<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, 1999
----------------------------------------
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 Identification Number)
incorporation or organization)
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:
<TABLE>
<CAPTION>
Number of Shares Outstanding
Class at December 10, 1999
----- ----------------------------
<S> <C>
Common Stock, $.01 par value 3,400,927
</TABLE>
<PAGE> 2
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
OCTOBER 31, 1999
INDEX
<TABLE>
<CAPTION>
Part I - FINANCIAL INFORMATION Page Number
-----------
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at October 31, 1999
and April 30, 1999.......................................................3
Consolidated Statements of Operations for the
Three Months Ended and Six Months Ended
October 31, 1999 and 1998................................................5
Consolidated Statements of Cash Flows for the
Six Months Ended October 31, 1999 and 1998 ..............................6
Notes to Consolidated Financial Statements...............................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................................8
Item 3. Quantitative and Qualitative Disclosures about Market Risk..............12
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.......................................................12
Item 2. Changes in Securities and Use of Proceeds...............................12
Item 3. Defaults Upon Senior Securities.........................................12
Item 4. Submission of Matters to a Vote of Security Holders.....................12
Item 5. Other Information.......................................................12
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, 1999 April 30, 1999
---------------- --------------
(Unaudited) (1)
<S> <C> <C>
Current Assets:
Cash $ 349,000 $1,018,000
Trade and other receivables 59,000 50,000
Inventories 212,000 211,000
Prepaid expenses 319,000 310,000
---------- ----------
Total current assets 939,000 1,589,000
Fixed Assets (at cost) - net of accumulated
depreciation 3,142,000 2,083,000
Other Assets:
Goodwill, net of accumulated amortization
of $6,341,000 at October 31, 1999 and
$6,010,000 at April 30, 1999 383,000 714,000
Other 189,000 190,000
---------- ----------
$4,653,000 $4,576,000
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
(1) The April 30, 1999 amounts have been extracted from the Company's Annual
Report on Form 10-K for the year ended April 30, 1999.
3
<PAGE> 4
CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
October 31, 1999 April 30, 1999
---------------- --------------
(Unaudited) (1)
<S> <C> <C>
Current Liabilities:
Accounts payable $ 649,000 $ 287,000
Accrued liabilities 757,000 1,021,000
Current Portion of note payable 178,000 123,000
------------ ------------
Total current liabilities 1,584,000 1,431,000
Deferred rent 395,000 405,000
Other liabilities 149,000 137,000
Note payable, less current portion 897,000 699,000
Subordinated convertible notes 1,800,000 1,800,000
Stockholders' Equity:
Common stock, $.01 par value, authorized
25,000,000 shares, issued and outstanding,
3,401,000 shares at October 31, 1999 and
at April 30, 1999 34,000 34,000
Additional paid-in capital 13,175,000 13,175,000
Deficit in retained earnings (13,381,000) (13,105,000)
------------ ------------
Total stockholders' equity (172,000) 104,000
------------ ------------
$ 4,653,000 $ 4,576,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
(1) The April 30, 1999 amounts have been extracted from the Company's Annual
Report on Form 10-K for the year ended April 30, 1999.
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,
----------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 3,523,000 $ 3,584,000 $ 6,663,000 $ 7,138,000
Costs and expenses:
Cost of goods sold 3,054,000 2,968,000 5,837,000 5,905,000
Selling, general and administrative 236,000 245,000 451,000 473,000
Depreciation 100,000 63,000 150,000 124,000
----------- ----------- ----------- -----------
Operating income 133,000 308,000 225,000 636,000
Other expenses:
Interest expense (84,000) (67,000) (170,000) (144,000)
Amortization of intangible assets (165,000) (168,000) (331,000) (329,000)
----------- ----------- ----------- -----------
Income (loss) before income taxes (116,000) 73,000 (276,000) 163,000
Provision for income taxes -- 4,000 -- 9,000
----------- ----------- ----------- -----------
Net income (loss) ($ 116,000) $ 69,000 ($ 276,000) $ 154,000
=========== =========== =========== ===========
Net income (loss) per
common share (basic and diluted): ($ .03) $ .02 ($ .08) $ .05
=========== =========== =========== ===========
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, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($ 276,000) $ 154,000
Adjustments to reconcile net income (loss)
to cash provided by operations:
Depreciation and amortization 481,000 453,000
Changes in operating assets and liabilities:
Trade and other receivables (9,000) (6,000)
Inventories (1,000) 12,000
Prepaid expenses (9,000) 109,000
Other assets 1,000 --
Accounts payable 362,000 (74,000)
Accrued liabilities (264,000) (275,000)
Deferred rent (10,000) (10,000)
Other liabilities 12,000 4,000
----------- -----------
Cash provided by operations 287,000 367,000
----------- -----------
Investing activities:
Additions to fixed assets (1,209,000) (192,000)
----------- -----------
Net cash used in investing activities (1,209,000) (192,000)
----------- -----------
Financing activities:
Borrowings 267,000 --
Principal payments on borrowings (14,000) (200,000)
----------- -----------
Net cash provided by (used in) financing activities 253,000 (200,000)
----------- -----------
Net decrease in cash (669,000) (25,000)
Cash at beginning of period 1,018,000 252,000
----------- -----------
Cash at end of period $ 349,000 $ 227,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 120,000 $ 144,000
=========== ===========
Income taxes $ -- $ --
=========== ===========
</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)
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, 1999 may not be indicative
of the results that may be expected for the year ending April 30, 2000. 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, 1999.
Certain amounts have been reclassified in the Fiscal 1999 financial statements
to conform to the Registrant's Fiscal 2000 presentation.
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, 1999
and 1998 include Sea View's operations for the twelve weeks and twenty-four
weeks ended October 14, 1999 and October 15, 1998, respectively.
FIXED ASSETS
<TABLE>
<CAPTION>
October 31, 1999 April 30, 1999
---------------- --------------
<S> <C> <C>
Construction in progress -- 1,507,000
Leasehold improvements 4,529,000 2,737,000
Furniture and equipment 1,955,000 1,031,000
----------- -----------
6,484,000 5,275,000
Less accumulated depreciation and amortization (3,342,000) (3,192,000)
----------- -----------
$ 3,142,000 $ 2,083,000
=========== ===========
</TABLE>
7
<PAGE> 8
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, 1999 were $3,523,000 compared
with $3,584,000 for the same period last year, a decrease of $61,000 or 1.7%.
For the six months ended October 31, 1999, total sales were $6,663,000 compared
with $7,138,000 for the same period last year, a decrease of $475,000 or 6.7%.
During the three and six month periods ended October 31, 1999, construction of
the renovations to the Registrant's Gladstone's restaurant temporarily caused a
substantial decrease in seating capacity. The decline in revenues for the three
and six month periods ended October 31, 1999 is attributable to the temporary
decrease in seating capacity. As of October 31, 1999, the Registrant's
Gladstone's restaurant is operating at full capacity and the renovations are
completed.
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, 1999 was $3,054,000,
or, as a percentage of sales, 86.7% compared with $2,968,000, or, as a
percentage of sales, 82.8% during the same period last year. Cost of goods sold
for the six months ended October 31, 1999 was $5,837,000, or, as a percentage of
sales, 87.6% compared with $5,905,000, or, as a percentage of sales, 82.7%
during the same period last year.
The increase in cost of goods sold as a percentage of sales is primarily
attributable to the Registrant's construction of renovations to the Gladstone's
restaurant during normal operating hours while the restaurant remained open to
the public. Additionally, the County of Los Angeles increased its assessment of
value for the Gladstone's property, resulting in a property tax increase, which
the Registrant is contesting. As a result of its efforts to minimize the
inconvenience and provide uninterrupted service to the public, the Registrant
experienced certain temporary increases in labor and other operating costs that
are not expected to recur.
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, 1999, cost of goods sold, as a percentage of sales, was 87.1%.
8
<PAGE> 9
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
For the three months ended October 31, 1999, selling, general and administrative
expenses were $236,000 compared with $245,000 for the same period last year, a
decrease of $9,000 or 3.7%. For the six months ended October 31, 1999, selling,
general and administrative expenses were $451,000 compared with $473,000 for the
same period last year, a decrease of $22,000 or 4.7%. The decrease in selling,
general and administrative expenses for the three and six month periods ended
October 31, 1999 as compared to the comparable periods in the prior year is
attributable to the Registrant's continuing efforts to effect a reduction in
such expenses as well as its expanded use of internal counsel in certain legal
matters.
OTHER INCOME AND EXPENSES
For the three and six months ended October 31, 1999, amortization expense was
$165,000 and $331,000, respectively. Amortization expense relates to the
Registrant's goodwill and will approximate $714,000 during the fiscal year
ending April 30, 2000.
For the three and six months ended October 31, 1999, interest expense was
$84,000 and $170,000, respectively. Interest expense for the three and six
months ended October 31, 1998 was $67,000 and $144,000, respectively. The
increase in interest expense for the three and six month periods ended October
31, 1999, as compared to the comparable periods in the prior year, is
attributable to increased levels of debt incurred to finance the Registrant's
renovations to Gladstone's.
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 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 replaced portions of its hardware and 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 the
Year 2000 Issue will not pose significant operational problems for its computer
systems. The Registrant has completed its Year 2000 preparations for its own
operating systems, and, accordingly, the Registrant has not developed a Year
2000 contingency plan. However, 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
On March 30, 1999, the Registrant completed a private offering of $1,800,000 of
subordinated, convertible notes ("Subordinated Notes") to a limited number of
existing shareholders of the Registrant who are "accredited investors" within
the meaning of Regulation D promulgated under the Securities Act of 1933, as
amended. The proceeds of the offering were used to retire existing indebtedness
to Outside LLC, an entity affiliated with Overhead (as defined herein), and to
finance the renovations at Gladstone's. The Subordinated Notes are immediately
convertible into common stock of the Registrant at a rate of $1 per share, and
pay interest at 5% per annum. The Registrant
9
<PAGE> 10
may pay interest on the Subordinated Notes in cash or in kind. The Subordinated
Notes mature on March 30, 2003; provided, however, that the holders of the
Subordinated Notes may elect to receive payment for fifty percent of the
outstanding Subordinated Notes on March 30, 2002.
The Registrant has entered into an agreement for tenant improvement and
equipment financing with Lyon Credit Corporation ("TI Facility"). The terms of
the agreement provide for the extension of up to $1,200,000 of credit, to be
repaid over a 5 year period with interest at the rate of the yield to maturity
of the five year Treasury Note plus 4 percent. This financing is secured by
certain tenant improvements and equipment. At October 31, 1999, the balance due
under the TI Facility was $1,075,000.
The terms of the Concession Agreement required Sea View to 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 was reduced to $437,500 on July 31,1999 upon Sea
View's satisfaction of certain conditions, including completion of the required
capital improvements and maintenance of certain net worth levels. The Concession
Agreement requires Sea View to reinstate the $2,000,000 letter of credit in the
event it fails to maintain the required net worth levels.
The Registrant posted the $2,000,000 letter of credit required by the Concession
Agreement 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. In consideration of
providing the cash collateral, the Registrant paid Overhead $50,000 for the
three months ended July 31, 1999. The $2,000,000 letter of credit expired on
July 31, 1999, and was replaced by a $437,500 letter of credit, in accordance
with the terms of the Concession Agreement.
On July 7, 1999, the Registrant entered into a one year, $500,000 revolving line
of credit agreement with Santa Monica Bank. The agreement provides for interest
at prime plus 1% on all amounts borrowed, requires a commitment fee of 1/2%, and
is secured by certain assets of the Registrant, including its license agreement
with MCA for use of the name Gladstone's. It is also guaranteed by Sea View. The
agreement requires the Registrant to comply with certain cash flow and liquidity
covenants, and includes a 60 consecutive days out of debt requirement. The
Registrant utilized $437,500 of the capacity of the revolving line of credit as
collateral support for a letter of credit issued by Santa Monica Bank pursuant
to the Concession Agreement. The letter of credit expires in one year and
requires a commitment fee of 1%. At October 31, 1999, the Registrant had no
borrowings outstanding under the line of credit.
On September 30, 1999, the Registrant and Santa Monica Bank amended the terms of
the revolving line of credit agreement to provide for a $200,000 increase in the
maximum amount of the line of credit from $500,000 to $700,000. The additional
$200,000 of available borrowing capacity will be available to the Registrant
during the period November 1, 1999 through March 31, 2000 only, after which the
line of credit will revert to its original $500,000 borrowing limit.
The Registrant is 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 three months ended October 31, 1999 totaled
$92,000. The terms of the Concession Agreement required Sea View to expend
approximately $2,700,000 on renovations to Gladstone's. The Registrant believes
Sea View has satisfied this requirement.
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
10
<PAGE> 11
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 generate an operating profit based on the terms of
the 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.
11
<PAGE> 12
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.
On October 18, 1999, the Registrant held its annual
stockholders' meeting. The stockholders voted on two proposals: the
election of directors and ratification of Ernst & Young LLP as the
Registrant's independent auditors.
The stockholders elected the following individuals to serve as
directors of the Registrant:
1. Alan Redhead: 3,104,947 (99.23%) votes for; 23,942 (.77%) withheld
2. J. Christopher Lewis: 3,104,947 (99.23%) votes for; 23,942 (.77%)
withheld
3. Jefferson W. Asher, Jr.: 3,104,697 (99.23%) votes for; 24,192 (.77%)
withheld
4. Richard P. Bermingham; 3,104,697 (99.23%) votes for; 24,192 (.77%)
withheld
5. Robert L. Morrison; 3,104,947 (99.23%) votes for; 23,942 (.77%)
withheld
The stockholders voted in favor of a proposal to ratify the
appointment of Ernst & Young LLP as the Registrant's independent
auditors for the fiscal year ending April 30, 2000 (3,105,467 (99.26%)
voted for the proposal; 22,994 (.73%) voted against the proposal, and
428 (.01%) abstained from voting on the proposal).
Item 5. Other Information
Not applicable.
12
<PAGE> 13
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
<TABLE>
<S> <C>
10.72 - Change in Terms Agreement, dated as of September 30,
1999, between California Beach Restaurants, Inc., and
Santa Monica Bank, and related documents.
27 - Financial data schedule
</TABLE>
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 14, 1999 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
<TABLE>
<CAPTION>
ITEM
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.72 Change in Terms Agreement, dated as of September 30, 1999,
between California Beach Restaurants, Inc., and Santa Monica Bank,
and related documents. (A)
27 Financial data schedule (A)
</TABLE>
(A) FILED HEREWITH ELECTRONICALLY
15
<PAGE> 1
[SANTA MONICA BANK LOGO]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$700,000.00 07-06-2000 2000314557 5015 RDB [Illegible]
- --------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------------------------------------
<S> <C>
BORROWER: CALIFORNIA BEACH RESTAURANTS, INC., LENDER: SANTA MONICA BANK
A CALIFORNIA CORPORATION (TIN: 95-2693503) LOAN SERVICING CENTER
17383 SUNSET BOULEVARD, #140 1231 4TH STREET
PACIFIC PALISADES, CA 90272 SANTA MONICA, CA 90401
==============================================================================================================
</TABLE>
LOAN TYPE: This is a Variable Rate (1.000% over Prime rate as published in the
Wall Street Journal. When a range of rates has been published, the higher of
the rates will be used, making an initial rate of 9.250%), Revolving Line of
Credit Loan to a Corporation for $700,000.00 due on July 6, 2000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
- -----
[ILLEGIBLE] [ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL INVESTMENT.
- -----
INT [X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
- -----
SPECIFIC PURPOSE. The specific purpose of this loan is: INCREASE OF REVOLVING
LINE OF CREDIT ORIGINALLY GRANTED FOR SHORT-TERM WORKING CAPITAL DURING
SEASONAL SLOW PERIODS AND/OR ADVERSE WEATHER PERIODS. LETTER OF CREDIT
SUB-LIMIT FOR THE PURPOSE OF ISSUING A STANDBY LETTER OF CREDIT TO THE COUNTY
OF LOS ANGELES ON BEHALF OF SEA VIEW RESTAURANTS, INC. AS A 3 MONTH SECURITY
DEPOSIT FOR THE USE OF THE BEACH SITE LOCATION OF GLADSTONES 4 FISH.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $700,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID TO BORROWER DIRECTLY: $0.00
UNDISBURSED FUNDS: $700,000.00
-----------
NOTE PRINCIPAL: $700,000.00
</TABLE>
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
<TABLE>
<S> <C>
PREPAID FINANCE CHARGES PAID IN CASH: $1,000.00
$1,000.00 Loan Fees
---------
TOTAL CHARGES PAID IN CASH: $1,000.00
</TABLE>
LIEN RELEASE FEES. In addition to all other charges, Borrower agrees, to the
extent not prohibited by law, to pay all governmental fees for release of
Lender's security interests in collateral securing this loan. Borrower will pay
these fees at the time the lien or liens are released. The estimated amount of
these future lien release fees is $20.00.
AUTOMATIC PAYMENTS. Borrower hereby authorizes Lender automatically to deduct
from Borrower's account numbered 14 021-620 the amount of any loan payment. If
the funds in the account are insufficient to cover any payment, Lender shall
not be obligated to advance funds to cover the payment. At any time and for any
reason, Borrower or Lender may voluntarily terminate Automatic Payments.
AVAILABILITY OF FUNDS. Additional $200,000.00 increase to the 500,000.00 line
of credit, to be made available November 1, 1999 through March 31, 2000.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED SEPTEMBER 30, 1999.
BORROWER:
CALIFORNIA BEACH RESTAURANTS, INC., A CALIFORNIA CORPORATION
By: /s/ ALAN REDHEAD
------------------------------
ALAN REDHEAD, PRESIDENT
================================================================================
<PAGE> 2
[SANTA MONICA BANK LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$700,000.00 07-06-2000 2000314557 5015 RDB [ILLEGIBLE]
- --------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------------------------------------
<S> <C>
BORROWER: CALIFORNIA BEACH RESTAURANTS, INC., LENDER: SANTA MONICA BANK
A CALIFORNIA CORPORATION (TIN: 95-2693503) LOAN SERVICING CENTER
17383 SUNSET BOULEVARD, #140 1231 4TH STREET
PACIFIC PALISADES, CA 90272 SANTA MONICA, CA 90401
==============================================================================================================
</TABLE>
PRINCIPAL AMOUNT: $700,000.00 DATE OF AGREEMENT: SEPTEMBER 30, 1999
DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated July 7, 1999 in the
amount of $500,000.00 and any renewals, modifications, substitutions or
consolidations thereof.
PROMISE TO PAY. CALIFORNIA BEACH RESTAURANTS, INC., A CALIFORNIA CORPORATION
("BORROWER") PROMISES TO PAY TO SANTA MONICA BANK ("LENDER"), OR ORDER, IN
LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF SEVEN
HUNDRED THOUSAND & 00/100 DOLLARS ($700,000.00) 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 ON DEMAND, OR IF NO DEMAND
IS MADE, IN ONE PAYMENT OF ALL OUTSTANDING PRINCIPAL PLUS ALL
ACCRUED UNPAID INTEREST ON JULY 6, 2000. IN ADDITION, BORROWER
WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST
BEGINNING OCTOBER 6, 1999, AND ALL SUBSEQUENT INTEREST PAYMENTS
- ------------- ARE DUE ON THE SAME DAY OF EACH MONTH AFTER THAT. The annual
[ILLEGIBLE] interest rate for this Agreement is computed on a 365/360 basis;
- ------------- that is, by applying the ratio of the annual interest rate over
INT 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. 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.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an independent index which is the
Prime rate as published in the Wall Street Journal. When a range of rates has
been published, the higher of the rates will be used (the "Index"). The Index
is not necessarily the lowest rate charged by Lender on its loans. If 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. Borrower understands that Lender
may make loans based on other rates as well. The interest rate change will not
occur more often than each DAY. THE INDEX CURRENTLY IS 8.250%. THE INTEREST
RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT
A RATE OF 1.000 PERCENTAGE POINT OVER THE INDEX, RESULTING IN AN INITIAL RATE
OF 9.250%. NOTICE: Under no circumstances will the interest rate on this
Agreement be more than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date 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. In any event, even upon
full prepayment of this Agreement, Borrower understands that Lender is entitled
to a MINIMUM INTEREST CHARGE OF $50.00. Other than Borrower's obligation to pay
any minimum interest charge, 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, they will reduce
the principal balance due.
LATE CHARGE. If a payment is 15 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE REGULARLY SCHEDULED PAYMENT OR $5.00, WHICHEVER IS GREATER.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligations, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other agreement
or loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender. (g) Any guarantor dies or any of the other events described in
this default section occurs with respect to any guarantor of this Agreement.
(h) A material adverse change occurs in Borrower's financial condition, or
Lender believes the prospect of payment or performance of the Indebtedness is
impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. 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 also, if permitted under
applicable law, increase the variable interest rate on this Agreement to 7.000
percentage points over the Index. Lender may hire or pay someone else to help
collect this Agreement if Borrower does not pay. Borrower also 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 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 will pay any court costs, in addition to all other sums provided
by law. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN
THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S
REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF LOS ANGELES COUNTY, THE
STATE OF CALIFORNIA. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without
limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh
<PAGE> 3
09-30-1999 CHANGE IN TERMS AGREEMENT PAGE 2
LOAN NO 2000314557 (CONTINUED)
================================================================================
accounts, and all trust accounts for which the grant of a security interest
would be prohibited by law. Borrower authorizes Lender, to the extent permitted
by applicable law, to charge or setoff all sums owing on this Agreement against
any and all such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement may be requested either orally or in writing by Borrower or
as provided in this paragraph. Lender may, but need not, require that all oral
requests be confirmed in writing. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender's
office shown above. The following party or parties are authorized as provided in
this paragraph to request advances under the line of credit until Lender
receives from Borrower at Lender's address shown above written notice of
revocation of their authority: ALAN REDHEAD, PRESIDENT; AND SAMUEL E. CHILAKOS,
SECRETARY. ANY ONE OF THE AUTHORIZED OFFICERS MAY REQUEST ADVANCES. 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 Agreement at
any time may be evidenced by endorsements on this Agreement or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Agreement if: (a) Borrower or any
guarantor is in default under the terms of this Agreement or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (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
Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidenced
or securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation makers, will not be
released by virtue of this Agreement. If any person who signed the original
obligation does not sign this Agreement below, then all persons signing below
acknowledge that this Agreement is given conditionally, based on the
representation to Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it. This
waiver applies not only to any initial extension, modification or release, but
also to all such subsequent actions.
SIXTY DAY OUT OF DEBT REQUIREMENT. Borrower agrees to be out of debt on this
credit for at least sixty (60) consecutive days after the Note date and before
the Note maturity date.
BUSINESS LOAN AGREEMENT. This Note is additionally subject to all terms and
conditions of a Business Laon Agreement dated July 6, 1999 and any replacements
or modifications thereof.
MISCELLANEOUS PROVISIONS. This Agreement is payable on demand. The inclusion of
specific default provisions or rights of Lender shall not preclude Lender's
right to declare payment of this Agreement on its demand. Lender may delay or
forgo enforcing any of its rights or remedies under this Agreement without
losing them. Borrower and any other person who signs, guarantees or endorses
this Agreement, to the extent allowed by law, waive any applicable statute of
limitations, presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, 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 time) 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.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
CALIFORNIA BEACH RESTAURANTS, INC., A CALIFORNIA CORPORATION
By: /s/ ALAN REDHEAD
-----------------------------
ALAN REDHEAD, PRESIDENT
================================================================================
<PAGE> 4
COMMERCIAL GUARANTY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5015 RDB
- -----------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
BORROWER: CALIFORNIA BEACH RESTAURANTS, INC., A LENDER: SANTA MONICA BANK
CALIFORNIA CORPORATION (TIN: 95-2693503) LOAN SERVICING CENTER
17383 SUNSET BOULEVARD, #140 1231 4TH STREET
PACIFIC PALISADES, CA 90272 SANTA MONICA, CA 90401
GUARANTOR: SEA VIEW RESTAURANTS, INC., A CALIFORNIA CORPORATION
17383 SUNSET BOULEVARD, #140
PACIFIC PALISADES, CA 90272
</TABLE>
================================================================================
AMOUNT OF GUARANTY. THE AMOUNT OF THIS GUARANTY IS UNLIMITED.
CONTINUING UNLIMITED GUARANTY. FOR GOOD AND VALUABLE CONSIDERATION, SEA VIEW
RESTAURANTS, INC., A CALIFORNIA CORPORATION ("GUARANTOR") ABSOLUTELY AND
UNCONDITIONALLY GUARANTEES AND PROMISES TO PAY TO SANTA MONICA BANK ("LENDER")
OR ITS ORDER, ON DEMAND, IN LEGAL TENDER OF THE UNITED STATES OF AMERICA, THE
INDEBTEDNESS (AS THAT TERM IS DEFINED BELOW) OF CALIFORNIA BEACH RESTAURANTS,
INC., A CALIFORNIA CORPORATION ("BORROWER") TO LENDER ON THE TERMS AND
CONDITIONS SET FORTH IN THIS GUARANTY. UNDER THIS GUARANTY, THE LIABILITY OF
GUARANTOR IS UNLIMITED AND THE OBLIGATIONS OF GUARANTOR ARE CONTINUING.
DEFINITIONS. The following words shall have the following meanings when used in
this Guaranty:
BORROWER. The word "Borrower" means CALIFORNIA BEACH RESTAURANTS, INC., A
CALIFORNIA CORPORATION.
GUARANTOR. The word "Guarantor" means SEA VIEW RESTAURANTS, INC., A
CALIFORNIA CORPORATION.
GUARANTY. The word "Guaranty" means this Guaranty made by Guarantor for
the benefit of Lender dated September 30, 1999.
INDEBTEDNESS. The word "Indebtedness" is used in its most comprehensive
sense and means and includes any and all of Borrower's liabilities,
obligations, debts, and indebtedness to Lender, now existing or hereinafter
incurred or created, including, without limitation, all loans, advances,
interest, costs, debts, overdraft indebtedness, credit card indebtedness,
lease obligations, other obligations, and liabilities of Borrower, or any
of them, and any present or future judgments against Borrower, or any of
them; and whether any such Indebtedness is voluntarily or involuntarily
incurred, due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined; whether Borrower may be liable
individually or jointly with others, or primarily or secondarily, or as
guarantor or surety; whether recovery on the Indebtedness may be or may
become barred or unenforceable against Borrower for any reason whatsoever;
and whether the Indebtedness arises from transactions which may be voidable
on account of infancy, insanity, ultra vires, or otherwise.
LENDER. The word "Lender" means SANTA MONICA BANK, its successors and
assigns.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and
continuous for so long as this Guaranty remains in force. Guarantor intends to
guarantee at all times the performance and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, of all
Indebtedness. Accordingly, no payments made upon the Indebtedness will
discharge or diminish the continuing liability of Guarantor in connection with
any remaining portions of the Indebtedness or any of the Indebtedness which
subsequently arises or is thereafter incurred or contracted. Any married person
who signs this Guaranty hereby expressly agrees that recourse may be had
against both his or her separate property and community property.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness incurred or
contracted before receipt by Lender of any notice of revocation shall have been
fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. If Guarantor elects to
revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written
notice of revocation must be mailed to Lender, by certified mail, at the address
of Lender listed above or such other place as Lender may designate in writing.
Written revocation of this Guaranty will apply only to advances or new
Indebtedness created after actual receipt by Lender of Guarantor's written
revocation. For this purpose and without limitation, the term "new Indebtedness"
does not include Indebtedness which at the time of notice of revocation is
contingent, unliquidated, undetermined or not due and which later becomes
absolute, liquidated, determined or due. This Guaranty will continue to bind
Guarantor for all Indebtedness incurred by Borrower or committed by Lender prior
to receipt of Guarantor's written notice of revocation, including any
extensions, renewals, substitutions or modifications of the Indebtedness. All
renewals, extensions, substitutions, and modifications of the Indebtedness
granted after Guarantor's revocation, are contemplated under this Guaranty and,
specifically will not be considered to be new Indebtedness. This Guaranty shall
bind the estate of Guarantor as to Indebtedness created both before and after
the death or incapacity of Guarantor, regardless of Lender's actual notice of
Guarantor's death. Subject to the foregoing, Guarantor's executor or
administrator or other legal representative may terminate this Guaranty in the
same manner in which Guarantor might have terminated it and with the same
effect. Release of any other guarantor or termination of any other guaranty of
the Indebtedness shall not affect the liability of Guarantor under this
Guaranty. A revocation received by Lender from any one or more Guarantors shall
not affect the liability of any remaining Guarantors under this Guaranty. The
obligations of Guarantor under this Guaranty shall be in addition to any
obligations of Guarantor, or any of them, under any other guaranties of the
Indebtedness of Borrower or any other person heretofore or hereafter given to
Lender unless such other guaranties are modified or revoked in writing; and this
Guaranty shall not, unless herein provided, affect, invalidate, or supersede any
such other guaranty. IT IS ANTICIPATED THAT FLUCTUATIONS MAY OCCUR IN THE
AGGREGATE AMOUNT OF INDEBTEDNESS COVERED BY THIS GUARANTY, AND IT IS
SPECIFICALLY ACKNOWLEDGED AND AGREED BY GUARANTOR THAT REDUCTIONS IN THE AMOUNT
OF INDEBTEDNESS, EVEN TO ZERO DOLLARS ($0.00), PRIOR TO WRITTEN REVOCATION OF
THIS GUARANTY BY GUARANTOR SHALL NOT CONSTITUTE A TERMINATION OF THIS GUARANTY.
THIS GUARANTY IS BINDING UPON GUARANTOR AND GUARANTOR'S HEIRS, SUCCESSORS AND
ASSIGNS SO LONG AS ANY OF THE GUARANTEED INDEBTEDNESS REMAINS UNPAID AND EVEN
THOUGH THE INDEBTEDNESS GUARANTEED MAY FROM TIME TO TIME BE ZERO DOLLARS
($0.00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before
or after any revocation hereof, WITHOUT NOTICE OR DEMAND AND WITHOUT LESSENING
GUARANTOR'S LIABILITY UNDER THIS GUARANTY, FROM TIME TO TIME: (a) PRIOR TO
REVOCATION AS SET FORTH ABOVE, TO MAKE ONE OR MORE ADDITIONAL SECURED OR
UNSECURED LOANS TO BORROWER, TO LEASE EQUIPMENT OR OTHER GOODS TO BORROWER, OR
OTHERWISE TO EXTEND ADDITIONAL CREDIT TO BORROWER; (b) TO ALTER, COMPROMISE,
RENEW, EXTEND, ACCELERATE, OR OTHERWISE CHANGE ONE OR MORE TIMES THE TIME FOR
PAYMENT OR OTHER TERMS OF THE INDEBTEDNESS OR ANY PART OF THE INDEBTEDNESS,
INCLUDING INCREASES AND DECREASES OF THE RATE OF INTEREST ON THE INDEBTEDNESS;
EXTENSIONS MAY BE REPEATED AND MAY BE FOR LONGER THAN THE ORIGINAL LOAN TERM;
(c) TO TAKE AND HOLD SECURITY FOR THE PAYMENT OF THIS GUARANTY OR THE
INDEBTEDNESS, AND EXCHANGE, ENFORCE, WAIVE, SUBORDINATE, FALL OR DECIDE NOT TO
PERFECT, AND RELEASE ANY SUCH SECURITY, WITH OR WITHOUT THE SUBSTITUTION OF NEW
COLLATERAL; (d) TO RELEASE, SUBSTITUTE, AGREE NOT TO SUE, OR DEAL WITH ANY ONE
OR MORE OF BORROWER'S
<PAGE> 5
09-30-1999 COMMERCIAL GUARANTY PAGE 2
LOAN NO 2000314557 (CONTINUED)
================================================================================
SURETIES, ENDORSERS, OR OTHER GUARANTORS ON ANY TERMS OR IN ANY MANNER LENDER
MAY CHOOSE; (e) TO DETERMINE HOW, WHEN AND WHAT APPLICATION OF PAYMENTS AND
CREDITS SHALL BE MADE ON THE INDEBTEDNESS; (f) TO APPLY SUCH SECURITY AND DIRECT
THE ORDER OR MANNER OF SALE THEREOF, INCLUDING WITHOUT LIMITATION, ANY
NONJUDICIAL SALE PERMITTED BY THE TERMS OF THE CONTROLLING SECURITY AGREEMENT
OR DEED OF TRUST, AS LENDER IN ITS DISCRETION MAY DETERMINE; (g) TO SELL,
TRANSFER, ASSIGN, OR GRANT PARTICIPATIONS IN ALL OR ANY PART OF THE
INDEBTEDNESS; AND (h) TO ASSIGN OR TRANSFER THIS GUARANTY IN WHOLE OR IN PART.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (a) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(b) this Guaranty is executed at Borrower's request and not at the request of
the Lender; (c) Guarantor has full power, right and authority to enter into this
Guaranty; (d) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (e) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or any
interest therein; (f) upon Lender's request, Guarantor will provide to Lender
financial and credit information in form acceptable to Lender, and all such
financial information which currently has been, and all future financial
information which will be provided to Lender is and will be true and correct in
all material respects and fairly present the financial condition of Guarantor as
of the dates the financial information is provided; (g) no material adverse
change has occurred in Guarantor's financial condition since the date of the
most recent financial statements provided to Lender and no event has occurred
which may materially adversely affect Guarantor's financial condition; (h) no
litigation, claim, investigation, administrative proceeding or similar action
(including those for unpaid taxes) against Guarantor is pending or threatened;
(i) Lender has made no representation to Guarantor as to the creditworthiness of
Borrower; and (j) Guarantor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower's financial
condition. Guarantor agrees to keep adequately informed from such means of any
facts, events, or circumstances which might in any way affect Guarantor's risks
under this Guaranty, and Guarantor further agrees that, absent a request for
information, Lender shall have no obligation to disclose to Guarantor any
information or documents acquired by Lender in the course of its relationship
with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender to (a) make any presentment, protest, demand, or
notice of any kind, including notice of change of any terms of repayment of the
Indebtedness, default by Borrower or any other guarantor or surety, any action
or nonaction taken by Borrower, Lender or any other guarantor or surety of
Borrower, or the creation of new or additional Indebtedness; (b) proceed
against any person, including Borrower, before proceeding against Guarantor; (c)
proceed against any collateral for the Indebtedness, including Borrower's
collateral, before proceeding against Guarantor; (d) apply any payments or
proceeds received against the Indebtedness in any order; (e) give notice of the
terms, time, and place of any sale of the collateral pursuant to the Uniform
Commercial Code or any other law governing such sale; (f) disclose any
information about the Indebtedness, the Borrower, the collateral, or any other
guarantor or surety, or about any action or nonaction of Lender; or (g) pursue
any remedy or course of action in Lender's power whatsoever.
Guarantor also waives any and all rights or defenses arising by reason of (h)
any disability or other defense of Borrower, any other guarantor or surety or
any other person; (i) the cessation from any cause whatsoever, other than
payment in full, of the Indebtedness; (j) the application of proceeds of the
indebtedness by Borrower for purposes other than the purposes understood and
intended by Guarantor and Lender; (k) any act of omission or commission by
Lender which directly or indirectly results in or contributes to the discharge
of Borrower or any other guarantor or surety, or the Indebtedness, or the loss
or release of any collateral by operation of law or otherwise; (l) any statute
of limitations in any action under this Guaranty or on the indebtedness; or (m)
any modification or change in terms of the Indebtedness, whatsoever, including
without limitation, the renewal, extension, acceleration, or other change in
the time payment of the Indebtedness is due and any change in the interest
rate, and including any such modification or change in terms after revocation
of this Guaranty on Indebtedness incurred prior to such revocation.
Guarantor waives all rights and any defenses arising out of an election of
remedies by Lender even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
Guarantor's rights of subrogation and reimbursement against Borrower by
operation of Section 580d of the California Code of Civil Procedure or
otherwise.
Guarantor waives all rights and defenses that Guarantor may have because
Borrower's obligation is secured by real property. This means among other
things: (1) Lender may collect from Guarantor without first foreclosing on any
real or personal property collateral pledged by Borrower. (2) If Lender
forecloses on any real property collateral pledged by Borrower: (A) The amount
of Borrower's obligation may be reduced only by the price for which the
collateral is sold at the foreclosure sale, even if the collateral is worth
more than the sale price. (B) Lender may collect from Guarantor even if Lender,
by foreclosing on the real property collateral, has destroyed any right
Guarantor may have to collect from Borrower. This is an unconditional waiver of
any rights and defenses Guarantor may have because Borrower's obligation is
secured by real property. These rights and defenses include, but are not
limited to, any rights and defenses based upon Section 580a, 580b, 580d, or 726
of the Code of Civil Procedure.
Guarantor understands and agrees that the foregoing waivers are waivers of
substantive rights and defenses to which Guarantor might otherwise be entitled
under state and federal law. The rights and defenses waived include, without
limitation, those provided by California laws of suretyship and guaranty,
anti-deficiency laws, and the Uniform Commercial Code. Guarantor acknowledges
that Guarantor has provided these waivers of rights and defenses with the
intention that they be fully relied upon by Lender. Until all Indebtedness is
paid in full, Guarantor waives any right to enforce any remedy Lender may have
against Borrower or any other guarantor, surety,or other person, and further,
Guarantor waives any right to participate in any collateral for the
Indebtedness now or hereafter held by Lender.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective successors, any claim or right to
payment Guarantor may now have or hereafter have or acquire against Borrower,
by subrogation or otherwise, so that at no time shall Guarantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. section 547(b), or any
successor provision of the Federal bankruptcy laws.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and
agrees that each of the waivers set forth above is made with Guarantor's full
knowledge of its significance and consequences and that, under the
circumstances, the waivers are reasonable and not contrary to public policy or
law. If any such waiver is determined to be contrary to any applicable law or
public policy, such wavier shall be effective only to the extent permitted by
law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender
by law, Lender shall have, with respect to Guarantor's obligations to Lender
under this Guaranty and to the extent permitted by law, a contractual security
interest in and a right of setoff against, and Guarantor hereby assigns,
conveys, delivers, pledges, and transfers to Lender all of Guarantor's right,
title and interest in and to, all deposits, moneys, securities and other
property of Guarantor now or hereafter in the possession of or on deposit with
Lender, whether held in a general or special account or deposit, whether held
jointly with someone else, or whether held for safekeeping or otherwise,
excluding however, all IRA, Keogh, and trust accounts. Every such security
interest and right of setoff may be exercised without demand upon or notice to
Guarantor. No security interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of Lender or by any neglect to exercise
such right of setoff or to enforce such security interest or by any delay in so
doing. Every right of setoff and security interest shall continue in full force
and effect until such right of setoff or security interest is specifically
waived or released by an instrument in writing executed by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower
<PAGE> 6
09-30-1999 COMMERCIAL GUARANTY PAGE 3
LOAN NO. 2000314557 (CONTINUED)
================================================================================
becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor
may have against Borrower, upon any account whatsoever, to any claim that
Lender may now or hereafter have against Borrower. In the event of insolvency
and consequent liquidation of the assets of Borrower, through bankruptcy, by an
assignment for the benefit of creditors, by voluntary liquidation, or
otherwise, the assets of Borrower applicable to the payment of the claims of
both Lender and Guarantor shall be paid to Lender and shall be first applied by
Lender to the Indebtedness of Borrower to Lender. Guarantor does hereby assign
to Lender all claims which it may have or acquire against Borrower or against
any assignee or trustee in bankruptcy of Borrower; provided however, that such
assignment shall be effective only for the purpose of assuring to Lender full
payment in legal tender of the Indebtedness. If Lender so requests, any notes
or credit agreements now or hereafter evidencing any debts or obligations of
Borrower to Guarantor shall be marked with a legend that the same are subject
to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender
hereby is authorized, in the name of Guarantor, from time to time to execute
and file financing statements and continuation statements and to execute such
other documents and to take such other actions as Lender deems necessary or
appropriate to perfect, preserve and enforce its rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
INTEGRATION, AMENDMENT. Guarantor warrants, represents and agrees that
this Guaranty, together with any exhibits or schedules incorporated
herein, fully incorporates the agreements and understandings of Guarantor
with Lender with respect to the subject matter hereof and all prior
negotiations, drafts, and other extrinsic communications between Guarantor
and Lender shall have no evidentiary effect whatsoever. Guarantor further
agrees that Guarantor has read and fully understands the terms of this
Guaranty; Guarantor has had the opportunity to be advised by Guarantor's
attorney with respect to this Guaranty; the Guaranty fully reflects
Guarantor's intentions and parol evidence is not required to interpret the
terms of this Guaranty. Guarantor hereby indemnifies and holds Lender
harmless from all losses, claims, damages, and costs (including Lender's
attorneys' fees) suffered or incurred by Lender as a result of any breach
by Guarantor of the warranties, representations and agreements of this
paragraph. No alteration or amendment to this Guaranty shall be effective
unless given in writing and signed by the parties sought to be charged or
bound by the alteration or amendment.
APPLICABLE LAW. This Guaranty has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Guarantor agrees
upon Lender's request to submit to the jurisdiction of the courts of LOS
ANGELES County, State of California. This Guaranty shall be governed by
and construed in accordance with the laws of the State of California.
ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Guaranty.
Lender may pay someone else to help enforce this Guaranty, and Guarantor
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 (and including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. Guarantor also shall pay all court costs and such additional
fees as may be directed by the court.
NOTICES. All notices required to be given by either party to the other
under this Guaranty shall be in writing, may be sent by telefacsimile
(unless otherwise required by law), and, except for revocation notices by
Guarantor, shall be effective when actually delivered or when deposited
with a nationally recognized overnight courier, or when deposited in the
United States mail, first class postage prepaid, addressed to the party to
whom the notice is to be given at the address shown above or to such other
addresses as either party may designate to the other in writing. All
revocation notices by Guarantor shall be in writing and shall be effective
only upon delivery to Lender as provided above in the section titled
"DURATION OF GUARANTY." If there is more than one Guarantor, notice to any
Guarantor will constitute notice to all Guarantors. For notice purposes,
Guarantor agrees to keep Lender informed at all times of Guarantor's
current address.
INTERPRETATION. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and construction
so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the
words "Borrower" and "Guarantor" respectively shall mean all and any one
or more of them. The words "Guarantor," "Borrower," and "Lender" include
the heirs, successors, assigns, and transferees of each of them. Caption
headings in this Guaranty are for convenience purposes only and are not to
be used to interpret or define the provisions of this Guaranty. If a court
of competent jurisdiction finds any provision of this Guaranty to be
invalid or unenforceable as to any person or circumstance, such finding
shall not render that provision invalid or unenforceable as to any other
persons or circumstances, and all provisions of this Guaranty in all other
respects shall remain valid and enforceable. If any one or more of
Borrower or Guarantor are corporations or partnerships, it is not
necessary for Lender to inquire into the powers of Borrower or Guarantor
or of the officers, directors, partners, or agents acting or purporting
to act on their behalf, and any Indebtedness made or created in reliance
upon the professed exercise of such powers shall be guaranteed under this
Guaranty.
WAIVER. Lender shall not be deemed to have waived any rights under this
Guaranty 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 Guaranty 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 Guaranty. No prior waiver by
Lender, nor any course of dealing between Lender and Guarantor, shall
constitute a waiver of any of Lender's rights or of any of Guarantor's
obligations as to any future transactions. Whenever the consent of Lender
is required under this Guaranty, 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.
REINSTATEMENT OF LIABILITY. The liability of Guarantor hereunder shall be
reinstated and revived, and the rights of Lender shall continue with respect to
any amounts on account of the Indebtedness, which shall thereafter be required
to be restored or returned by Lender upon the bankruptcy, insolvency or
reorganization of Borrower or for any other reason, as though such amount had
not been paid.
OTHER GUARANTIES. The liability of Guarantor hereunder shall be reinstated and
revived, and the rights of Lender shall continue with respect to any amounts on
account of the Indebtedness, which shall thereafter be required to be restored
or returned by Lender upon the bankruptcy, insolvency or reorganization of
Borrower or for any other reason, as though such amount had not been paid.
<PAGE> 7
09-30-1999 COMMERCIAL GUARANTY PAGE 4
LOAN NO 2000314557 (CONTINUED)
================================================================================
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS
GUARANTY IS DATED SEPTEMBER 30, 1999.
GUARANTOR:
SEA VIEW RESTAURANTS, INC., A CALIFORNIA CORPORATION
BY: /s/ ALAN REDHEAD
-------------------------
ALAN REDHEAD, PRESIDENT
================================================================================
<PAGE> 8
[SANTA MONICA BANK LOGO]
COMMERCIAL SECURITY AGREEMENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$700,000 07-06-2000 2000314557 5015 RDB
- ----------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan or item.
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
BORROWER: CALIFORNIA BEACH RESTAURANTS, INC. A LENDER: SANTA MONICA BANK
CALIFORNIA CORPORATION (TIN: 95-2693503) LOAN SERVICING CENTER
17383 SUNSET BOULEVARD, #140 1231 4TH STREET
PACIFIC PALISADES, CA 90272 SANTA MONICA, CA 90401
GRANTOR: SEA VIEW RESTAURANTS, INC., A CALIFORNIA CORPORATION (TIN: 95-4232409)
17383 SUNSET BOULEVARD, #140,
PACIFIC PALISADES, CA 90272
</TABLE>
================================================================================
THIS COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO AMONG CALIFORNIA BEACH
RESTAURANTS, INC., A CALIFORNIA CORPORATION (REFERRED TO BELOW AS "BORROWER");
SEA VIEW RESTAURANTS, INC., A CALIFORNIA CORPORATION (REFERRED TO BELOW AS
"GRANTOR"); AND SANTA MONICA BANK (REFERRED TO BELOW AS "LENDER"). 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.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
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 each and every person or entity signing
the Note, including without limitation CALIFORNIA BEACH RESTAURANTS, INC.,
A CALIFORNIA CORPORATION.
COLLATERAL. The word "Collateral" means the following described property of
Grantor, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
ALL INVENTORY, CHATTEL PAPER, ACCOUNTS, EQUIPMENT AND GENERAL
INTANGIBLES
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions
for any property described above.
(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 nay of the property
described in this Collateral section.
(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.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "Events of Default."
GRANTOR. The word "Grantor" means SEA VIEW RESTAURANTS, INC., A CALIFORNIA
CORPORATION. Any Grantor who signs this Agreement, but does not sign the
Note, is signing this Agreement only to grant a security interest in
Grantor's interest in the Collateral to Lender and is not personally liable
under the Note except as otherwise provided by contract or law (e.g.,
personal liability under a guaranty or as a surety).
GUARANTOR. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with the Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by
the Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor or Borrower is
responsible under this Agreement or under any of the Related Documents.
LENDER. The word "Lender" means SANTA MONICA BANK, its successors and
assigns.
NOTE. The word "Note" means the Change in Terms Agreement between Borrower
and Lender dated September 30, 1999, which modifies the following described
existing indebtedness: Promissory Note dated July 7, 1999 in the amount of
$500,000.00 and any renewals, modifications, substitutions or
consolidations thereof.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
BORROWER'S WAIVERS AND RESPONSIBILITIES. Except as otherwise required under
this Agreement or by applicable law, (a) Borrower agrees
<PAGE> 9
09-30-1999 COMMERCIAL SECURITY AGREEMENT PAGE 2
LOAN NO 2000314557 (CONTINUED)
================================================================================
that Lender need not tell Borrower about any action or inaction Lender takes in
connection with this Agreement; (b) Borrower assumes the responsibility for
being and keeping informed about the Collateral; and (c) Borrower waives any
defenses that may arise because of any action or inaction of Lender, including
without limitation any failure of Lender to realize upon the Collateral or any
delay by Lender in realizing upon the Collateral; and Borrower agrees to remain
liable under the Note no matter what action Lender takes or fails to take under
this Agreement.
GRANTOR'S REPRESENTATIONS AND WARRANTIES. Grantor warrants that: (a) this
Agreement is executed at Borrower's request and not at the request of Lender;
(b) Grantor has the full right, power and authority to enter into this
Agreement and to pledge the Collateral to Lender; (c) Grantor has established
adequate means of obtaining from Borrower on a continuing basis information
about Borrower's financial condition; and (d) Lender has made no representation
to Grantor about Borrower or Borrower's creditworthiness.
GRANTOR'S WAIVERS. Except as prohibited by applicable law, Grantor waives any
right to require Lender to (a) make any presentment, protest, demand, or notice
of any kind, including notice of change of any terms of repayment of the
Indebtedness, default by Borrower or any other guarantor or surety, any action
or nonaction taken by Borrower, Lender, or any other guarantor or surety of
Borrower, or the creation of new or additional Indebtedness; (b) proceed
against any person, including Borrower, before proceeding against Grantor; (c)
proceed against any collateral for the Indebtedness, including Borrower's
collateral, before proceeding against Grantor; (d) apply any payments or
proceeds received against the Indebtedness in any order; (e) give notice of the
terms, time, and place of any sale of any collateral pursuant to the Uniform
Commercial Code or any other law governing such sale; (f) disclose any
information about the Indebtedness, the Borrower, any collateral, or any other
guarantor or surety, or about any action or nonaction of Lender; or (g) pursue
any remedy or course of action in Lender's power whatsoever.
Grantor also waives any and all rights or defenses arising by reason of (h) any
disability or other defense of Borrower, any other guarantor or surety or any
other person; (i) the cessation from any cause whatsoever, other than payment
in full, of the Indebtedness; (j) the application of proceeds of the
Indebtedness by Borrower for purposes other than the purposes understood and
intended by Grantor and Lender; (k) any act of omission or commission by Lender
which directly or indirectly results in or contributes to the discharge of
Borrower or any other guarantor or surety, or the indebtedness, or the loss or
release of any collateral by operation of law or otherwise; (l) any statute of
limitations in any action under this Agreement or on the Indebtedness; or (m)
any modification or change in terms of the Indebtedness, whatsoever, including
without limitation, the renewal, extension, acceleration, or other change in
the time payment of the Indebtedness is due and any change in the interest rate.
Grantor waives all rights and defenses arising out of an election of remedies
by Lender, even though that election of remedies, such as nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
Grantor's rights of subrogation and reimbursement against Borrower by the
operation of Section 580d of the California Code of Civil Procedure, or
otherwise.
This waiver includes, without limitation, any loss of rights Grantor may suffer
by reason of any rights or protections of Borrower in connection with any
anti-deficiency laws, or other laws limiting or discharging the Indebtedness or
Borrower's obligations (including, without limitation, Section 726, 580a, 580b,
and 580d of the California Code of Civil Procedure). Grantor waives all rights
and protections of any kind which Grantor may have for any reason, which would
affect or limit the amount of any recovery by Lender from Grantor following a
nonjudicial sale or judicial foreclosure of any real or personal property
security for the Indebtedness including, but not limited to, the right to any
fair market value hearing pursuant to California Code of Civil Procedure
Section 580a.
Grantor understands and agrees that the foregoing waivers are waivers of
substantive rights and defenses to which Grantor might otherwise be entitled
under state and federal law. The rights and defenses waived include, without
limitation, those provided by California laws of suretyship and guaranty,
anti-deficiency laws, and the Uniform Commercial Code. Grantor acknowledges
that Grantor has provided these waivers of rights and defenses with the
intention that they be fully relied upon by Lender. Until all Indebtedness is
paid in full, Grantor waives any right to enforce any remedy Lender may have
against Borrower or any other guarantor, surety, or other person, and further,
Grantor waives any right to participate in any collateral for the Indebtedness
now or hereafter held by Lender.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Grantor hereby forever waives and relinquishes in favor of
Lender and Borrower, and their respective successors, any claim or right to
payment Grantor may now have or hereafter have or acquire against Borrower, by
subrogation or otherwise, so that at no time shall Grantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. section 547(b), or any
successor provision of the Federal bankruptcy laws.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual security interest
in and hereby assigns, conveys, delivers, pledges, and transfers all of
Grantor's right, title and interest in and to Grantor's accounts with Lender
(whether checking, savings, or some other account), including all accounts held
jointly with someone else and all accounts Grantor may open in the future,
excluding, however, all IRA and Keogh accounts, and all trust accounts for
which the grant of a security interest would be prohibited by law. Grantor
authorizes Lender, to the extent permitted by applicable law, to charge or
setoff all Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such 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. Grantor hereby appoints Lender as its irrevocable
attorney-in-fact 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 or 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. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of
Grantor. THIS IS A CONTINUING SECURITY AGREEMENT AND WILL CONTINUE IN
EFFECT EVEN THOUGH ALL OR ANY PART OF THE INDEBTEDNESS IS PAID IN FULL AND
EVEN THOUGH FOR A PERIOD OF TIME BORROWER MAY NOT BE INDEBTED TO LENDER.
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, the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws 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
theretofore shipped or delivered pursuant to a contract of sale, or for
services theretofore performed by Grantor with or for the account debtor;
there shall be no setoffs or counterclaims against any such account; and no
agreement under which any deductions or discounts may be claimed shall have
been made with the account debtor except those disclosed to Lender in
writing.
LOCATION OF THE COLLATERAL. Grantor, upon request of Lender, 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: (a) all real property owned or being purchased by
Grantor; (b) all real property being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor; and (d)
all other properties where Collateral is or may be located. Except in the
ordinary course of its business, Grantor shall not remove the
<PAGE> 10
09-30-1999 COMMERCIAL SECURITY AGREEMENT PAGE 3
LOAN NO 2000314557 (CONTINUED)
================================================================================
Collateral from its existing locations without prior written consent of Lender.
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts, the records
concerning the Collateral) at Grantor's address shown above, or at such other
locations as are acceptable to Lender. Except in the ordinary course of its
business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or other titled
property. Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the State of
California, without the prior written consent of Lender.
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 qualify 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 it 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 right in the
Collateral against the claims and demands of all other persons.
COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shall require, and
insofar as the Collateral consists of accounts and general intangibles, Grantor
shall deliver to Lender schedules of such Collateral, including such
information as Lender may require, including without limitation names and
addresses of account debtors and agings of accounts and general intangibles.
Insofar as the Collateral consists of inventory and equipment, Grantor shall
deliver to Lender, as often as Lender shall require, such lists, descriptions,
and designations of such Collateral as Lender may require to identify the
nature, extent, and location of such Collateral. Such information shall be
submitted for Grantor and each of its subsidiaries or related companies.
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all tangible
Collateral in good condition and repair. Grantor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral.
Lender and its designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral wherever
located. Grantor shall immediately notify Lender of all cases involving the
return, rejection, repossession, loss or damage of or to any Collateral; of any
request for credit or adjustment or of any other dispute arising with respect
to the Collateral; and generally of all happenings and events affecting the
Collateral or the value or the amount of the Collateral.
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. If the Collateral
is subjected to a lien which is not discharged within fifteen (15) days,
Grantor shall deposit with Lender cash, a sufficient corporate surety 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.
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 for the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any hazardous waste or
substance, as those terms are defined in the Comprehensive Environment 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 of
Federal laws, rules, or regulations adopted pursuant to any of the foregoing.
The terms "hazardous waste" and "hazardous substance" shall also include,
without limitation, petroleum and petroleum by-products or any fraction thereof
and asbestos. The representations and warranties contained herein are based on
Grantor's due diligence in investigating the Collateral for hazardous wastes and
substances. Grantor hereby (a) 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 such laws, and (b) 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 it 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 if 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. If 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, if 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
<PAGE> 11
09-30-1999 COMMERCIAL SECURITY AGREEMENT PAGE 4
LOAN NO 2000314557 (CONTINUED)
================================================================================
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. If
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: (a)
the name of the insurer; (b) the risks insured; (c) the amount of the
policy; (d) the property insured; (e) the then current value on the basis
of which insurance has been obtained and the manner of determining that
value; and (f) 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 right 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.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay 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 shall 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 (i) the term of any applicable insurance policy or (ii) 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. This Agreement 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 the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due
on the Indebtedness.
OTHER DEFAULTS. Failure of Grantor or Borrower 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 failure of Borrower
to comply with or to perform any term, obligation, covenant or condition
contained in any other agreement between Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other credit or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor or Borrower 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.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral documents to create and valid and perfected security interest
or lien) at any time and for any reason.
INSOLVENCY. The dissolution or termination of Grantor or Borrower's
existence as a going business, the insolvency of Grantor or Borrower, the
appointment of a receiver for any part of Grantor's or Borrower's
property, any assignment for the benefit of creditors, any type of credit
workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor or 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 Grantor or Borrower
or by any governmental agency against the Collateral or any other
collateral securing the Indebtedness. This includes a garnishment of any
of Grantor's or Borrower's deposit accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor dies
or becomes incompetent.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of
the Indebtedness is impaired.
RIGHTS AND REMEDIES OF 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 Borrower would be required to pay,
immediately due and payable, without notice.
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 its
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
<PAGE> 12
9-30-1999 COMMERCIAL SECURITY AGREEMENT PAGE 5
LOAN NO 2000314557 (CONTINUED)
================================================================================
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 ten (10)
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. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right, (b)
the receiver may be an employee of Lender and may serve without bond, and
(c) all fees of the receiver and his or her attorney shall become 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.
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 time in its discretion transfer any Collateral
into its own name or that of its 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, chooses in action, or similar property, 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 Borrower 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. Borrower 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.
CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether evidenced
by this Agreement or the Related Documents or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by
Lender or 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 Grantor or Borrower under this Agreement, after Grantor or
Borrower's failure to perform, shall not affect Lender's right to declare a
default and to 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
parties sought to be charged or bound by the alteration or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Grantor and
Borrower agree upon Lender's request to submit to the jurisdiction of the
courts of the State of California. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
ATTORNEYS' FEES; EXPENSES. Grantor and Borrower agree to pay upon demand all
of Lender's costs and expenses, including attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement.
Lender may pay someone else to help enforce this Agreement, and Grantor and
Borrower shall pay the costs and expenses of such enforcement. Costs and
expenses include Lender's attorney's fees and legal expenses whether or not
there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (and including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Grantor and Borrower also shall pay all courts 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.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Grantor and
Borrower under this Agreement shall be joint and several, and all references
to Borrower shall mean each and every Borrower, and all references to
Grantor shall mean each and every Grantor. This means that each of the
persons signing below is responsible for all obligations in this Agreement.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile (unless otherwise required by
law), and shall be effective when actually delivered or when deposited with
a nationally recognized overnight courier or deposited in the United States
mail, first class, postage prepaid, addressed to the party to whom the
notice is to be given at the address shown above. 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. To the extent permitted by applicable law, if there is
more than one Grantor or Borrower, notice to any Grantor or Borrower will
constitute notice to all Grantor and Borrowers. For notice purposes, Grantor
and Borrower will keep Lender informed at all times of Grantor and
Borrower's current address(es).
POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing
or payable from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment
for the Collateral; (c) to settle or compromise any and all claims arising
under the Collateral, and, in the place and stead of Grantor, to execute
and deliver its release and settlement for the claim; and (d) to file any
claim or claims or to take any action or institute or take part in any
proceedings, either in its own name or in the name of Grantor, or otherwise,
which in the discretion of Lender may seem to be necessary or advisable.
This power is given as security for the Indebtedness, and the authority
hereby conferred is and shall be irrevocable and shall remain in full force
and effect until renounced by Lender.
PREFERENCE PAYMENTS. Any monies Lender pays because of an asserted
preference claim in Borrower's bankruptcy will become a part of the
Indebtedness and, at Lender's option, shall be payable by Borrower as
provided above in the "EXPENDITURES BY LENDER" paragraph.
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of this
Agreement in all other respects shall remain valid and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on transfer
of the Collateral, this Agreement shall be binding upon and inure to the
benefit of the parties, their successors and assigns.
<PAGE> 13
09-30-1999 COMMERCIAL SECURITY AGREEMENT PAGE 6
LOAN NO 2000314557 (CONTINUED)
================================================================================
WAIVER. 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.
WAIVER OF CO-OBLIGOR'S RIGHTS. If more than one person is obligated for
the Indebtedness, Borrower irrevocably waives, disclaims, and relinquishes
all claims against such other person which Borrower 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.
BORROWER AND GRANTOR ACKNOWLEDGE HAVING READ ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT, AND BORROWER AND GRANTOR AGREE TO ITS TERMS.
THIS AGREEMENT IS DATED SEPTEMBER 30, 1999.
BORROWER:
CALIFORNIA BEACH RESTAURANTS, INC., A CALIFORNIA CORPORATION
By: /s/ ALAN REDHEAD
------------------------------------
ALAN REDHEAD, PRESIDENT
GRANTOR:
SEA VIEW RESTAURANTS, INC., A CALIFORNIA CORPORATION
By: /s/ ALAN REDHEAD
------------------------------------
ALAN REDHEAD, PRESIDENT
================================================================================
<PAGE> 14
AGREEMENT TO PROVIDE INSURANCE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$700,000.00 07-06-2000 2000314557 5015 RDB
- ----------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan or item.
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
BORROWER: CALIFORNIA BEACH RESTAURANTS, INC. LENDER: SANTA MONICA BANK
A CALIFORNIA CORPORATION (TIN: 95-2693503) LOAN SERVICING CENTER
17383 SUNSET BOULEVARD, #140 1231 4TH STREET
PACIFIC PALISADES, CA 90272 SANTA MONICA, CA 90401
GRANTOR: SEA VIEW RESTAURANTS, INC., A CALIFORNIA CORPORATION (TIN: 95-4232409)
17383 SUNSET BOULEVARD, #140,
PACIFIC PALISADES, CA 90272
====================================================================================================
</TABLE>
INSURANCE REQUIREMENTS. SEA VIEW RESTAURANTS, INC., A CALIFORNIA CORPORATION
("Grantor") understands that insurance coverage is required in connection with
the extending of a loan or the providing of other financial accommodations to
CALIFORNIA BEACH RESTAURANTS, INC., A CALIFORNIA CORPORATION ("Borrower") by
Lender. These requirements are set forth in the security documents. The
following minimum insurance coverages must be provided on the following
described collateral (the "Collateral"):
COLLATERAL: ALL INVENTORY AND EQUIPMENT.
TYPE. All risks, including fire, theft and liability.
AMOUNT. Full insurable value.
BASIS. Replacement value.
ENDORSEMENTS. Lender's loss payable clause with stipulation that
coverage will not be cancelled or diminished without a minimum of
ten (10) days' prior written notice to Lender.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Lender. Grantor understands
that credit may not be denied solely because insurance was not purchased
through Lender.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Lender, seven (7)
days from the date of this Agreement, evidence of the required insurance as
provided above, with an effective date of September 30, 1999, or earlier.
Grantor acknowledges and agrees that if Grantor fails to provide any required
insurance or fails to continue such insurance in force, Lender may do so at
Grantor's expense as provided in the applicable security document. The cost of
any such insurance, at the option of Lender, shall be payable on demand or
shall be added to the indebtedness as provided in the security document.
GRANTOR ACKNOWLEDGES THAT IF LENDER SO PURCHASES ANY SUCH INSURANCE, THE
INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE
COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN THE
COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY
PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor
authorizes Lender to provide to any person (including any insurance agent or
company) all information Lender deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER
30, 1999.
GRANTOR:
SEA VIEW RESTAURANTS, INC., A CALIFORNIA CORPORATION
By: /s/ ALAN REDHEAD
----------------------------
ALAN REDHEAD, PRESIDENT
- --------------------------------------------------------------------------------
INSURANCE VERIFICATION
PHONE: ________________
DATE: _______________
AGENT'S NAME: _______________________________________
INSURANCE COMPANY: _____________________________________________________________
POLICY NUMBER: _________________________________________________________________
EFFECTIVE DATES: _______________________________________________________________
COMMENTS: ______________________________________________________________________
- --------------------------------------------------------------------------------
<PAGE> 15
NOTICE OF FINAL AGREEMENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY LOAN NO. COLLATERAL OFFICER
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$700,000.00 LOAN DATE 07-06-2000 2000314557 CALL 5015 ACCOUNT RDB INITIALS
- ----------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to
any particular loan or item.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
BORROWER: CALIFORNIA BEACH RESTAURANTS, INC., LENDER: SANTA MONICA BANK
A CALIFORNIA CORPORATION (TIN: 95-2693503) LOAN SERVICING CENTER
17383 SUNSET BOULEVARD, #140 1231 4TH STREET
PACIFIC PALISADES, CA 90272 SANTA MONICA, CA 90401
</TABLE>
===============================================================================
BY SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND AGREES THAT: (A) THE WRITTEN
LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES, (B) THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES, AND (C) THE WRITTEN LOAN
AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS OF THE PARTIES.
- -------------------------------------------------------------------------------
AS USED IN THIS NOTICE, THE FOLLOWING TERMS HAVE THE FOLLOWING MEANINGS:
LOAN: The term "Loan" means the following described loan: a Variable
Rate (1.000% over Prime rate as published in the Wall Street Journal.
When a range of rates has been published, the higher of the rates will
be used, making an initial rate of 9.250%), Nondisclosable Revolving
Line of Credit Loan to a Corporation for $700,000.00 due on July 6,
2000.
PARTIES. The term "Parties" means SANTA MONICA BANK and any and all
entities or individuals who are obligated to repay the loan or have
pledged property as security for the Loan, including without limitation
the following:
BORROWER: CALIFORNIA BEACH RESTAURANTS, INC., A CALIFORNIA
CORPORATION
GRANTOR #1: SEA VIEW RESTAURANTS, INC., A CALIFORNIA
CORPORATION
GUARANTOR: SEA VIEW RESTAURANTS, INC., A CALIFORNIA
CORPORATION
LOAN AGREEMENT. The term "Loan Agreement" means one or more promises,
promissory notes, agreements, undertakings, security agreements, deeds
of trust or other documents, or commitments, or any combination of those
actions or documents, relating to the Loan including without limitation
the following:
NECESSARY FORMS
Corporate Resolution to Borrow Corporate Resolution to Guarantee
Corporate Resolution to Grant Collateral Loan Agreement/Negative Pledge
Promissory Note/Change in Terms Agr. Commercial Guaranty
Security Agreement Commercial Pledge Agreement
UCC -- 1 Agreement to Provide Insurance
Disbursement Request and Authorization Notice of Final Agreement
- -------------------------------------------------------------------------------
<PAGE> 16
09-30-1999 NOTICE OF FINAL AGREEMENT PAGE 2
LOAN NO 2000314557 (CONTINUED)
================================================================================
EACH PARTY WHO SIGNS BELOW, OTHER THAN SANTA MONICA BANK, ACKNOWLEDGES,
REPRESENTS, AND WARRANTS TO SANTA MONICA BANK THAT IT HAS RECEIVED, READ AND
UNDERSTOOD THIS NOTICE OF FINAL AGREEMENT. THIS NOTICE IS DATED SEPTEMBER 30,
1999.
BORROWER:
CALIFORNIA BEACH RESTAURANTS, INC., A CALIFORNIA CORPORATION
By: /s/ ALAN REDHEAD
----------------------------
ALAN REDHEAD, PRESIDENT
GRANTOR:
SEA VIEW RESTAURANTS, INC.,
A CALIFORNIA CORPORATION
By: /s/ ALAN REDHEAD By: /s/ SAMUEL E. CHILAKOS
---------------------------- --------------------------------
ALAN REDHEAD, PRESIDENT SAMUEL E. CHILAKOS, SECRETARY
GUARANTOR:
SEA VIEW RESTAURANTS, INC.,
A CALIFORNIA CORPORATION
By: /s/ ALAN REDHEAD By: /s/ SAMUEL E. CHILAKOS
---------------------------- --------------------------------
ALAN REDHEAD, PRESIDENT SAMUEL E. CHILAKOS, SECRETARY
LENDER:
SANTA MONICA BANK
By: /s/ RICK BERGER
----------------------------
Authorized Officer
================================================================================
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT OCTOBER 31, 1999 AND THE CONSOLIDATED STATEMENTS
OF OPERATIONS AND CASH FLOWS FOR THE SIX MONTHS THEN ENDED AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> OCT-31-1999
<CASH> 349,000
<SECURITIES> 0
<RECEIVABLES> 59,000
<ALLOWANCES> 0
<INVENTORY> 212,000
<CURRENT-ASSETS> 939,000
<PP&E> 6,484,000
<DEPRECIATION> 3,342,000
<TOTAL-ASSETS> 4,653,000
<CURRENT-LIABILITIES> 1,584,000
<BONDS> 2,697,000
0
0
<COMMON> 34,000
<OTHER-SE> (206,000)
<TOTAL-LIABILITY-AND-EQUITY> 4,653,000
<SALES> 6,663,000
<TOTAL-REVENUES> 6,663,000
<CGS> 5,837,000
<TOTAL-COSTS> 5,987,000
<OTHER-EXPENSES> 782,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170,000
<INCOME-PRETAX> (276,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (276,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> (.08)
<EPS-DILUTED> (.08)
</TABLE>
