RESTAURANTS, INC., a
California corporation ("CBR" or the "Company"), SEA VIEW RESTAURANTS, INC., a
California corporation and wholly-owned subsidiary of CBR ("Sea View"), and the
parties designated on the signature page hereto ("Providers"). The effective
date of this Agreement is November 1, 1998.
WHEREAS, pursuant to a Concession Agreement dated as of November 1,
1997 (the "Concession Agreement") by and between Sea View and the County of Los
Angeles, State of California (the "County"), Sea View is required to provide a
letter of credit in favor of the County to support Sea View's obligations under
the Concession Agreement; and
WHEREAS, Providers are willing to provide credit support for such
letter of credit on behalf of Sea View;
NOW, THEREFORE, in consideration of the promises and covenants
contained herein, the parties hereby agree as follows:
1. Letter of Credit. Providers hereby agree to provide the credit
support for an irrevocable letter of credit in the form attached hereto as
Exhibit A, securing Sea View's obligations under the Concession Agreement (the
"Letter of Credit"). Providers agree to provide credit support for such Letter
of Credit for a term expiring December 31, 1998, or such earlier date that Sea
View notifies Providers in writing that the Letter of Credit may be terminated
by Providers or the Line of Credit (defined below) is terminated (such
expiration date or earlier termination date to be referred to as "Termination
Date"). Provider shall not be obligated to extend the Letter of Credit beyond
the Termination Date or cause to be replaced any amounts drawn by the County
against the Letter of Credit.
2. Fees and Costs. CBR shall pay all costs incurred by Providers with
respect to this Agreement and the Letter of Credit, including the fees and
expenses of the bank issuing the Letter of Credit, as well as Providers'
reasonable attorney fees associated in negotiating and documenting the Letter of
Credit and this Agreement.
3. Compensation. In consideration for Providers agreeing to provide
credit support for the Letter of Credit, CBR agrees to pay to Providers the
following:
(i) for the period November 1, 1998 through November 30, 1998, CBR
agrees to pay Providers Sixteen Thousand Six Hundred Sixty Six
Dollars and Sixty Seven Cents ($16,666.67) in cash, payable
December 1, 1998;
(ii) for the period December 1, 1998 through December 31, 1998, CBR
agrees to pay Providers Sixteen Thousand Six Hundred Sixty Six
Dollars and Sixty Seven Cents ($16,666.67) in cash, payable
January 1, 1999; provided that if the Letter of Credit
terminates subsequent to November 1,
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1998 and prior to December 31, 1998, the amount payable shall
be prorated for the number of days the Letter of Credit was in
place.
4. Letter of Credit Draw Down. In the event the County draws down the
Letter of Credit , the amount drawn down by the County (a "Draw Down") shall be
automatically converted into a debt obligation of the Company and evidenced by a
promissory note ("Note") substantially in the form set forth as Exhibit B
attached hereto. At the request of Providers, the Company shall promptly file an
application with the California Department of Corporations to qualify the
issuance by the Company of a loan with substantially identical terms to the Note
set forth in Exhibit B hereto, except that the interest rate shall be 12% per
annum (a "Qualified Note"), and once qualified such Qualified Note shall replace
the Note.
5. Line of Credit. Although not contractually bound to do so, Provider
or any of its affiliated entities may provide to the Companies a One Million
Dollar ($1,000,000) line of credit (the "Line of Credit"). If the Line of Credit
is in fact provided and terminated by the Company, Providers' obligation to
provide credit support for the Letter of Credit shall automatically cease. In
addition, the Line of Credit shall provide that an event of default with respect
to payments due under the Note shall be deemed to be an immediate default under
the Line of Credit.
6. Miscellaneous
6.1 Amendment. Neither this Agreement nor any term hereof may
be Amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
6.2 Entire Agreement; Assignment. This Agreement (i)
constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them
with respect to the subject matter hereof and (ii) shall not be
assigned by operation of law or otherwise.
6.3 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement, which shall
remain in full force and effect.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to
have been duly given when delivered in person, by cable, telegram or
telex, or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the address set forth
opposite each such party's name on the signature page or to such other
address as the person to whom notice is given may have previously
furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only
upon receipt thereof).
6.5 Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the State of California regardless of
the laws that might otherwise govern under principles of conflicts of laws
applicable thereto.
6.6 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in
this Agreement, express or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
6.7 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
CALIFORNIA BEACH RESTAURANTS, INC.
By: /s/ Samuel E. Chilakos
-----------------------------------------
Its: Vice President - Finance
-------------------------------------
Address: 17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
Attention: President
PROVIDERS
Overhead Partners, L.P., a California
limited partnership
By: /s/ J. Christopher Lewis
-----------------------------------------
Its: General Partner
-------------------------------------
Address: 300 S. Grand Avenue, 29th Floor
Los Angeles, CA 90071
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EXHIBIT A
[JP MORGAN LETTERHEAD]
__________, 1998
Letter of Credit No. PB-285466
County of Los Angeles
500 West Temple Street
Los Angeles, CA 90012
Gentlemen:
In accordance with instructions received from our client, we hereby
establish our Irrevocable Letter of Credit No. PB-285466 in your favor for the
account of Overhead Partners, L.P. for the amount of U.S. $2,000,000.00 (TWO
MILLION AND 00/100 DOLLARS) which is available for payment upon presentation of
your right draft(s) drawn on us accompanied by your statement appropriately
completed and purportedly signed by an authorized signatory of your company
stating as follows,
"There has been an Event of Default under the Concession Agreement by
and between the County of Los Angeles ("County") and Sea View
Restaurants, Inc. dated as of November 1, 1997, and $___________ is due
and payable thereunder."
Drafts drawn hereunder must be marked "Drawn under Morgan Guaranty Trust
Company of New York, Letter of Credit Number PB-285466, dated ___________.
In the event that County makes a total or partial drawing under this
instrument, then a representative of the County may telephonically contact
Morgan Guaranty Trust Company of New York at any reasonable time(s) during the
following thirty (30) day period and shall be entitled to accurate information
as to the remaining sums available under the Letter of Credit and whether or not
the amount(s) previously drawn have been replenished.
This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amplified or amended by reference
to any document, instrument, or agreement referred to herein, and any such
reference shall not be deemed to incorporate herein by reference to any such
document, instrument, or agreement.
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This Credit is subject to the Uniform Customs and Practices for Documentary
Credits, (1993 Revision), International Chamber of Commerce Publication No. 500.
We hereby agree that all draft(s) drawn hereunder and in compliance with
the terms and conditions of this Credit will be duly honored upon proper
presentation and delivery of documents specified, if presented to Morgan
Guaranty Trust Company of New York, c/o J.P. Morgan Services, Inc., 500 Stanton
Christiana Road, Newark, Delaware 19713-2107, Attention Private Client Group,
Letters of Credit, on or before the expiry date of December 31, 1998.
We further agree to provide you with written notice of the impending expiry
date of this Letter of Credit by certified mail to Stan Wisniowski, Director,
Los Angeles County Department of Beaches and Harbors, 13837 Fiji Way, Marina del
Rey, California 90292, to be delivered no more than thirty (30) and no less than
twenty (20) days prior to the aforementioned October 31, 1998 expiry date.
Yours very truly,
/s/ [SIG]
-------------------------------------
Authorized Signature
Private Client Group Letter of Credit
(302) 634-2342
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EXHIBIT B
SEA VIEW RESTAURANTS, INC.
SENIOR PROMISSORY NOTE
$2,000,000 LOS ANGELES, CALIFORNIA
November 1, 1998
Sea View Restaurants, Inc., a California corporation (the "Company"),
the principal office of which is located at 17383 Sunset Boulevard, Suite 140,
Pacific Palisades, California 90272, for value received hereby promises to pay
to _______________________ ______________, or its registered assigns, the sum of
Two Million Dollars ($2,000,000), or such lesser amount as shall then equal the
outstanding principal amount hereof and any unpaid accrued interest hereon, as
set forth below. This Note is issued in connection with the transactions
described in Section 4 of that certain Letter of Credit Agreement, dated as of
November 1, 1998, between the Company, California Beach Restaurants, Inc., a
California corporation and parent corporation of the Company (the "Parent"), and
the Providers described therein, as the same may from time to time be amended,
modified or supplemented (the "Letter of Credit Agreement").
The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder
hereof, by the acceptance of this Note, agrees:
1. PAYMENT. The amount and date of any "Draw Down" of the Letter of
Credit as set forth in the Letter Credit Agreement shall be noted on Exhibit A
hereto. With respect to any particular Draw Down, all principal and interest
shall be due and payable on the earlier to occur of (i) Ninety (90) days from
the date of any such Draw Down or (ii) when declared due and payable by the
Holder under the occurrence of an Event of Default (as defined below). Payment
for all amounts due hereunder shall be made by mail to the registered address of
the Holder.
2. INTEREST. The Company shall pay interest at the rate of ten percent
(10%) per annum (the "Interest Rate") on the principal of this Note outstanding
during the period beginning on the date of a Draw Down and ending on the date
that the principal amount and interest with respect to any Draw Down becomes due
and payable, but in no event shall such rate exceed the maximum lawful interest
rate permitted by the laws of the State of California. If, for any circumstances
whatsoever, fulfillment of any provision hereof, at the time performance of such
provision shall be due, shall involve transcending the limit
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of validity prescribed by law, then, ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity; and if, for any circumstance,
the holder hereof shall ever receive as interest an amount which would be
excessive interest, said amount shall be applied to the reduction of the unpaid
balance due hereunder and not to the payment of interest. This provision shall
control every other provision of all agreements between the Company and the
Holders.
3. EVENTS OF DEFAULT. If any of the events specified in this Section 3
shall occur (herein individually referred to as an "Event of Default"), the
Holder of the Note may, so long as such condition exists, declare the entire
principal and unpaid accrued interest hereon immediately due and payable, by
notice in writing to the Company.
(i) Default in the payment of the principal and unpaid accrued
interest of this Note when due and payable; or
(ii) The institution by the Company of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to
institution of bankruptcy or insolvency proceedings against it
or the filing by it of a petition or answer or consent seeking
reorganization or release under the federal Bankruptcy Act, or
any other applicable federal or state law, or the consent by
it to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar
official of the Company, or of any substantial part of its
property, or the making by it of an assignment for the benefit
of creditors, or the taking of corporate action by the Company
in furtherance of any such action; or
(iii) If, within sixty (60) days after the commencement of an action
against the Company (and service of process in connection
therewith on the Company) seeking any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar relief
under any present or future statute, law or regulation, such
action shall not have been resolved in favor of the Company or
all orders or proceedings thereunder affecting the operations
or the business of the Company stayed, or if the stay of any
such order or proceeding shall thereafter be set aside, or if,
within sixty (60) days after the appointment without the
consent or acquiescence of the Company of any trustee,
receiver or liquidator of the Company, such appointment or of
all or any substantial part of the properties of the Company,
such appointment shall not have been vacated.
4. PREPAYMENT. This Note may be prepaid at any time by the Company. The
Company may at any time prepay in whole or in part the principal sum, plus
accrued interest to date of payment, of this Note.
5. LIMITATIONS ON DEBT: NEGATIVE PLEDGE. The Company may not incur
any indebtedness for borrowed money. If the Company shall create or assume any
indebtedness secured by any lien upon any of the Company's property or assets,
whether now owned or hereafter acquired, the Company shall, at the request of
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Providers, make or cause to be made effective provision whereby the Notes will
be secured equally with any and all other indebtedness thereby secured as long
as any such other indebtedness shall be so secured.
6. ASSIGNMENT. The rights and obligations of the Company and the Holder
of this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
7. WAIVER AND AMENDMENT. Any provision of this Note may be amended,
waived or modified upon the written consent of the Company and Holder.
8. NOTICES. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if telegraphed or mailed by registered or
certified mail, postage prepaid, at the respective addresses of the parties as
set forth herein. Any party hereto may by notice so given change its address for
future notice hereunder. Notice shall conclusively be deemed to have been given
when personally delivered or when deposited in the mail or telegraphed in the
manner set forth above and shall be deemed to have been received when delivered.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
10. FEES. If this Note is not paid when due, the Company agrees to pay
all costs of collection and reasonable attorney fees incurred by the Holder,
whether or not suit is filed.
IN WITNESS WHEREOF, the Company has caused this Note to be issued this
_______ day of ______________, _______.
SEA VIEW RESTAURANTS, INC.
By:
---------------------------------
Its: President
---------------------------------
Name of Holder:
---------------------
Address:
----------------------------
- ------------------------------------
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EXHIBIT 10.66
LINE OF CREDIT AGREEMENT
This Line of Credit Agreement, dated as of November 30, 1998 (the
"Agreement"), is entered into by and between Sea View Restaurants, Inc., a
California corporation ("Borrower"), and Outside, LLC, a California limited
liability company ("Lender").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto covenant and agree
as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings set forth below:
"Acquisition" means any transaction, or any series of related
transactions, by which Borrower directly or indirectly (i) acquires any
going business or all or substantially all of the assets of any firm,
partnership, joint venture, corporation or division thereof, whether
through purchase of assets, merger or otherwise, or (ii) acquires (in
one transaction or as the most recent transaction in a series of
transactions) control of at least a majority in ordinary voting power
of the securities of a corporation which have ordinary voting power for
the election of directors, or (iii) acquires control of a fifty percent
(50%) or more ownership interest in any partnership or joint venture.
"Affiliate" means, as to any Person, any other Person who
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (and
the correlative terms "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or
cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by
contract or otherwise).
"Authorization" means any authorization, consent, approval,
order, license, permit, exemption or other action by or from, or any
filing, registration or qualification with, any Governmental Agency or
other Person.
"Capital Expenditure" means any expenditure that is considered
a capital expenditure under Generally Accepted Accounting Principles,
consistently applied, including any amount that is required to be
treated as an asset subject to a Capital Lease.
"Capital Lease" means, as to any Person, a lease of any
property by that Person as lessee that is, or should be, in accordance
with the rules promulgated by the Financial Accounting Standards Board,
recorded as a "capital lease" on the balance sheet of that Person.
<PAGE> 2
"CBR" means California Beach Restaurants, Inc., a California
corporation, its successors and permitted assigns.
"Contingent Obligation" means, as to any Person, any (a)
direct or indirect guarantee of Indebtedness of, or other obligation
performable by, any other Person, including any endorsement (other than
for collection or deposit in the ordinary course of business),
co-making or sale with recourse of the obligations of any other Person
or (b) contractual assurance (not arising solely by operation of law)
given to an obligee with respect to the performance of an obligation
by, or the financial condition of, any other Person, whether direct,
indirect or contingent.
"Debtor Relief Laws" means the Bankruptcy Code of the United
States of America, as amended from time to time, and all other
applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, or similar
debtor relief laws from time to time in effect affecting the rights of
creditors generally.
"Disposition" means the sale, transfer, lease, loan,
abandonment or other disposition in any single transaction or series of
related transactions of (a) all or substantially all of the assets of a
division or comparable business segment of Borrower, or (b) any other
individual asset, or group of related assets, of Borrower that has or
have at the date of the Disposition a book value or fair market value
(which shall be deemed to be equal to the sales price for such asset or
assets upon a sale to a Person) of Seventy-five Thousand Dollars
($75,000) or more, other than (i) the sale or other disposition of
inventory in the ordinary course of business and (ii) the sale or other
disposition of equipment or other personal property that is (x) not
required in the business of Borrower as presently conducted or
reasonably foreseen to be useful in the future, or (y) replaced by
equipment or personal property, as the case may be, performing
substantially the same function, not later than ninety (90) days after
such sale or disposition.
"Distribution" means, with respect to any shares of capital
stock or any warrant or right to acquire shares of capital stock or any
other equity security issued by a Person, (a) the retirement,
redemption, purchase, or other acquisition for value by such Person of
any such security, and (b) the declaration or (without duplication)
payment by such Person of any dividend in cash or in property (other
than in common stock of such Person) on or with respect to any such
security.
"Governmental Agency" means (a) any international, foreign,
federal, state, county or municipal government, or political
subdivision thereof, (b) any governmental or quasi-governmental agency,
authority, board, bureau, commission, department, instrumentality or
public body, (c) any court, administrative tribunal or public utility,
or (d) any arbitration tribunal or other non-governmental authority to
whose jurisdiction a Person has consented.
"Indebtedness" means, as to any Person, (a) all indebtedness
of such Person for borrowed money, (b) that portion of the obligations
of such Person under Capital Leases
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which is properly recorded as a liability on a balance sheet of that
Person prepared in accordance with generally accepted accounting
principles, (c) any obligation of such Person that is evidenced by a
promissory note or other instrument representing an extension of credit
to such Person, whether or not for borrowed money, (d) any obligation
of such Person for the deferred purchase price of property or services
(other than trade or other accounts payable in the ordinary course of
business in accordance with customary terms), (e) any obligation of
such Person that is secured by a Lien on assets of such Person, whether
or not that Person has assumed such obligation or whether or not such
obligation is non-recourse to the credit of such Person, but only to
the extent of the fair market value of the assets so subject to the
Lien, and (f) obligations of such Person for unreimbursed draws under
letters of credit issued for the account of such Person.
"Investment" means, when used in connection with any Person,
any investment by or of that Person, whether by means of purchase or
other acquisition of capital stock or other Securities of any other
Person or by means of loan, advance, capital contribution, guaranty or
other debt or equity participation or interest, or otherwise, in any
other Person, including any partnership and joint venture interests of
such Person in any other Person.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment for security, security interest, encumbrance,
lien or charge of any kind, whether voluntarily incurred or arising by
operation of law or otherwise, affecting any property, including any
agreement to grant any of the foregoing, any conditional sale or other
title retention agreement, any lease in the nature of a security
interest, and/or the filing of or agreement to give any financing
statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the
Uniform Commercial Code or comparable law of any jurisdiction with
respect to any property.
"Permitted Encumbrances" means: (a) general and special ad
valorem real estate taxes and assessments which are not delinquent; (b)
present or future zoning laws and ordinances or other laws and
ordinances restricting the occupancy use or enjoyment of real property;
(c) liens in favor of Lender; and (d) purchase money liens and
equipment leases entered into in the ordinary course of business.
"Person" means any person or entity, whether an individual,
trustee, corporation, general partnership, limited partnership, joint
stock company, trust, estate, unincorporated organization, business
association, firm, joint venture, Governmental Agency, or otherwise.
"Requirement of Law" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or
governing documents of such Person, and any law, or judgment, award,
decree, writ or determination of a Governmental Agency, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
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"Securities" means any capital stock, share, voting trust
certificate, bond, debenture, note or other evidence of indebtedness,
limited partnership interest, or any warrant, option or other right to
purchase or acquire any of the foregoing.
"Subsidiary" means, as of any date of determination and with
respect to any Person, any corporation, partnership or joint venture,
whether now existing or hereafter organized or acquired: (a) in the
case of a corporation, of which a majority of the securities having
ordinary voting power of the election of directors or other governing
body (other than securities having such power only by reason of the
happening of a contingency) are at the time beneficially owned by such
Person and/or one or more Subsidiaries of such Person, or (b) in the
case of a partnership or joint venture, of which such Person or a
Subsidiary of such Person is a general partner or joint venturer or of
which a majority of the partnership or other ownership interests are at
the time beneficially owned by such Person and/or one or more of its
Subsidiaries.
ARTICLE 2
LOANS
2.1 Revolving Line of Credit. Lender hereby agrees to make loans in an
aggregate amount of One Million Dollars ($1,000,000) on a revolving credit basis
to Borrower ("Revolving Commitment"). The Lender's Revolving Commitment shall
terminate on February 28, 1999, at which time all outstanding principal and
accrued interest on the Revolving Note shall be due and payable.
A loan made by Lender to Borrower shall be evidenced by a
promissory note of Borrower, substantially in the form of Exhibit A ("Revolving
Note"), with appropriate insertions therein as to date and principal amount of
any borrowing hereunder and representing the obligation of the Borrower to pay
the aggregate unpaid principal amount of all loans made by Lender to Borrower
hereunder, with interest thereon at ten percent (10%) per annum, payable on the
first of each month. (Five days prior to the first of each month, Borrower shall
provide Lender with a written calculation of interest payable on the first day
of the next month.) Lender is hereby authorized (but not required) to record the
date and amount of each borrowing, payment or prepayment of principal of its
loan made to Borrower, and any such recordation shall constitute prima facie
evidence of the accuracy of the information so recorded. Failure of Lender to
make any such recordation or notation in the books and records of Lender (or any
error in such recordation or notation) shall not affect the obligations of the
Borrower hereunder under the Revolving Note. Interest shall be calculated on the
basis of a year of 360 days and actual days elapsed. Amounts borrowed by
Borrower may be repaid and, through February 28, 1999, reborrowed.
2.2 Notice of Borrowing. Borrower shall give Lender written notice five
(5) business days prior to the proposed borrowing date, requesting that the
Lender make the revolving loan on the proposed borrowing date and specifying the
aggregate amount of the revolving loan requested to be made. All borrowings
hereunder shall made in a minimum aggregate amount of Twenty-five Thousand
Dollars ($25,000).
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2.3 Late Payments. If any installment of principal or interest under
the Revolving Note to Lender is not paid when due, it shall thereafter bear
interest at the fixed rate of fifteen percent (15%) per annum, to the fullest
extent permitted by applicable law. Accrued and unpaid interest on past due
amounts (including, without limitation, interest on past due interest) shall be
compounded monthly, on the last day of each calendar month, to the fullest
extent permitted by applicable law.
2.4 Manner and Treatment of Payments. Each payment hereunder or on the
Revolving Note shall be made to Lender, by wire transfer, in immediately
available funds not later than 11:00 a.m., Los Angeles time, on the day of
payment. Lender shall provide Borrower with payment instructions, including bank
accounts and wire transfer instructions. All payments received after 11:00 a.m.,
Los Angeles time, on any particular business day, shall be deemed received on
the next succeeding business day. All payments shall be made in lawful money of
the United States of America.
2.5 Failure to Charge Not Subsequent Waiver. Any decision by Lender not
to require payment of any interest (including interest at any post-default
rate), or to calculate any amount payable by a particular method, on any
occasion shall in no way limit or be deemed a waiver of Lender's right to
require all payment of any interest (including interest after default).
2.6 Commitment Fee. The Borrower agrees to pay the Lender a commitment
fee equal to $3,125, due on the date hereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
3.1 Existence and Qualification; Power; Compliance With Laws. Borrower
is a corporation duly formed, validly existing and in good standing under the
laws of California. Borrower is duly qualified to transact business, and is in
good standing, in California. Borrower has all requisite corporate power and
authority to conduct its business, to own and lease its properties and to
execute and deliver the Agreement and the Revolving Note to which it is a party
and to perform the obligations to be performed by it.
3.2 Authority; Compliance With Other Agreements and Instruments and
Government Regulations. The execution, delivery and performance by Borrower of
the Agreement and the Revolving Note have been duly authorized by all necessary
corporate action, and do not:
(a) Require any consent or approval not heretofore obtained of
any partner, director, stockholder, security holder or creditor of
Borrower;
(b) Violate or conflict with any provision of Borrower's
charter, articles of incorporation or bylaws, as applicable;
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(c) Result in or require the creation or imposition of any
Lien with respect to any property now owned or leased or hereafter
acquired by Borrower;
(d) Violate any Requirement of Law applicable to Borrower; or
(e) Result in a breach of or default under, or would, with the
giving of notice or the lapse of time or both, constitute a breach of
or default under, or cause or permit the acceleration of any obligation
owed under, any indenture or loan or credit agreement or any other
contractual obligation to which Borrower is a party or by which
Borrower or any of its property is bound or affected.
3.3 No Governmental Approvals Required. No authorization, consent,
approval, order, license or permit from, or filing, registration or
qualification with, any Governmental Agency is required to authorize or permit
under applicable laws the execution, delivery and performance by Borrower of the
Agreement and Revolving Note.
3.4 Binding Obligations. Each of the Agreement and Revolving Note will,
when executed and delivered by Borrower, constitute the legal, valid and binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms, except as enforcement may be limited by Debtor Relief Laws or equitable
principles relating to the granting of specific performance and other equitable
remedies as a matter of judicial discretion.
ARTICLE 4
AFFIRMATIVE COVENANTS
So long as any part of the Revolving Note remains unpaid, or any other
Obligation remains unpaid or unperformed, Borrower shall, unless Lender
otherwise consents:
4.1 Liens and Taxes. Keep the assets and property of the Borrower free
and clear of all Liens, subject only to Permitted Encumbrances, and pay and
perform when due all other obligations secured by or constituting a Lien
affecting any of the Collateral, except that Borrower shall not be required to
pay or perform any such taxes, Lien claims or other obligations (x) for which
Borrower has been fully indemnified, or (y) which are being actively contested
in good faith by appropriate proceedings, provided that Borrower has established
and maintains adequate accounting reserves for the payment or performance of
such taxes, Lien claims or other obligations.
4.2 Preservation of Existence. Preserve and maintain its existence in
the jurisdiction of its formation and all authorizations, rights, franchises,
privileges, consents, approvals, orders, licenses, permits and registrations
from any Governmental Agency that are necessary for the transaction of its
businesses, and qualify and remain qualified to transact business in each
jurisdiction in which such qualification is necessary in view of its businesses
or the ownership or leasing of its properties except where the failure to
preserve and maintain any such
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authorizations, rights, franchises, privileges, consents, approvals, orders,
licenses, permits and registrations or to so qualify or remain qualified would
not constitute a material adverse effect on the Borrower.
4.3 Maintenance of Properties. Maintain, preserve and protect all of
its depreciable properties in good order and condition, subject to wear and tear
in the ordinary course of business, and not permit any waste of its properties,
except that the failure to maintain, preserve and protect a particular item of
depreciable property that is not of significant value, either intrinsically or
to the operations of Borrower, shall not constitute a violation of this covenant
unless such failure occurs with respect to a sufficient number of items of
depreciable property to jeopardize the existing condition of any bar or
restaurant operation of Borrower.
4.4 Maintenance of Insurance. At all times maintain its existing
policies of insurance.
4.5 Compliance With Laws. Comply with all requirements of applicable
laws.
4.6 Books, Records and Inspection Rights. At all times maintain full
and complete books of account and other records with respect to its business and
operations in conformity with generally accepted accounting principles and in
material conformity with all applicable requirements of any Governmental Agency
having regulatory jurisdiction over Borrower.
4.7 Compliance With Agreements. Promptly and fully comply with all
Contractual obligations under all material agreements, indentures, leases and/or
instruments to which it is a party, whether such material agreements,
indentures, leases or instruments are with Lender or another Person, except that
Borrower need not comply with contractual obligations under any such agreements,
indentures, leases or instruments then being contested by any of them in good
faith by appropriate proceedings or if the failure to comply with such
agreements, indentures, leases or instruments does not constitute a material
adverse effect.
4.8 Financial Information. So long as any part of the Revolving Note
remains unpaid, Borrower shall deliver to Lender copies of Borrower's filings
with the Securities and Exchange Commission within three (3) business days of
such filings.
ARTICLE 5
NEGATIVE COVENANTS
5.1 Disposition of Property. Make any Disposition of its property,
whether now owned or hereafter acquired.
5.2 Mergers; Dissolution. Merge or consolidate with or into any Person;
or dissolve or agree to its dissolution.
5.3 Investments and Acquisitions. Make any Acquisition or enter into
any agreement to make any Acquisition, or make or suffer to exist any
Investment, except:
7
<PAGE> 8
(a) Investments consisting of cash equivalents; and
(b) Investments consisting of demand deposits in any bank or
other financial institution.
5.4 Distributions. Make any Distribution, whether from capital, income
or otherwise, and whether in cash or other property, except for Distributions to
CBR less than or equal in aggregate amount to the aggregate amount of all taxes
paid in cash by CBR with respect to property or operations of Borrower, or
Distributions to CBR in repayment of money advanced by CBR to the Company.
5.5 Change in Nature of Business. Make any material change in the
nature of the business of Borrower as at present conducted.
5.6 Liens; Sales and Leasebacks. Create, incur, assume or suffer to
exist any Lien of any nature upon or with respect to any of its property,
whether now owned or hereafter acquired; or engage in any sale and leaseback
transaction with respect to any of its property, except Permitted Encumbrances.
5.7 Indebtedness and Contingent Obligations. Create, incur, assume or
suffer to exist any Indebtedness or Contingent Obligation, except Indebtedness
and Contingent Obligations in favor of Lender under this Agreement.
5.8 Transactions with Affiliates. Enter into any transaction of any
kind with any Affiliate of Borrower, except for transactions on terms at least
as favorable to Borrower as would be the case in an arm's-length transaction
between unrelated parties of equal bargaining power.
ARTICLE 6
EVENTS OF DEFAULT AND REMEDIES
UPON EVENT OF DEFAULT
6.1 Events of Default. The existence or occurrence of any one or more
of the following events, whatever the reason therefor and under any
circumstances whatsoever, shall constitute an Event of Default:
(a) Borrower fails to make any payment of principal or
interest on any Loan within the earlier of ten (10) business days
following the date when due, or two (2) business days following receipt
of written notice of nonpayment; or
(b) Borrower fails to perform or observe any other covenant
contained in this Agreement, and such failure continues for thirty (30)
days after the earlier to occur of (i) a senior officer of Borrower
becoming aware of such failure, or (ii) notice thereof from the Lender;
or
8
<PAGE> 9
(c) Any representation or warranty made in this Agreement
proves to have been incorrect when made in any respect that is
materially adverse to the interests of Lender; or
(d) This Agreement or the Revolving Note at any time after its
execution and delivery and for any reason other than the agreement of
Lender or satisfaction in full of all the obligations, ceases to be in
full force and effect or is declared by a court of competent
jurisdiction to be null and void, invalid or unenforceable in any
respect; or
(e) A judgment against Borrower is entered for the payment of
money in excess of One Hundred Thousand Dollars ($100,000) and, absent
procurement of a stay of execution, such judgment remains unbonded or
unsatisfied for forty-five (45) calendar days after the date of entry
of judgment; or
(f) Borrower or CBR institutes or consents to any proceeding
under a Debtor Relief Law relating to it or to all or any part of its
respective property, or is unable or admits in writing its inability to
pay its debts as they mature, or makes an assignment for the benefit of
creditors; or applies for or consents to the appointment of any
receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer for it or for all or any part of its property; or any
receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer is appointed without the application or consent of that
Person and the appointment continues undischarged or unstayed for sixty
(60) calendar days; or any proceeding under a Debtor Relief Law
relating to Borrower or CBR or to all or any part of its respective
property is instituted without the consent of that Person and continues
undismissed or unstayed for sixty (60) calendar days; or any judgment,
writ, warrant of attachment or execution or similar process is issued
or levied against all or any material part of the property of Borrower
or CBR and is not released, vacated or fully bonded within sixty (60)
calendar days after its issue or levy; or
(g) The occurrence of a "Draw Down" (as such term is
specifically defined in the Letter of Credit Agreement dated November
1, 1998 (the "Letter of Credit Agreement"); or
(h) The Concession Agreement dated November 1, 1997, by and
between the County of Los Angeles and Borrower, or any other license or
permit is modified, revoked or terminated such that Borrower's business
operations are modified in any materially adverse respect.
6.2 Remedies Upon Event of Default. Without limiting any other rights
or remedies of Lender provided for elsewhere in this Agreement, or the Revolving
Note, or by applicable law, or it equity, or otherwise, Lender may declare all
or any part of the unpaid principal of the Revolving Note, all interest accrued
and unpaid thereon and all other amounts payable under the Revolving Note to be
forthwith due and payable, whereupon the same shall become and be
9
<PAGE> 10
forthwith due and payable, without protest, presentment, notice of dishonor,
demand or further notice of any kind, all of which are expressly waived by
Borrower.
ARTICLE 7
MISCELLANEOUS
7.1 Cumulative Remedies; No Waiver. The rights, powers, privileges and
remedies of Lender provided herein or in the Revolving Note are cumulative and
not exclusive of any right, power, privilege or remedy provided by law or
equity. No failure or delay on the part of Lender in exercising any right,
power, privilege or remedy may be, or may be deemed to be, a waiver thereof; nor
may any single or partial exercise of any right, power, privilege or remedy
preclude any other or further exercise of the same or any other right, power,
privilege or remedy.
7.2 Amendments; Consents. No amendment, modification, supplement,
extension, termination or waiver of any provision of this Agreement, no approval
or consent thereunder, and no consent to any departure by Borrower or any other
party therefrom, may in any event be effective unless in writing signed by
Lender, and then only in the specific instance and for the specific purpose
given.
7.3 Costs, Expenses and Taxes.
(a) Borrower shall pay on demand the reasonable attorneys
fees, costs and expenses of Lender incurred in connection with the
negotiation, preparation, execution and delivery of the Agreement;
(b) Borrower shall pay on demand the reasonable attorneys
fees, costs and expenses of Lender incurred in connection with any
amendment, waiver, refinancing, restructuring, reorganization
(including a bankruptcy reorganization) and enforcement or attempted
enforcement of the Loan Documents, and any matter related thereto.
7.4 Nature of Lender's Obligations. Nothing contained in this Agreement
or any other Loan Document and no action taken by Lender pursuant hereto or
thereto may, or may be deemed to, make Lender and Borrower or any Affiliate of
Borrower a partnership, an association, a joint venture or other entity.
7.5 Survival of Representations and Warranties. All representations and
warranties contained herein or in the Revolving Note have been or will be relied
upon by Lender, notwithstanding any investigation made by Lender or on its
behalf.
7.6 Notices.
(a) All notices, requests, demands, directions and other
communications provided hereunder must be in writing and must be
mailed, telecopied, or personally delivered to the appropriate party at
the address set forth on the signature pages of this
10
<PAGE> 11
Agreement or at any other address as may be designated by it in a
written notice sent to the other party; and
(b) Any notice, request, demand, direction or other
communication given by telecopier must be confirmed within forty-eight
(48) hours by letter mailed or delivered to the appropriate party at
its respective address.
7.7 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto or thereto may execute any counterpart, each
of which when executed and delivered will be deemed to be an original and all of
which counterparts, when taken together will be deemed to be but one and the
same instrument.
7.8 Binding Effect; Assignment. This Agreement and the Revolving Note
shall be binding upon and inure to the benefit of Borrower, Lender and their
respective successors and assigns, except that Borrower and/or its Affiliates
may not assign their rights hereunder or thereunder or any interest herein or
therein without the prior written consent of Lender. Lender shall have the right
to sell or transfer any interest in this Agreement and the Revolving Note to (i)
any Person other than a competitor of Borrower with the prior consent of
Borrower, which consent shall not be unreasonably withheld, or (ii) any
Affiliate.
7.9 Indemnity by Borrower. Borrower agrees to defend (by counsel
satisfactory to Lender), indemnify, save and hold harmless Lender and its
Affiliates, directors, partners, officers, agents, attorneys and employees
(collectively the "Indemnitees") from and against:
(a) Any and all claims, demands, actions, causes of action and
discovery requests that are asserted against any Indemnitee by any
Person (other than Lender) if the claim, demand, action or cause of
action directly or indirectly relates to a claim, demand, action or
cause of action that such Person asserts or may assert against
Borrower, any Affiliate of Borrower (excluding Lender and its
Affiliates, except in their capacities as Lender hereunder) or any
officer, director or shareholder of Borrower;
(b) Any and all claims, demands, actions, causes of action and
discovery requests if the claim, demand, option, cause of action or
discovery request arises out of or relates to the relationship of
Borrower and Lender under this Agreement (including without limitation
any injury or death to persons or damage to property or other loss
occurring on or in connection with the assets and property of Borrower,
whether caused by the alleged negligence or any other act or omission
of Borrower or any other Person);
(c) Any and all claims, demands, actions, causes of action or
discovery requests if the claim, demand, action, cause of action or
discovery request arises out of or relates to any alleged act or
omission of Borrower, any Affiliate of Borrower (excluding Lender and
its Affiliates, except in their capacities as Lender hereunder), or any
Person who is an agent or employee of Borrower; and
(d) Any and all liabilities, losses, costs or expenses
(including reasonable attorneys' fees (including, without limitation,
the cost of in-house legal services) and
11
<PAGE> 12
disbursements and other professional services) that any Indemnitee
suffers or incurs as a result of the assertion of any foregoing claim,
demand, action or cause of action; provided that no Indemnitee shall be
entitled to indemnification for any loss caused by its own gross
negligence or willful misconduct.
The relationship between Borrower and Lender is, and shall at all times
remain, solely that of a borrower and lender; Lender shall not under any
circumstance be construed to be a partner or a joint venturer of Borrower or its
Affiliates; Lender shall not under any circumstance be deemed to be in a
relationship of confidence or trust or a fiduciary relationship with Borrower or
its Affiliates, or to owe any fiduciary duty to Borrower or its Affiliates;
Lender does not undertake or assume any responsibility or duty to Borrower or
its Affiliates to select, review, inspect, supervise, pass judgment upon or,
inform Borrower or its Affiliates of any matter in connection with their
property or the operations of Borrower or its Affiliates; Borrower and its
Affiliates shall rely entirely upon their own judgment with respect to such
matters; and any review, inspection, supervision, exercise of judgment or supply
of information undertaken or assumed by Lender in connection with such matters
is solely for the protection of Lender and neither Borrower nor any other Person
is entitled to rely thereon; and
7.10 Integration. This Agreement, together with the Revolving Note,
comprises the complete and integrated agreement of the parties on the subject
matter hereof and supersedes all prior agreements, written or oral, on the
subject matter hereof.
7.11 Governing Law. Except to the extent otherwise expressly provided
therein, this Agreement and the Revolving Note shall be governed by, and
construed and enforced in accordance with, the local laws of California.
7.12 Severability of Provisions. Any provision in this Agreement that
is held to be inoperative, unenforceable or invalid as to any party or in any
jurisdiction shall, as to that party or jurisdiction, be inoperative,
unenforceable or invalid without affecting the remaining provisions or the
operation, enforceability or validity of that provision as to any other party or
in any other jurisdiction, and to this end the provisions of this Agreement are
declared to be severable.
7.13 Guaranty. This Agreement and the Revolving Note shall be
guaranteed by CBR.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
BORROWER:
SEA VIEW RESTAURANTS, INC.,
a California corporation
By: /s/ Samuel E. Chilakos
------------------------------------
Vice President, Finance
----------------------------------------
(Printed/Typed Name and Title)
By: /s/ Alan Redhead
------------------------------------
President
----------------------------------------
(Printed/Typed Name and Title)
Address:
17383 Sunset Blvd., Suite 140
Pacific Palisades, California 90272
Telecopier: (310) 459-9356
Telephone: (310) 459-9676
13
<PAGE> 14
LENDER:
Outside, LLC, a California limited
liability company
By: /s/ J. Christopher Lewis
------------------------------------
General Partner
----------------------------------------
(Printed/Typed Name and Title)
Address:
300 S. Grand Avenue
Los Angeles, California 90071
Telecopier: (213) 229-8597
Telephone: (213) 229-8453
14
<PAGE> 15
EXHIBIT A
SEA VIEW RESTAURANTS, INC.
SENIOR PROMISSORY NOTE
$1,000,000 LOS ANGELES, CALIFORNIA
November 30, 1998
Sea View Restaurants, Inc. a California corporation (the "Company"),
the principal office of which is located at 17383 Sunset Boulevard, Suite 140,
Pacific Palisades, California 90272, for value received hereby promises to pay
to Outside, LLC, a California limited liability company, or its registered
assigns, the sum of One Million Dollars ($1,000,000), or such lesser amount as
shall then equal the outstanding principal amount hereof and any unpaid accrued
interest hereon, as set forth below. The Company promises to pay interest on the
unpaid principal amount hereof from the date hereof until paid, at the rate of
ten percent (10%) per annum, payable on the first day of each month, with all
unpaid principal and accrued interest thereon due and payable February 28, 1999.
This Note is the "Revolving Note," in the aggregate principal amount of One
Million Dollars ($1,000,000), referenced in the Line of Credit Agreement dated
as November 30, 1998, among the Company and Lender ("Credit Agreement"), and is
issued pursuant to and is entitled to the benefits of the Credit Agreement.
Reference is hereby made to the Credit Agreement for a more complete statement
of the terms and conditions under which the loans evidenced hereby are made and
are to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
office of Lender.
The interest set forth herein shall in no event exceed the maximum
lawful interest rate permitted by the laws of the State of California. If, for
any circumstances whatsoever, fulfillment of any provision hereof, at the time
performance of such provision shall be due, shall involve transcending the limit
of validity prescribed by law, then, ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity; and if, for any circumstance,
the holder hereof shall ever receive as interest an amount which would be
excessive interest, said amount shall be applied to the reduction of the unpaid
balance due hereunder and not to the payment of interest. This provision shall
control every other provision of all agreements between the Company and the
Holders.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of the
Company, which is absolutely unconditional, to pay the principal and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
If an Event of Default shall occur, the Holder of the Note may, so long
as such condition exists, declare the entire principal and unpaid accrued
interest hereon immediately due and payable, by notice in writing to the
Company.
15
<PAGE> 16
This Note may be prepaid at any time by the Company. The Company may at
any time prepay in whole or in part the principal sum, plus accrued interest to
date of payment, of this Note.
The rights and obligations of the Company and the Holder of this Note
shall be binding upon and benefit the successors, assigns, heirs, administrators
and transferees of the parties.
Any provision of this Note may be amended, waived or modified upon the
written consent of the Company and Holder.
Any notice, request or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or if telegraphed or mailed by registered or certified
mail, postage prepaid, at the respective addresses of the parties as set forth
herein. Any party hereto may by notice so given change its address for future
notice hereunder. Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail or telegraphed in the manner
set forth above and shall be deemed to have been received when delivered.
This Agreement shall be governed by and construed in accordance with
the laws of the State of California.
If this Note is not paid when due, the Company agrees to pay all costs
of collection and reasonable attorneys fees incurred by the Holder, whether or
not suit is filed.
IN WITNESS WHEREOF, the Company has caused this Note to be issued this
30th day of November, 1998.
SEA VIEW RESTAURANTS, INC.
By: /s/Alan Redhead
-------------------------------
Its: President
-------------------------------
Name of Holder: Outside, LLC
Address: 300 S. Grand Ave., 29th Floor
Los Angeles, California 90071
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF CALIFORNIA BEACH RESTAURANTS, INC., AS OF OCTOBER
31, 1998 AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS AND CASH FLOWS
FOR THE THREE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> OCT-31-1998
<CASH> 227,000
<SECURITIES> 0
<RECEIVABLES> 45,000
<ALLOWANCES> 0
<INVENTORY> 150,000
<CURRENT-ASSETS> 634,000
<PP&E> 4,000,000
<DEPRECIATION> (2,986,000)
<TOTAL-ASSETS> 2,920,000
<CURRENT-LIABILITIES> 1,614,000
<BONDS> 0
0
0
<COMMON> 34,000
<OTHER-SE> 904,000
<TOTAL-LIABILITY-AND-EQUITY> 2,920,000
<SALES> 3,584,000
<TOTAL-REVENUES> 3,584,000
<CGS> 2,968,000
<TOTAL-COSTS> 3,276,000
<OTHER-EXPENSES> 239,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,000
<INCOME-PRETAX> 73,000
<INCOME-TAX> 4,000
<INCOME-CONTINUING> 69,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,000
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
