<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 July 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
incorporation or organization) Identification Number)
17383 Sunset Boulevard, Suite 140, Pacific Palisades, CA 90272
--------------------------------------------------------------
(Address and zip code of Principal executive offices)
(310) 459-9676
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
Number of Shares Outstanding
Class at September 8, 1999
----- ----------------------------
Common Stock, $.01 par value 3,400,930
- ---------------------------- -----------------------------
1
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
JULY 31, 1999
INDEX
<TABLE>
<CAPTION>
Part I - FINANCIAL INFORMATION Page Number
-----------
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at July 31, 1999
and April 30, 1999..........................................................3
Consolidated Statements of Operations for the
Three Months Ended July 31, 1999 and 1998...................................5
Consolidated Statements of Cash Flows for the
Three Months Ended July 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.................11
Part II - OTHER INFORMATION
Item 1. Legal Proceedings..........................................................11
Item 2. Changes in Securities and Use of Proceeds..................................11
Item 3. Defaults Upon Senior Securities............................................11
Item 4. Submission of Matters to a Vote of Security Holders........................11
Item 5. Other Information..........................................................11
Item 6. Exhibits and Reports on Form 8-K...........................................11
Signature Page........................................................................13
</TABLE>
2
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
July 31, 1999 April 30, 1999
------------- --------------
(Unaudited) (1)
Current Assets:
<S> <C> <C>
Cash $ 356,000 $1,018,000
Trade and other receivables 43,000 50,000
Inventories 201,000 211,000
Prepaid expenses 393,000 310,000
----------- ----------
Total current assets 993,000 1,589,000
Fixed Assets (at cost) - net of accumulated
depreciation and amortization 3,150,000 2,083,000
Other Assets:
Goodwill, net of accumulated amortization
of $6,176,000 at July 31, 1999 and
$6,010,000 at April 30, 1999 548,000 714,000
Other 190,000 190,000
----------- ----------
$ 4,881,000 $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
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
July 31, 1999 April 30, 1999
------------ ------------
(Unaudited) (1)
Current Liabilities:
<S> <C> <C>
Accounts payable $ 666,000 $ 287,000
Accrued liabilities 1,099,000 1,021,000
Current portion of note payable 123,000 123,000
------------ ------------
Total current liabilities 1,888,000 1,431,000
Note payable, less current portion 699,000 699,000
Subordinated convertible notes 1,800,000 1,800,000
Deferred rent 400,000 405,000
Other liabilities 150,000 137,000
Stockholders' Equity:
Common stock, $.01 par value, authorized
25,000,000 shares, issued and outstanding
3,401,000 shares at July 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 (13,265,000) (13,105,000)
------------ ------------
Total stockholders' equity (56,000) 104,000
------------ ------------
$ 4,881,000 $ 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
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended July 31,
------------------------------
1999 1998
---- ----
<S> <C> <C>
Sales $ 3,140,000 $ 3,554,000
Costs and Expenses:
Cost of goods sold 2,783,000 2,937,000
Selling, general and administrative 215,000 225,000
Depreciation 50,000 61,000
----------- -----------
92,000 331,000
Other income (expenses):
Interest expense (86,000) (77,000)
Amortization of intangible assets (166,000) (164,000)
----------- -----------
(Loss) income before income taxes (160,000) 90,000
Provision for income taxes -- 5,000
----------- -----------
Net (loss) income $ (160,000) $ 85,000
=========== ===========
Net (loss) income per common share:
Basic $ (.05) $ .03
=========== ===========
Diluted $ (.05) $ .03
=========== ===========
Weighted average number of common shares outstanding:
Basic 3,401,000 3,401,000
Diluted 3,401,000 3,401,000
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
5
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended July 31,
---------------------------
1999 1998
---- ----
<S> <C> <C>
Operating activities:
Net (loss) income $ (160,000) $ 85,000
Adjustments to reconcile net (loss) income
to cash provided by operations:
Depreciation and amortization 216,000 225,000
Changes in operating assets and liabilities:
Trade and other receivables 7,000 (8,000)
Inventories 10,000 13,000
Prepaid expenses (83,000) (7,000)
Accounts payable 379,000 318,000
Accrued liabilities 78,000 (227,000)
Deferred rent (5,000) (56,000)
Other liabilities 13,000 (8,000)
----------- ---------
Cash provided by operations 455,000 335,000
----------- ---------
Investing activities:
Decrease in other assets 1,000
Additions to fixed assets (1,117,000) (121,000)
----------- ---------
Net cash used in investing activities (1,117,000) (120,000)
----------- ---------
Financing activities:
Borrowings -- 100,000
Principal payments on borrowings -- (200,000)
----------- ---------
Net cash used in financing activities -- (100,000)
----------- ---------
Net increase (decrease) in cash (662,000) 115,000
Cash at beginning of period 1,018,000 252,000
----------- ---------
Cash at end of period $ 356,000 $ 367,000
=========== =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 63,000 $ 60,000
=========== =========
Income taxes $ -- $ --
=========== =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
6
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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 three month period ended July 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.
NOTE B - ACCOUNTING PERIODS
The Company's restaurant operations are conducted through its wholly-owned
subsidiary, Sea View Restaurants, Inc. ("Sea View"). The Company's consolidated
financial statements for the three months ended July 31, 1999 and 1998 include
Sea View's operations for the twelve weeks ended July 22, 1999 and July 23,
1998, respectively.
NOTE C - FIXED ASSETS
<TABLE>
<CAPTION>
July 31, 1999 April 30, 1999
------------- --------------
<S> <C> <C>
Construction in progress 2,624,000 1,507,000
Leasehold improvements 2,737,000 2,737,000
Furniture and equipment 1,031,000 1,031,000
----------- -----------
6,392,000 5,275,000
Less accumulated depreciation and amortization (3,242,000) (3,192,000)
----------- -----------
$ 3,150,000 $ 2,083,000
=========== ===========
</TABLE>
7
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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 July 31, 1999 were $3,140,000 compared
with $3,554,000 for the same period last year, a decrease of $414,000 or 11.7%.
During the three months ended July 31, 1999, a substantial portion of
Gladstone's restaurant seating was unavailable due to the construction of
improvements required by Sea View's concession agreement ("Concession
Agreement") with the County of Los Angeles ("County"). The decrease in sales for
the three months ended July 31, 1999 as compared with the comparable period in
the prior year is attributable to the reduced Gladstone's seating capacity
existing during that period. The improvements were completed during August,
1999.
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 July 31, 1999 was $2,783,000, or,
as a percentage of sales, 88.6% compared with $2,937,000, or, as a percentage of
sales, 82.6% during the same period last year. The increase in cost of goods
sold as a percentage of sales for the three months ended July 31, 1999 as
compared to the comparable period in the prior year is the result of temporary
increases in labor and supplies expenses resulting from the Registrant's
continuation of operations during the construction of substantial improvements
to its Gladstone's restaurant. Additionally, the County increased its assessment
of value for the Gladstone's property, resulting in a property tax increase,
which the Registrant intends to contest.
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
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased by $9,000 or 4.3% during
the three months ended July 31, 1999, as compared to the comparable period in
the prior fiscal year. The decrease is attributable to the Registrant's
continuing efforts to reduce general and administrative costs.
AMORTIZATION OF INTANGIBLE ASSETS
For the three months ended July 31, 1999 and 1998, amortization expense was
$166,000 and $164,000, respectively. Amortization expense relates to the
Registrant's Goodwill and will approximate $714,000 during Fiscal 2000.
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 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
9
<PAGE> 10
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 July
31, 1999, the balance due under the TI Facility was $822,000.
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 July 31, 1999, the Registrant had no
borrowings outstanding under the line of credit.
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 July 31, 1999 totaled
$1,117,000. 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 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
10
<PAGE> 11
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.69 Note Agreement, between California Beach Restaurants,
Inc.,Sea View Restaurants, Inc., and Lyon Credit
Corporation and related documents
10.70 Revolving line of credit agreement between California Beach
Restaurants, Inc., Sea View Restaurants, Inc., and Santa
Monica Bank, dated July 7, 1999
11
<PAGE> 12
10.71 Standby letter of credit agreement between
California Beach Restaurants, Inc., and Santa
Monica Bank, dated July 9, 1999
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
12
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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: September 10, 1999 By: /s/ Alan Redhead
------------------------------
Alan Redhead
Chief Executive Officer
(Duly Authorized Officer)
By /s/ Samuel E. Chilakos
------------------------------
Samuel E. Chilakos
Vice President - Finance
and Chief Financial Officer
13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
ITEM
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.69 Note Agreement, between California Beach Restaurants, Inc., Sea View
Restaurants, Inc., and Lyon Credit Corporation and related documents
(A)
10.70 Revolving line of credit agreement between California Beach
Restaurants, Inc., Sea View Restaurants, Inc., and Santa Monica Bank,
dated July 7, 1999 (A)
10.71 Standby letter of credit agreement between California Beach
Restaurants, Inc., and Santa Monica Bank, dated July 9, 1999 (A)
27 Financial Data Schedule (A)
(A) FILED HEREWITH ELECTRONICALLY
</TABLE>
<PAGE> 1
EXHIBIT 10.69
[LYON CREDIT CORPORATION LETTERHEAD]
December 15, 1998 A Subsidiary of Credit Lyonnais
Mr. Alan Redhead
President
CALIFORNIA BEACH RESTAURANTS, INC.
17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
RE: LOAN PROPOSAL
Dear Alan:
Lyon Credit Corporation ("Lender") is pleased to present to California Beach
Restaurants, Inc. ("Borrower") the below outlined loan proposal. The terms and
conditions of our proposal are as follows:
- - TRANSACTION: The transaction shall be structured under a Master Loan
& Security Agreement ("Agreement"). The Agreement will
allow for multiple fundings documented as separate
schedules to the Agreement, with minimum takedowns of
$500,000.
- - LENDER: Lyon Credit Corporation
- - BORROWER: CALIFORNIA BEACH RESTAURANTS, INC.
- - LOAN AMOUNT: $1,500,000
- - COLLATERAL: Borrower shall grant to LCC a first priority security
interest (blanket UCC-1 filing) in the following
property (the "Equipment"): Various new furniture,
fixtures and equipment located at Borrower's
Gladstone's 4 Fish Restaurant; (detailed list to be
compiled later), including together with all parts,
accessories, attachments, substitutions, repairs,
improvements and replacements and any and all rights
thereunder and proceeds there of, including without
limitation insurance proceeds.
- - RATE: 8.33%
<PAGE> 2
Loan Proposal
December 15, 1998
Page Two
o LOAN EXPIRATION: March 31, 1999.
o INTEREST RATE/INDEX: (Fixed upon loan commencement). The interest rate to be
used will be based upon an index prior to funding the Transaction. Such index
to be the yield-to-maturity of the five (5) year Treasury Note as published
in the Wall Street Journal and an Adder. For purposes of this proposal, the
REFERENCE YIELD IS 4.33% AND THE ADDER IS 400 BASIS POINTS. The
yield-to-maturity of the Reference Yield in effect on the day prior to any
Transaction funding will be the yield used along with the Adder to determine
the applicable interest rate on any promissory note.
o LOAN AMORTIZATION: The Loan, shall be fully amortized over a term of sixty
(60) months, to be paid in equal monthly payments, in arrears.
o TRANSACTION COSTS: Borrower agrees that all transaction costs including all
appraisals, legal, recording, filing and other expenses related to the
Transaction will be for the account of Borrower, such expenses not to exceed
$2,000.00 without the prior written approval of Borrower.
o PRE-PAYMENT: Year 1, 5%; Year 2, 4%; Year 3, 3%; Year 4, 2%; Year 5, 1%, of
outstanding principal.
o MISCELLANEOUS: Prior to funding the Transaction, Lender will need evidence
of the following: 1) that Borrower or Guarantor has successfully received an
equity contribution satisfactory to Lender in a minimum amount of $1.5
million and 2) that no letter of credit requirement will exist under the
existing Concession Agreement between Borrower and the County of Los Angeles.
o INSURANCE: Prior to any funding, Borrower must provide Lender, at Borrower's
expense, satisfactory evidence of insurance (as to amount, terms and
insurer) covering Collateral against all risks of physical damage with
Lender named as loss payee. Such insurance shall provide for a minimum of 30
days notice prior to cancellation or any material change.
o PROGRESS PAYMENTS: Lender shall advance funds in partial payment of
equipment upon Borrower's execution of appropriate documentation. Progress
Payments shall be payable on a monthly basis and will be based on Prime
Lending Rate, as published in The Wall Street Journal, plus 1%.
o EXPIRATION: This proposal and all of its terms shall expire on December 31,
1998, if Lender has not received your acceptance hereof by such date.
<PAGE> 3
Loan Proposal
December 15, 1998
Page Three
o PROPOSAL FEE: By signing below, Borrower acknowledges the terms and
conditions of this proposal and agrees to pay a Proposal Fee of $15,000.00.
Upon receipt of the executed proposal letter and accompanying Proposal Fee,
Lender shall commence the investment approval process. The Proposal Fee will be
refundable to Borrower less all applicable Transaction Costs within 30 days of
either the latter of the last funding on this Transaction or upon Loan
Expiration.
In the event that this Transaction is not approved by Lender, the Proposal Fee
will be refunded to Borrower less applicable Transaction Costs. If this
Transaction is approved and any portion of its is not funded by Lender by Loan
Expiration, a portion of the Proposal Fee will be deemed as earned by Lender on
a pro-rated basis. For purposes of calculation, the amount(s) funded under the
various note(s) shall be the numerator and the loan approval amount stated in
Lender's approval letter shall be the denominator. The resulting percentage
amount shall be multiplied by the total Proposal Fee to calculate the amount of
the Proposal Fee to be refunded to Borrower (less applicable transaction
expenses). Any remaining balance shall be deemed as earned by Lender.
This proposal is based upon final acceptance from Lender's executive committee.
Approval by Lender's executive committee will be evidenced by issuance of an
approval letter covering the Transaction. Any such approval shall be subject to
the completion of documentation as Lender may, in its sole discretion, require
and the occurrence of no material adverse change in business, financial
condition or prospects of Borrower or Guarantor.
Alan, I look forward to hearing from your regarding the above stated proposal.
Please do not hesitate to call with any additional questions which you may have
at (949) 477-5550.
Sincerely, AGREED TO AND ACCEPTED BY:
Lyon Credit Corporation CALIFORNIA BEACH RESTAURANTS, INC.
/s/ JOHN D. WHEELING By: /s/ SAM CHILAKOS
- --------------------------------- ----------------------------------
John S. Wheeling
Account Officer Title: Vice President, Finance
------------------------------
Date: December 22, 1998
-------------------------------
<PAGE> 4
[LYON CREDIT CORPORATION LETTERHEAD]
February 1, 1999
Alan Redhead
President
California Beach Restaurants, Inc.
17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
Subject: Loan Commitment -- $1,200,000
Dear Mr. Redhead:
Lyon Credit Corporation ("LCC") ("Lender") has approved a loan request for
California Beach Restaurants, Inc. ("Borrower"), substantially as outlined in
its Loan Proposal dated December 15, 1998, subject to the following additional
terms and conditions.
1. Loan Amount -- $1,200,000.
2. UCC Search.
3. Insurance.
4. Copy of Borrower's executed Concession/Lease Agreement with the County of
Los Angeles prior to funding.
5. Final signed copy of Borrower's term sheet on the Convertible Subordinated
Note Offering for a minimum of $1.5 million prior to any funding.
6. Certification from Borrower's CFO or President, prior to any fundings,
that the "net worth test" as defined in the Concession Lease Agreement has
been satisfied.
7. Collateral inspection.
8. Landlord Waiver.
9. Fixture Filing.
If you have any questions concerning this approval, please call me at (714)
477-5540.
Sincerely,
/s/ RAYMOND A. ORPHAN
-------------------------------
Raymond A. Orphan
Vice President
<PAGE> 5
PROMISSORY NOTE
$821,564.75 April 27, 1999
THIS PROMISSORY NOTE is executed and delivered effective as of the date
written above by the undersigned (collectively, the "Maker") to LYON CREDIT
CORPORATION, a Delaware corporation ("Holder").
1. LOAN. FOR VALUE RECEIVED, the Maker promises to pay to Holder, or
order, the principal sum of EIGHT HUNDRED TWENTY ONE THOUSAND FIVE HUNDRED SIXTY
FOUR AND 75/100 ($ 821,564.75 ), with interest on all unpaid principal from the
date such principal sum is disbursed to or on behalf of Maker by Holder, at the
rate of ONE percent ( 1.0 %) plus the prime lending rate published in The Wall
Street Journal until maturity.
2. DEMAND. This note shall be due and payable, in full, upon demand by
Holder. Payment shall include all principal together with all interest accrued
thereon.
3. PAYMENTS. Payment shall be applied first to interest and the remainder
to principal. Principal and interest shall be paid in lawful money of the United
States of America. Payments shall be made at 1266 East Main Street, Stamford,
Connecticut, or elsewhere as Holder may designate. Interest may be calculated on
a daily basis using a 360-day year. Maker agrees that the rate of interest
contracted for in this note shall, for purposes of applicable law, include the
interest rates stated herein and any other charges, costs, fees and other
expenses which are to be paid by Maker to or for the benefit of Holder to the
extent that the same are deemed to be interest, all of which Maker hereby agrees
to pay. In no event will the total of interest rates charged hereunder be
greater than that permitted by applicable federal or state law.
4. DEFAULTS BY MAKER. A default shall occur if: (i) Maker fails to pay
this note when declared due by Holder or (ii) Maker or any of them becomes a
bankrupt or debtor in or under any state or federal insolvency proceeding.
5. DEFAULT REMEDIES. If a default occurs, then without notice, at the
election of Holder, the entire principal sum and all accrued interest which is
unpaid shall immediately be due and payable. In any event, upon any default
occurring or at maturity by acceleration or upon demand, all principal and
accrued interest shall bear interest at the after-default rate of fifteen
percent (15%) per annum from the date of default until this note is paid in
full.
6. RESERVATION OF RIGHTS. Failure of Holder to exercise any election
hereunder shall not constitute any waiver of any rights, remedies, options or
elections of Holder in the event of any subsequent default or otherwise.
7. FEES AND COSTS. If any default shall occur, Maker promises to pay all
of the following costs and fees if incurred by or on behalf of Holder: (i)
reasonable attorneys' fees, (ii) all costs and expenses of collection,
enforcement or interpretation, whether or not suit is filed, and (iii) all costs
of suit, each of which are to be determined and awarded by a court and not by a
jury. "Suit" includes proceedings in courts of original, appellate and
bankruptcy jurisdiction.
8. WAIVERS BY MAKER. To the maximum extent allowed by applicable law,
Maker expressly waives: (i) diligence, demand, dishonor, protest, presentment,
and grace of any kind, and any notice of the foregoing, and any notices of
nonpayment, default or acceleration, (ii) any and all rights of homestead and
exemption, and (iii) any release or discharge arising from any extension of time
or change in terms of payment or otherwise in this note, or from any change,
addition to or alteration of any instrument securing this note, or from any
other cause whatsoever other than payment in full.
9. PARTIES BOUND. "Maker" means the undersigned (individually or
collectively and jointly and severally) and all co-makers, endorsers, payors,
obligors, sureties and guarantors of this note and anyone who may become liable
for payment or performance of the same, and their respective successors and
assigns, jointly and
<PAGE> 6
severally, and if married, both as a community and as a sole and separate
obligation. "Holder" means the original payee of this note and its successors
and assigns as owners and holder of this note.
10. CHOICE OF LAW. This note shall be governed by and construed and
enforced under applicable federal law and by the laws of the State of
Connecticut.
11. SECURITY. This note is secured by a security interest in certain
collateral, and may be secured by other, additional security interests in other
collateral or by a lien or liens on real property owned by Maker.
California Beach Restaurants, Inc.
as Maker
By: /s/ Samuel E. Chilakos
------------------------------------
Title: Vice President Finance
Witness/Attest:
By: /s/ Martin Sniewski
------------------------------------
Name: Martin Sniewski
Title:
------------------------------------
<PAGE> 7
GUARANTY
THIS GUARANTY (the "Guaranty") is made and delivered by Sea View
Restaurants, Inc. a California corporation (the "Guarantor") for the benefit of
Lyon Credit Corporation (the "Guaranteed Party") to induce Guaranteed Party to
enter into that certain Security Agreement No. 30-00095 with California Beach
Restaurants, (the "Obligor") dated as of even date herewith (the "Security
Agreement").
WITNESSETH
1. GUARANTY.
a) Guarantor (and each of them if there are more than one) for valuable
consideration, the receipt whereof is hereby acknowledged, jointly and
severally irrevocable guarantees due and punctual payment and performance
to Guaranteed Party at its office at 1266 East Main Street, Stamford,
Connecticut 06902, or at such other place as Guaranteed Party shall from
time to time advise in writing, on demand, in lawful money of the United
States, of any and all Indebtedness (as defined below) of Obligor no matter
how acquired by Guaranteed Party.
b) For the purposes of this Guaranty, "Indebtedness" shall include, but is not
limited to, Indebtedness of Obligor as defined in the Security Agreement,
any and all advances, loans, debts, lease obligations, performance
obligations, notes, security agreements and liabilities of Obligor,
heretofore, now, or hereafter made, entered into, incurred, created or
owing, whether voluntary or involuntary and however arising, whether due or
not due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, and whether Obligor may be liable individually or jointly
with others, or whether recovery upon such Indebtedness may be or hereafter
become barred by any statute of limitations, or whether such Indebtedness
may be or hereafter become otherwise unenforceable. This Guaranty is a
guaranty of payment and performance and not of collection.
c) This Guaranty is a continuing guaranty relating to any Indebtedness,
including Indebtedness arising under successive transactions which shall
either continue the Indebtedness, renew it from time to time after it has
been satisfied or create new Indebtedness.
d) The obligations hereunder are joint and several, independent of the
obligations of Obligor or the obligations of any other persons or
guarantors who may be liable to Guaranteed Party in whole or in part for
the Indebtedness, and a separate action or actions may be brought and
prosecuted against Guarantor or any of them (if there are more than one)
whether action is brought against Obligor alone or whether Obligor be
joined in any such action or actions, and Guarantor waives the benefit of
any statute of limitations affecting its liability hereunder or the
enforcement thereof.
2. OBLIGATIONS UNCONDITIONAL. Guarantor's obligations hereunder shall be
unconditional (and shall not be subject to any defense, setoff, counterclaim or
recoupment whatsoever) irrespective of the genuineness, validity, regularity or
enforceability of the Indebtedness or the Security Agreement or any conduct of
Obligor and/or Guaranteed Party which might constitute a legal or equitable
discharge of a surety, guarantor or guaranty and shall remain in full force and
effect without regard to any circumstance whatsoever (whether or not Guarantor
shall have any knowledge or notice thereof), including, without limitation: (i)
any failure, omission or delay on the part of Obligor or Guaranteed Party to
conform or comply with any term of the Security Agreement; (ii) any waiver,
consent, extension, indulgence, compromise, release or other action or inaction
under or in respect of the Security Agreement or any obligation or liability of
Obligor or Guaranteed Party, or any exercise or non-exercise of any right,
remedy, power or privilege under or in respect to any such instrument or
agreement or any such obligation or liability; (iii) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, liquidation or similar proceeding
with respect to Obligor or Guaranteed Party or any of their respective
properties, or any action taken by any trustee or receiver or by any court in
any such proceeding; (iv) any merger or consolidation of Obligor or Guarantor
into or with any other corporation or any sale, lease or transfer of all or any
of the assets of Obligor or Guarantor to any other entity; or (v) any change in
the ownership of Obligor. The obligations of Guarantor set forth herein
constitute full recourse obligations of Guarantor enforceable against him to the
full extent of all his assets and properties. Without limiting the generality of
the foregoing, Guarantor agrees that (i) repeated and successive demands may be
made and recoveries may be had hereunder as and when, from time to time, Obligor
shall default under or fail to comply with the terms of the Security Agreement
and that notwithstanding the recovery hereunder for or in respect of any given
default or failure to so comply by Obligor under the Security Agreement, this
Guaranty shall remain in force and effect and shall apply to each and every
subsequent default, and (ii) in the event that any Indebtedness is paid by
Obligor, and thereafter all or any part of such payment is recovered from
Guaranteed Party to whom paid, as a preferential or fraudulent transfer under
the Federal Bankruptcy Code, any applicable state insolvency law, or any other
similar Federal or state law now or hereafter in effect, the
<PAGE> 8
liability of Guarantor hereunder with respect to such Indebtedness so paid and
recovered shall continue and remain in full force and effect as if, to the
extent of such recovery, such payment had not been made. If (i) an event
permitting the exercise of remedies under the Security Agreement shall at any
time have occurred and be continuing and (ii) such exercise, or any consequences
thereof provided in the Security Agreement shall at any time be prevented by
reason of the pendency against Obligor of a case or proceeding under the
bankruptcy or insolvency law, Guarantor agrees that, solely for purposes of this
Guaranty and its obligations hereunder, the Security Agreement shall be deemed
to have been declared in default and all amounts thereunder shall be deemed to
be due and payable, with all the attendant consequences as provided in the
Security Agreement, as if declaration of default and the consequence thereof had
been accomplished in accordance with the terms thereof, and Guarantor shall
forthwith pay any amounts guaranteed hereunder.
3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and warrants
that
a) Guarantor is duly organized and validly existing in good standing under the
laws of the State of and has all requisite corporate power and authority to
enter into and perform its obligations provided under this Guaranty,
b) this Guaranty has been duly authorized by all necessary corporate action,
and has been duly executed and delivered by Guarantor and is a legal, valid
and binding obligation of Guarantor, enforceable in accordance with its
terms except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors rights generally and general
principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law,
c) the execution and delivery by Guarantor of this Guaranty is not, and the
performance by it of its obligations hereunder will not be, inconsistent
with Guarantor's other activities, do not and will not contravene any law,
governmental rule or regulation, judgment or order applicable to Guarantor,
and do not and will not contravene any provision of, or constitute a
default under, its certificate of incorporation or by laws or any
indenture, mortgage, contract or other instrument to which Guarantor is a
party or by which it is bound,
d) no consent or approval of, giving of notice to, registration with, or
taking of any other action in respect to or by, any Federal, national,
state or local governmental authority or agency or other entity is required
with respect to the execution, delivery and performance by Guarantor of
this Guaranty, or if any such approval, notice, registration or action is
required, it has been duly given or obtained,
e) there are no suits or proceedings pending or threatened in any court or
before any commission, board or other administrative agency against or
affecting Guarantor, which will have a material adverse effect on the
ability of Guarantor to fulfill its obligations under this Guaranty.
3A. EXISTENCE, ETC. Guarantor agrees that, so long as this Guaranty is in
effect, Guarantor shall (i) preserve and maintain its corporate existence, (ii)
preserve and maintain all of its material rights, privileges and franchises,
except where the failure to preserve and maintain any such right, privilege or
franchise would not materially and adversely affect the ability of Guarantor to
perform its obligations under this Guaranty, and (iii) comply with all the
requirements of all applicable laws, rules, regulations and orders of
governmental or regulatory authorities except where the failure to comply with
any such requirement would not materially and adversely affect the ability of
Guarantor to perform its obligations under this Guaranty.
4. CERTAIN RIGHTS AND POWERS OF GUARANTEED PARTY.
a) Guarantor authorizes Guaranteed Party, without notice or consent and
without affecting, impairing or discharging in whole or in part its
liability hereunder, from time to time to (i) renew, modify, amend,
compromise, extend, accelerate, discharge or otherwise change the time for
payment of, or otherwise change the terms or provisions of the Indebtedness
or any part thereof, including increase or decrease of the rate of interest
thereon; (ii) take and hold security for the payment of this Guaranty or
the Indebtedness guaranteed, and exchange, enforce, waive, and release any
such security; (iii) apply such security and direct the order or manner of
sale thereof as Guaranteed Party in its discretion may determine; and (iv)
release or substitute in whole or in part any one or more of the endorsers,
Guarantor or anyone else who may be partially or wholly liable for any part
of the Indebtedness. Guaranteed Party may without notice assign this
Guaranty in whole or in part. At the option of Guaranteed Party and upon
notice to Guarantor, Guarantor may be joined in an action or proceeding
commenced by Guaranteed Party against Obligor in respect of any
Indebtedness.
b) Guaranteed Party shall have a lien and security interest upon and a right
of setoff against all moneys, securities and other property of Guarantor
now or hereafter in the possession of Guaranteed Party whether held in a
special account, for safekeeping or otherwise; and every lien and security
interest and right of setoff may be exercised without demand upon Guarantor
or notice by Guaranteed Party. No lien or right of setoff may be deemed to
have
<PAGE> 9
been waived by any act or conduct on the part of Guaranteed Party or by any
neglect to exercise such right of setoff or to enforce such lien or
security interest or by any delay in so doing, and every right of setoff,
lien or security interest and shall continue in full force and effect until
such right of setoff, lien or security interest is specifically waived or
released by an instrument in writing executed by Guaranteed Party.
c) Any Indebtedness of Obligor now or hereafter held by or owing to Guarantor
is hereby subordinated to the Indebtedness of Obligor to Guaranteed Party;
and such Indebtedness of Obligor to Guarantor, if Guaranteed Party so
requests, shall be collected, enforced and received by Guarantor as trustee
for Guaranteed Party and be paid over to Guaranteed Party on account of the
Indebtedness of Obligor to Guaranteed Party but without reducing or
affecting in any manner the liability of Guarantor under the other
provisions of this Guaranty. In the event of any distribution, division or
application, partial or complete, voluntary or involuntary, by operation of
law or otherwise, of all or any part of the assets of Obligor or the
proceed thereof to the creditors of Obligor, or upon any Indebtedness of
Obligor, by reason of dissolution, liquidation or other winding up of
Obligor or its business, or compromise or settlement with its creditors, or
any sale, receivership, insolvency or bankruptcy proceeding or assignment
for the benefit of creditors, or any proceeding by or against Obligor for
any relief under any provisions of the Federal Bankruptcy Code, any
applicable state insolvency law, or any other similar Federal or state law
now or hereafter in effect, then and in any such event any payment or
distribution of any kind or character, which shall be payable or
deliverable with respect to any and all Indebtedness due to Guarantor by
Obligor, shall be paid or delivered directly to Guaranteed Party for
application on any Indebtedness to Guaranteed Party until such Indebtedness
shall have been first and fully paid. Guarantor hereby sells, assigns,
transfers and sets over to Guaranteed Party all of its rights to any and
all such distributions.
5. WAIVER OF DEMANDS, NOTICES AND CERTAIN RIGHTS OF GUARANTOR. Guarantor
waives any right to require Guaranteed Party to (a) proceed with or exhaust
remedies against Obligor; (b) proceed against or exhaust any security held from
Obligor or Guarantor; (c) pursue any other remedy available to Guaranteed Party
whatsoever; or (d) proceed against any other persons or guarantors who may be
liable to Guaranteed Party in whole or in part for the Indebtedness. Guarantor
waives any defense arising by reason of any disability or other defense of
Obligor or by reason of the cessation or modification from any cause whatsoever
of the liability of Obligor. Guarantor shall have no right to subrogation, and
waives any right to enforce any remedy which Guaranteed Party now has or may
hereafter have against Obligor, and waives any benefit of, and any right to
participate in any security now or hereafter held by Guaranteed Party. Guarantor
waives diligence, all presentments, demands for performance, notices of
non-performance, default, protests, notices of protest, notices of dishonor,
notices of acceptance of this Guaranty and of the existence, creation, or
incurring of new, changes, modified, increased or additional Indebtedness, all
other notices of every and any kind. Guarantor hereby further agrees that no
payment or performance hereunder by Guarantor shall give rise to any claim of
Guarantor against Guaranteed Party.
a) Where there is but a single Obligor, or where a single Guarantor executes
this Guaranty, then all words used herein in the plural shall be deemed to
have been used in the singular where the context and construction so
require; and when there is more than one Obligor named herein, or when this
Guaranty is executed by more than one Guarantor, the words "Obligor" and
"Guarantor" respectively shall mean all and any one or more of them.
b) Guarantor agrees to pay on demand to Guaranteed Party all costs and
expenses of collection (including, without limitation, the fees and
disbursements of counsel) incident to the enforcement, protection on
preservation of any right or claim of Guaranteed Party under this Guaranty
against Guarantor as a result of breach of this Guaranty by Guarantor.
c) If any provision of this Guaranty shall contravene or be invalid under
applicable law or regulation (including Federal law and regulation), such
contravention or invalidity shall not affect the entire Guaranty, the
provisions held to be invalid to be deemed deleted or modified and the
Guaranty interpreted and construed as though such invalid provision or
provisions were not part hereof or conformed thereto.
d) Guaranteed Party may give notice to Guarantor or make a request of
Guarantor in the U.S. mail, first class postage prepaid, addressed to
Guarantor at its address below, or an address furnished by Guarantor to
Guaranteed Party. All notices to be given by Guarantor hereunder shall be
deemed adequately given if sent by registered or certified mail to
Guaranteed Party at the address of Guaranteed Party stated herein, or at
such other place as Guaranteed Party may designate to Guarantor in writing.
e) This Guaranty shall be binding upon successors and assigns of Guarantor,
but no assignment hereof, or of any right to any funds due or to become due
under this Guaranty, shall in any event relieve Guarantor of its
obligations hereunder.
<PAGE> 10
f) This Guaranty constitutes the entire agreement of the parties with respect
to the subject matter hereof. ANY VARIATION OR MODIFICATION OF THIS
GUARANTY AND ANY WAIVER OF ANY OF ITS PROVISIONS SHALL NOT BE VALID UNLESS
IN WRITING AND SIGNED BY AN AUTHORIZED OFFICER OR MANAGER OF GUARANTEED
PARTY.
g) GUARANTOR WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY LITIGATION ARISING
HEREFROM OR IN RELATION HERETO.
h) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, Guarantor (and each of them if there are more than
one), has caused this Guaranty to be executed and delivered by its officer
hereunder duly authorized independent of any other party and not relying upon or
in consideration of the execution hereof by any other party, this 27th day of
April, 1999.
Sea View Restaurants, Inc.
Guarantor
By: /s/ Samuel E. Chilakos
------------------------------------
Name: Samuel E. Chilakos
Title: Vice President, Finance
By: /s/ Martin Sniewski
------------------------------------
Name: Martin Sniewski
Title:
---------------------------------
----------------------------------------
(Seal)
<PAGE> 11
SECURITY AGREEMENT
Security Agreement No. 30-00095
THIS SECURITY AGREEMENT (the "Security Agreement"), dated as of March 15,
1999 made by and between LYON CREDIT CORPORATION, a Delaware corporation, with
an office address at 1266 East Main Street, Stamford, Connecticut 06902-3546
(together with its successors and assigns, if any, "Secured Party") and
California Beach Restaurants, a Corporation with its residence, mailing address
and principal place of business at 17383 Sunset Blvd., Suite 140, Pacific
Palisades, CA 90272 ("Borrower");
WITNESSETH:
1. GRANT OF SECURITY INTEREST: To secure payment on each Note made by Borrower
in the form attached hereto as Exhibit "A" together with any extensions or
renewals thereof, and any amendments or modifications thereto (each, a "Note",
and collectively, the "Notes"), and also to secure any other indebtedness,
obligation, or liability of the Borrower to the Secured Party, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising and no matter how acquired by Secured Party, including, but
not limited to, all future advances or loans which may be made at the option of
the Secured Party to or on behalf of Borrower (all the foregoing hereinafter
called the "Indebtedness"), Borrower hereby grants and conveys to the Secured
Party a first security interest in, and mortgages to the Secured Party, each
unit of property (such unit, an "Item") described in a Schedule in the form
attached hereto as Exhibit "B" (a "Schedule") and accepted by Borrower in any
Delivery and Acceptance Certificate in the form attached to such Schedule (a
"Certificate"), all products and proceeds thereof, if any, all additions,
attachments, accessories and accessions thereto and any and all substitutions,
replacements or exchanges thereto, and any and all insurance and/or other
proceeds thereof, including, but not limited to, every permitted lease or
sublease, howsoever designated, covering all or any part thereof (all or any of
the foregoing hereinafter collectively called the "Collateral").
TO HAVE AND TO HOLD the Collateral with the power and authority and subject
to the terms and conditions set forth in this Security Agreement.
2. REPAYMENT: Borrower will duly and punctually pay the Indebtedness secured
by this Security Agreement in accordance with the terms of the Notes and this
Security Agreement. Payments of Indebtedness shall be made to Secured Party at
its office address stated above, except as otherwise directed by Secured Party,
and shall not be prorated for any cause or reason except as herein may be
specifically provided. Payments shall be due periodically as specified in the
applicable Note, except that in the event any month in which a payment is due
does not contain a numbered day equal to such payment day specified, payment
shall be made on the last day of such month. If any payment is not made within
ten (10) days after due date, Borrower agrees to pay a late charge of five cents
(5cents) per dollar on, and in addition to, the amount of such payment, but not
exceeding the lawful maximum, if any.
3. OBLIGATIONS ABSOLUTE: The obligations of Borrower under this Security
Agreement shall be absolute and unconditional under all circumstances
whatsoever, including, but not limited to, the existence of any claim, set-off,
defense, counterclaim or recoupment to any present or future claim of Borrower
against Secured Party under this Security Agreement or otherwise, against the
manufacturer or seller of any of the Collateral or against any other person or
entity for whatever reason. This Security Agreement shall not terminate, nor
shall the obligations of Borrower be affected, by reason of any defect in title
to, damage to or any loss or destruction of, the Collateral from whatsoever
cause, or the interference with the use thereof by any person or entity, or the
invalidity or unenforceability or lack of due authorization in respect of this
Security Agreement or any lack of right, power or authority of the
<PAGE> 12
Secured Party to enter into this Security Agreement, or any failure of Secured
Party to perform any obligation of Secured Party or Borrower or any other person
or entity under this Security Agreement or any instrument or document executed
in connection herewith, or for any other cause, whether similar or dissimilar to
the foregoing, any present or future law or regulation to the contrary
notwithstanding, it being the express intention of Secured Party and Borrower
that all payments by Borrower shall be, and continue to be, payable in all
events unless the obligation to pay the same shall be terminated pursuant to the
express provisions of this Security Agreement.
4. REPRESENTATIONS AND WARRANTIES: Borrower represents and warrants as of the
date of this Security Agreement that:
a) Borrower is a Corporation duly organized and validly existing in good
standing under the laws of its state of organization and has the
[Corporate, Partnership] power to enter into and perform its
obligations under this Security Agreement,
b) this Security Agreement has been duly authorized, executed and
delivered by Borrower and, assuming due authorization, execution and
delivery by Secured Party, is a legal, valid and binding obligation of
Borrower, enforceable in accordance with its terms except as may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors
generally, and general principles of equity, regardless of whether
such enforceability is considered in a proceeding in equity or at law,
c) the execution and delivery by Borrower of this Security Agreement is
not, and the performance by it of its obligations hereunder will not
be, inconsistent with Borrower's [articles or certificate of
incorporation or by-laws] [partnership agreement], do not and will not
contravene any law, governmental rule or regulation, judgment or order
applicable to Borrower, and do not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage,
contract or other instrument to which Borrower is a party or by which
it is bound,
d) no consent or approval of, giving of notice to, registration with, or
taking of any other action in respect to or by, any federal, state or
local governmental authority or agency or other entity is required
with respect to the execution, delivery and performance by Borrower of
this Security Agreement, or if any such approval, notice, registration
or action is required, it has been duly given or obtained,
e) there are no suits or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or
affecting Borrower, which will have a material adverse effect on the
ability of Borrower to fulfill its obligations under this Security
Agreement,
f) each financial statement and other related information furnished to
Secured Party by Borrower has been prepared in accordance with
generally accepted accounting principles and, since the date of the
most recent financial statement so delivered, there has been no
material adverse change (as that term is defined in paragraph 12 (k)
below),
g) this Security Agreement shall be effective against all creditors of
Borrower under applicable law, including, without limitations,
fraudulent conveyance and bulk transfer laws, and
h) the Collateral will at all times be used solely in the conduct of the
business of Borrower and be and remain in the possession and control
of Borrower.
i) Borrower shall be "Year 2000 Compliant" by January 1, 2000. For
purposes of this paragraph, "Year 2000 Compliant" means that all
software, embedded microchips and other processing capabilities
utilized by, and material to the business operations or
<PAGE> 13
financial condition of Borrower are able to interpret, store,
transmit, receive and manipulate data on and involving all calendar
dates in and after the Year 2000. From time to time, at the request of
the Lender, Borrower shall provide to Lender such information as is
requested regarding the status of its efforts to become Year 2000
compliant.
5. LIENS: Borrower is the lawful owner of the Collateral. Borrower shall keep
the Collateral free and clear from all liens, charges, encumbrances and security
interests of any kind ("Liens"), except for
(i) the Lien of Secured Party, as provided in this Security Agreement,
(ii) Liens for taxes either not yet due or being contested by Borrower in
good faith with due diligence and by appropriate proceedings, so long
as such proceedings do not, in the opinion of Secured Party, involve
any material danger of sale, forfeiture or loss of Collateral or any
part thereof or title thereto or interest therein,
(iii) inchoate materialmen's, mechanics', workmen's, repairmen's,
employees', carriers', warehousemen's or other like Liens arising in
the ordinary course of business of Borrower and not delinquent and
Borrower shall be maintaining adequate reserves therefor. Secured
Party shall, at its own cost and expense, promptly take such action as
may be necessary to discharge duly all Secured Party's Liens upon full
payment and satisfaction of all Indebtedness.
6. USE AND OPERATION:
(a) Borrower shall not assign, sublet, mortgage, hypothecate or alter any
of the Collateral or any interest in this Security Agreement, nor
shall Borrower remove any of the Collateral from the specified place
of Collateral location, without the prior written consent of Secured
Party, and any attempt so to assign, sublet, mortgage, hypothecate,
alter or remove any of the Collateral without the prior written
consent of the Secured Party shall be void and without effect.
(b) Borrower will not, without the prior written consent of Secured Party,
affix or install any accessory, equipment, or device on any Collateral
if such addition will impair the originally intended function or use
of any such Collateral or its value in place. Borrower agrees that
each Item of Collateral shall prior to its installation be personal
property under applicable law. Borrower agrees to take such action as
shall be required by Secured Party from time to time to protect the
rights and interests of Secured Party in each such item. Borrower will
not, without the prior written consent of Secured Party and subject to
such conditions as Secured Party may impose for its protection, affix
or install any Collateral to or in any other personal property.
Secured Party and Borrower agree that each Item of Collateral and
every part thereof is severed from any real property and, even if
physically attached to any real property, it is the intention of
Secured Party and Borrower that such Item
(i) shall retain the character of personal property,
(ii) shall be removable,
(iii) shall be treated as personal property with respect to the rights
of all persons and entities,
(iv) shall not become part of any real property, and
(v) by virtue of its nature as personal property, shall not be
affected in any way by any instrument dealing with any real
property.
<PAGE> 14
Borrower represents that it has not entered into, and agrees that it will not
enter into, any agreement or other arrangement which prohibits or restricts in
any manner the right of Secured Party or Borrower to sever Items of Collateral
from the real property on which they are located, to sever Items of Collateral
from any other equipment or personal property to which such Items are attached
or to remove Items of Collateral from the place where they are then located.
7. MAINTENANCE AND SERVICE:
(a) Items of Collateral shall be used only in the manner for which they
were designed and intended and Borrower will at its sole expense at
all times maintain Collateral in good operating order, repair,
condition and appearance and keep Collateral protected from the
elements, ordinary wear and tear excepted. Borrower will, at all
times, operate and maintain each Item of Collateral in accordance with
(i) the standards applied by Borrower with respect to similar
equipment owned or leased by it and
(ii) prudent operating and maintenance standards and manufacturer's
requirements. Borrower will not use or operate any Item of
Collateral in violation of applicable laws and regulations
(including all applicable environmental and occupational safety
laws).
(b) Any alterations or modifications with respect to Collateral that may
at any time prior to full repayment of the Indebtedness secured hereby
be required to comply with any applicable law or any governmental rule
or regulation shall be made by Borrower as required and at the sole
expense of Borrower.
8. REPORTS:
(i) Borrower agrees that Secured Party shall not be responsible for
any loss or damage to Borrower, its customers or any other third
parties caused by the Collateral, any failure thereof or defect
therein, or otherwise. Nevertheless, Borrower will immediately
notify Secured Party in reasonable detail of each accident
arising out of any alleged or apparent improper manufacturing,
functioning or operation of any Collateral;
(ii) Borrower will notify Secured Party in writing within ten (10)
days after any day in which any Lien shall attach to any
Collateral not expressly permitted hereby of the full particulars
thereof and of the then location of such Collateral on such day;
(iii) Borrower will notify Secured Party forthwith in writing of the
location of any Collateral moved by Borrower from the place where
delivered to Borrower or from the location specified in this
Security Agreement or any subsequent agreement executed by the
parties and Borrower will not change or discontinue its place or
places of business and/or residence and/or name;
(iv) Borrower will within ninety (90) days of the close of each of its
fiscal years deliver to Secured Party Borrower's balance sheet
and profit and loss statement prepared in accordance with
generally accepted accounting principles and, to the extent
available, certified to by a recognized firm of certified public
accountants. Borrower will deliver to Secured Party, within sixty
(60) days of the close of each of its fiscal quarters, Borrower's
quarterly financial report (which shall be in reasonable detail)
prepared in accordance with generally accepted accounting
principles and certified to by the chief financial officer of
Borrower; and
<PAGE> 15
(v) Borrower will permit Secured Party to inspect and examine
Collateral at such times and from time to time during normal
business hours as Secured Party may wish (and at such other times
as may be mutually agreeable) and without any requirement for
advance notice, provided that such examination and inspection
shall not unreasonably interfere with Borrower's normal business
operations.
9. RISK OF LOSS:
a) Borrower is solely responsible for the entire risk of use and
operation, and for each and every cause or hazard, and all loss and
damage to any and all Collateral whether arising through operation or
otherwise. In the event of damage to any Item of Collateral, Borrower,
at its cost and expense, shall promptly repair the Item, restoring it
to its previous condition or the condition in which it was required to
be assuming Borrower had met all its obligations for maintenance of
the Collateral. Upon the occurrence of an Event of Loss (defined
below) with respect to any Item, Borrower shall prepay to Secured
Party an amount of Indebtedness under the Note relating to the
Schedule hereto in which such Item is described equal to the sum of
(i) all interest theretofore accruing, and unpaid thereon, with
respect to such Item, plus
(ii) the unpaid principal balance of the Note with respect such item,
plus
(iii) an amount equal to two (2%) percent of the unpaid principal
balance of the Note with respect to such Item.
Provided Borrower is not in breach or default of this Security Agreement, any
proceeds of insurance received by Secured Party with respect to any such loss
shall be paid to Borrower to the extent necessary to reimburse Borrower costs
incurred and paid by Borrower in repairing damaged Equipment or as a credit
against total amount payable by Borrower with respect to the Collateral
involved, as the case may be, all as provided in this Security Agreement.
b) For the Purpose hereof "Event of Loss" shall mean, with respect to any
Item of Collateral, if such Item is
(i) destroyed, condemned, irreparably damaged or damaged beyond
economic repair,
(ii) requisitioned for use by a governmental entity for an indefinite
period or stated period extending beyond a period in excess of
ninety (90) consecutive days or the final installment payment
date stated on the applicable Note, whichever is earlier,
(iii) the subject of an insurance settlement with respect to such Item
of Collateral on the basis of a constructive total loss,
(iv) stolen or lost and not recovered within thirty (30) days,
(v) the subject of a condemnation or requisition of title by a
governmental entity, or
(vi) prohibited by applicable law from being used by Borrower for a
period of ninety (90) consecutive days or the final installment
payment date on the applicable Note, whichever is earlier.
10. INSURANCE:
(a) Borrower, at its own cost and expense shall obtain, maintain and shall
keep the Collateral insured against all risks of loss or damage from
every cause whatsoever in an amount not less than the greater of
actual cash value or the aggregate amount of all unpaid
<PAGE> 16
Indebtedness as at any time, without deductible and without
co-insurance (except as Secured Party may approve in writing).
Borrower shall also obtain and maintain, in accordance with industry
standards, until repayment in full of the Indebtedness, public
liability insurance covering liability for bodily injury, including
death, and property damage resulting from the purchase, ownership,
leasing, maintenance, use or operation of the Collateral in an amount
of at least $1,000,000 [WITH RESPECT TO EACH SEPARATE SCHEDULE
HERETO], or in such greater amounts as Secured Party may from time to
time require. Secured Party shall be the sole named loss-payee with
respect to damage or loss to the Collateral and shall be a named
additional insured on the public liability insurance. All insurance
shall be with insurers and in form satisfactory to Secured Party;
shall provide for at least thirty (30) days advance written notice to
Secured Party before any cancellation or material modification
thereof; shall waive any claim for premium against Secured Party; and
shall not be invalidated or the insurer's liability to or for or on
behalf of Secured Party be diminished or affected by any breach of
warranty or representation or other act or omission of the Borrower.
Upon request, Borrower shall deliver to Secured Party the original
policy or policies of insurance, certificates of insurance or other
evidence satisfactory to Secured Party evidencing the insurance
required hereby. Secured Party may, at its option, apply proceeds of
insurance, in whole or in part, to
(A) repair or replace Collateral or any portion thereof, or (B)
satisfy any obligation of Borrower to Secured Party hereunder.
(b) Secured Party is authorized, but under no duty, to obtain such
insurance upon failure of the Borrower to do so. Borrower shall give
immediate written notice to the Secured Party and to insurers of loss
or damage to the Collateral and shall promptly file proofs of loss
with insurers. Borrower hereby irrevocably appoints the Secured Party
as attorney-in-fact, coupled with an interest, for the Borrower in
obtaining, adjusting and canceling any such insurance and endorsing
settlement drafts and hereby assigns to the Secured Party all sums
which may become payable under such insurance, including return
premiums and dividends, as additional security for the Indebtedness.
11. EXPENSES; INDEMNIFICATION:
(a) Expenses. Borrower shall pay to Secured Party on demand any and all
expenses, including reasonable attorneys' fees and legal expenses,
which are incurred by Secured Party (i) in the prosecution or defense
of any action arising out of or connected with the subject matter of
this Security Agreement, the Indebtedness, the Collateral or any of
Secured Party's rights therein, and (ii) in connection with the
custody, preservation, protection, use, operation, preparation for
sale or sale of any Collateral, the incurring of all of which are
hereby authorized to the extent Secured Party deems the same
advisable.
(b) Indemnification. Borrower hereby agrees to indemnify Secured Party and
its affiliates, and their respective directors, officers, employees,
agents, counsel and other advisors (each an "Indemnified Person")
against, and hold each of them harmless from, any and all liabilities,
obligations, losses, claims, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature
whatsoever, including reasonable attorneys' fees and legal expenses,
to an Indemnified Person, which may be imposed on, incurred by, or
asserted against any Indemnified Person, in any way relating to or
arising out of the Collateral, this Security Agreement or the
transactions contemplated hereby or any action taken or omitted to be
taken by it hereunder (the "Indemnified Liabilities"); provided that
Borrower shall not be liable to a particular Indemnified Person for
any portion of such Indemnified Liabilities to the extent such
Indemnified Person is found by
<PAGE> 17
a final decision of a court of competent jurisdiction to have resulted
from such Indemnified Person's gross negligence or willful misconduct.
If and to the extent that the foregoing indemnification is for any
reason held unenforceable, Borrower agrees to make the maximum
contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
12. DEFAULT; REMEDIES: If any of the following (herein an "Event of Default")
shall occur:
(a) Borrower shall default in the payment of Indebtedness to Secured Party
or in making any other payment hereunder or under any Note when due,
and such default shall continue for a period of ten (10) days without
its cure by Borrower, or
(b) Borrower shall default in the payment when due of any obligations of
Borrower, whether or not to Secured Party, arising independently of
this Security Agreement or any Note, and such default shall continue
for a period of ten (10) days without its cure by Borrower, or
(c) Borrower shall default in the performance of any other covenant
contained herein (including any Schedule hereto), any Certificate in
respect hereof or any Note or any other document entered into in
connection with this Security Agreement and such default shall
continue for fifteen (15) days after written notice thereof to
Borrower by Secured Party, or
(d) Borrower shall breach any of its insurance obligations under paragraph
10 hereof,
(e) any representation or warranty made by Borrower in this Security
Agreement or any other documents entered into in connection with this
Security Agreement shall prove to be incorrect in any material respect
when any such representation or warranty was made or given, or
(f) Borrower shall become insolvent or make an assignment for the benefit
of creditors, or
(g) Borrower shall apply for or consent to the appointment of a receiver,
trustee or liquidator for a substantial part of its property or such
receiver, trustee or liquidator is appointed without the application
or consent of Borrower, or
(h) a petition shall be filed by or against Borrower under the Federal
bankruptcy laws (including, without limitation, a petition for
reorganization, arrangement or extension) or under any other
insolvency law or law providing for the relief of debtors, if such
petition is not dismissed within thirty (30) days, or
(i) there is, without the prior consent of Secured Party, a change in
control (defined to be a change in the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of Borrower, whether through the ownership of
voting securities, by contract or otherwise), or
(j) there is a material adverse change (defined to be a decrease of at
least one-third (1/3) of net worth, as determined in accordance with
generally accepted accounting principles) in Borrower's or any
guarantor's financial condition;
then, to or more the extent permitted by applicable law, Secured Party shall
have the right to exercise any one of the following remedies one or more times:
A) declare this Security Agreement in default, such declaration being
applicable to all Schedules hereunder except as specifically excepted
by Secured Party;
B) declare the entire amount of unpaid total Indebtedness immediately due
and payable;
<PAGE> 18
C) declare due and payable in addition to any unpaid Indebtedness due on
or before Secured Party declares this Security Agreement in default,
as liquidated damages for loss of a bargain and not as a penalty, an
amount calculated in accordance with the provisions of paragraph 9 as
though the Collateral had suffered an Event of Loss, as of the date
that Secured Party declares this Security Agreement in default;
D) declare due and payable the amount of any indemnification hereunder if
then determinable, with interest as provided herein;
E) upon notice to any lessees or sublessees permitted pursuant to
paragraph 6(a) to obtain and retain all rentals thereafter due, paid
and/or payable;
F) without demand or legal process enter into premises where the
Collateral may be found and take possession of and remove the same,
whereupon all rights of Borrower in the Collateral shall terminate
absolutely, and either
(i) retain all prior payments of Indebtedness and sell the Collateral
at public or private sale, with or without having the Collateral
at the sale, at which sale Secured Party may purchase all or any
of the Collateral, the proceeds of such sale, less expenses of
retaking, storage, repairing and reselling, and reasonable
attorneys' fees incurred by Secured Party, to be applied to the
payment of the unpaid total Indebtedness, Borrower remaining
liable for the balance of said unpaid total Indebtedness, and any
surplus thereafter remaining to be for the account of Borrower
(except as otherwise provided under applicable law) or
(ii) retain the Collateral and all prior payments of Indebtedness, in
satisfaction of the remaining unpaid Indebtedness;
G) pursue any other remedy then available to Secured Party at law or in
equity. Borrower hereby covenants and agrees to notify Secured Party
immediately of the occurrence of any default specified in this
paragraph 12.
13. REMEDIES CUMULATIVE: Time of performance of Borrower's obligations
hereunder is of the essence. All remedies of Secured Party hereunder are
cumulative, and may, to the extent permitted by law, be exercised concurrently
or separately, and the exercise of any one remedy shall not be deemed to be an
election of such remedy to the exclusion of any other remedy or to preclude the
exercise of any other remedy at any other time. Failure on the part of the
Secured Party to exercise, or delay in exercising, any right or remedy hereunder
or Secured Party's failure at any time to restrict performance by Borrower of
any of the provisions hereof shall not operate as a waiver thereof; nor shall
any single or partial exercise by Secured Party of any right or remedy hereunder
preclude any other further exercise thereof or the exercise of any other right
or remedy.
14. ASSIGNMENT: Borrower acknowledges, and understands that Secured Party may
assign this Security Agreement, any Schedule or Certificate or any Note to a
bank or any other lending institution or any other person, organization or
agency, and Borrower shall
(a) recognize any such assignment,
(b) accept the lawful demands of such assignee,
(c) surrender assigned Collateral only to such assignee,
(d) pay all Indebtedness payable hereunder and do any and all things
required of Borrower hereunder, notwithstanding any default of
the Secured Party or the existence of any claim, defense or
offset between Borrower and Secured Party, and
<PAGE> 19
(e) not require any assignee of the Security Agreement to perform any
duty, covenant or condition required to be performed by Secured
Party under the terms of this Security Agreement provided that
Secured Party shall remain liable for such performance. The
obligations of Borrower shall not be subject, as against any such
assignee or transferee, to any defense, set-off or counterclaim
available to Borrower against Secured Party and any such defense,
set-off or counterclaim may be asserted only against Secured
Party.
15. FILINGS:
(a) Borrower agrees to execute any instrument or instruments necessary or
expedient for filing, recording, perfecting, or notifying of the interest of
Secured Party upon request of, and as determined by, Secured Party. Borrower
hereby specifically authorizes Secured Party to file financing statements not
signed by Borrower or to execute same for and on behalf of Borrower as
Borrower's attorney-in-fact, irrevocably and coupled with an interest, for such
purposes. A carbon, photographic or other reproduction of the Security Agreement
or a financing statement shall be sufficient as a financing statement for filing
purposes.
(b) Without limiting the foregoing paragraph (a), Borrower hereby acknowledges
and agrees that the normal practice of Secured Party is to electronically file
financing statements through computerized filing services such as CSC- The
United States Corporation Company ("Filing Service"). The Filing Service
pursuant to a Power of Attorney delivered by Secured Party will execute the
financing statement on behalf of both Borrower (and Secured Party where
applicable or where desired by Secured Party as not all states require execution
of Secured Party on financing statements). The names of Borrower and Secured
Party, addresses, and collateral description on the computerized financing
statement filing shall be the same as on the financing statement executed by
Borrower but the format and spacing may vary in non-material ways. Borrower
acknowledges that the original financing statement executed by Borrower shall be
retained in the collateral files of Secured Party but may be filed by Secured
Party should it deem it necessary. In connection with the foregoing process,
Borrower hereby authorizes and appoints Secured Party and the applicable Filing
Service as Borrower's agent and attorney-in-fact, irrevocably and coupled with
an interest for the execution and filing of the financing statements and fully
acknowledges and agrees and has initialed this paragraph as additional
affirmation as to the full enforceability of this power of attorney for such
purposes.
BORROWER
-------------
INT.
16. MISCELLANEOUS:
(a) In case of failure of Borrower to comply with any provision of
this Security Agreement, Secured Party shall have the right, but
shall not be obligated, to effect such compliance in whole or in
part, and all moneys spent and expenses and obligations incurred
or assumed by Secured Party in effecting such compliance
(including but not limited to, attorneys' fees and costs incurred
in attempting to effect compliance against Borrower and/or
others) shall constitute additional Indebtedness hereby secured
due to Secured Party five (5) days after the date Secured Party
sends notice to Borrower requesting payment. Secured Party's
effecting such compliance shall not be waiver of Borrower's
default. Interest on any payments made by Secured Party hereunder
on amounts due after Secured Party declares default under
paragraph 12 and interest on any overdue payment under paragraph
11 shall be at the default rate prescribed in the Note, (or, if
there is more than one Note, at the highest among the default
rates prescribed in such Notes), but not to exceed the maximum
lawful rate. Any
<PAGE> 20
provisions in this Security Agreement, any Schedule hereto or
Certificate in respect hereof which are in conflict with any
statute, law or rule applicable shall be deemed omitted, modified
or altered to conform thereto.
(b) If any provision of this Security Agreement shall contravene or
be invalid under applicable law or regulation (including federal
law and regulation), such contravention or invalidity shall not
affect the entire Security Agreement, the provisions held to be
invalid to be deemed deleted or modified and the Security
Agreement interpreted and construed as though such invalid
provision or provisions were not part hereof or conformed
thereto.
(c) Any notice, report or other communication required or permitted
to be given or made under this Security Agreement by one of the
parties hereto to the other shall be in writing and shall be
deemed to have been sufficiently given or made for all purposes
if (i) sent by facsimile, or (ii) sent by U.S. mail, first class,
postage prepaid, addressed to such other party at its respective
address as set forth herein or to such other address as the
addressee shall theretofore furnish in writing to the addressor.
All such notices, reports and other communications shall be
effective when received.
(d) This Security Agreement, any addendum hereto attached and signed
by Secured Party and Borrower, any Schedule hereto and any
Certificate in respect hereof, constitute the entire agreement of
the parties with respect to the subject matter hereof. THIS
SECURITY AGREEMENT, ANY VARIATION OR MODIFICATION OF THIS
SECURITY AGREEMENT, ANY WAIVER OF ANY OF ITS PROVISIONS OR
CONDITIONS AND ALL SCHEDULES SHALL NOT BE VALID UNLESS IN WRITING
AND SIGNED BY AN AUTHORIZED OFFICER OR MANAGER OF SECURED PARTY.
(e) BORROWER WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY LITIGATION
ARISING HEREFROM OR IN RELATIONS HERETO.
(f) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CONNECTICUT, WITHOUT
REGARD TO CONFLICT OF LAW PRINCIPLES.
(g) BORROWER IRREVOCABLY (A) AGREES THAT ANY LEGAL OR EQUITABLE
PROCEEDING AGAINST IT OR RELATING TO THIS SECURITY AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY OR THE SUBJECT MATTER HEREOF
MAY BE INSTITUTED IN THE U.S. DISTRICT COURT FOR THE DISTRICT OF
CONNECTICUT OR, IN THE EVENT THAT COURT LACKS JURISDICTION, ANY
CONNECTICUT STATE COURT IN THE COUNTY OF FAIRFIELD, (B) WAIVES
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAY OF
VENUE OF ANY PROCEEDING BROUGHT IN SUCH COURT, (C) SUBMITS ITSELF
GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH
COURT FOR PURPOSES OF ANY PROCEEDING, WITH RESPECT TO ITS PERSON
AND PROPERTY, AND (D)WAIVES PERSONAL SERVICE OF PROCESS AND
AGREES THAT SERVICE MAY BE MADE BY PERSONAL DELIVERY OR BY
MAILING BY CERTIFIED MAIL, POSTAGE PREPAID, ADDRESSED TO BORROWER
AT ITS ADDRESS.
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.
<PAGE> 21
California Beach Restaurants,
as Borrower
By: /s/ Samuel E. Chilakos
------------------------------------
Name: Samuel E. Chilakos
-----------------------------------
Title: Vice President, Finance
----------------------------------
LYON CREDIT CORPORATION,
as Secured Party
By: /s/ Stephen B. Peterson
-----------------------------------
Name: Stephen B. Peterson
----------------------------------
Title: Assistant Vice President
---------------------------------
<PAGE> 22
SECURITY AGREEMENT
Security Agreement No. ____________
THIS SECURITY AGREEMENT (the "Security Agreement"), dated as of __ April
27, 1999 made by and between LYON CREDIT CORPORATION, a corporation organized
and existing under the laws of the State of Delaware, with an office address at
1266 East Main Street, Stamford, Connecticut 06902-3546 (together with its
successors and assigns, if any, "Secured Party") and Sea View Restaurants, Inc.
dba: Gladstones 4 Fish, corporation organized and existing under the laws of the
State of California with its residence, mailing address and principal place of
business at 17383 Sunset Blvd., Pacific Palisades, CA 90272 ("Guarantor");
WITNESSETH:
1. GRANT OF SECURITY INTEREST: The security interest granted below is given (i)
to secure payment on each Note made by California Beach Restaurants, Inc.
("Borrower") in the original stated principal amount of $1,200,000.00 together
with any extensions or renewals thereof, and any amendments or modifications
thereto (each, a "Note", and collectively, the "Notes"), (ii) to secure the
obligations of Guarantor under and in connection with that certain Guaranty,
dated as of _____________ _______, 1999, guaranteeing the payment and
performance of the Note, Security Agreement, dated on even date therewith,
executed by Borrower for the benefit of Secured Party ("Borrower Security
Agreement") and the "Indebtedness" as further described in the Borrower Security
Agreement, and all related documentation ("Loan Documents"), and (iii) also to
secure any other indebtedness, obligation, or liability of the Guarantor to the
Secured Party, whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising and no matter how acquired by
Secured Party, including, but not limited to, all future advances or loans which
may be made at the option of the Secured Party to or on behalf of Borrower
and/or Guarantor [all the foregoing in (i), (ii), and (iii) hereinafter called
the "Indebtedness"], Guarantor hereby grants and conveys to the Secured Party a
first security interest in, and mortgages to the Secured Party, any and all
furniture, equipment, fixtures, trade fixtures, furnishings, and all other
tangible personal property now owned or hereafter acquired by Guarantor,
together with all products and proceeds thereof, if any, all additions,
attachments, accessories and accessions thereto and any and all substitutions,
replacements or exchanges thereto, and any and all insurance and/or other
proceeds thereof, including, but not limited to, every permitted lease or
sublease, howsoever designated, covering all or any part thereof (all or any of
the foregoing hereinafter collectively called the "Collateral"). The purpose of
the Security Agreement is to ensure that Secured Party has a first lien security
1
<PAGE> 23
interest in any and all furniture, equipment, fixtures, trade fixtures,
furnishings, and all other tangible personal property, now owned or hereafter
acquired, used in and in connection with the operation of that certain
restaurant entitled Gladstones 4 Fish, located at 17300 Pacific Coast Highway,
Pacific Palisades, California 90272
TO HAVE AND TO HOLD the Collateral with the power and authority and
subject to the terms and conditions set forth in this Security Agreement.
2. PAYMENT: Guarantor will duly and punctually pay the Indebtedness secured by
this Security Agreement in accordance with the terms of the Guaranty. In no
event shall any payments be refunded to Guarantor.
3. OBLIGATIONS ABSOLUTE: The obligations of Guarantor under this Security
Agreement shall be absolute and unconditional under all circumstances
whatsoever, including, but not limited to, the existence of any claim, set-off,
defense, counterclaim or recoupment to any present or future claim of Guarantor
against Secured Party under this Security Agreement or otherwise, against the
manufacturer or seller of any of the Collateral or against any other person or
entity for whatever reason. This Security Agreement shall not terminate, nor
shall the obligations of Guarantor be affected, by reason of any defect in title
to, damage to or any loss or destruction of, the Collateral from whatsoever
cause, or the interference with the use thereof by any person or entity, or the
invalidity or unenforceability or lack of due authorization in respect of this
Security Agreement or any lack of right, power or authority of the Secured Party
to enter into this Security Agreement, or any failure of Secured Party to
perform any obligation of Secured Party or Guarantor or any other person or
entity under this Security Agreement or any instrument or document executed in
connection herewith, or for any other cause, whether similar or dissimilar to
the foregoing, any present or future law or regulation to the contrary
notwithstanding, it being the express intention of Secured Party and Guarantor
that all payments by Guarantor shall be, and continue to be, payable in all
events unless the obligation to pay the same shall be terminated pursuant to the
express provisions of this Security Agreement.
4. REPRESENTATIONS AND WARRANTIES: Guarantor represents and warrants as of the
date of this Security Agreement that:
a) Guarantor is a corporation duly organized and validly existing in good
standing under the laws of its state of organization and has the
requisite power to enter into and perform its obligations under this
Security Agreement,
b) this Security Agreement has been duly authorized, executed and
2
<PAGE> 24
delivered by Guarantor and, assuming due authorization, execution and
delivery by Secured Party, is a legal, valid and binding obligation of
Guarantor, enforceable in accordance with its terms except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the rights of creditors generally, and
general principles of equity, regardless of whether such enforceability
is considered in a proceeding in equity or at law,
c) the execution and delivery by Guarantor of this Security Agreement is
not, and the performance by it of its obligations hereunder will not be,
inconsistent with Guarantor's (articles or certificate of incorporation
or by-laws), do not and will not contravene any law, governmental rule
or regulation, judgment or order applicable to Guarantor, and do not and
will not contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument to which Guarantor is
a party or by which it is bound,
d) no consent or approval of, giving of notice to, registration with, or
taking of any other action in respect to or by, any federal, state or
local governmental authority or agency or other entity is required with
respect to the execution, delivery and performance by Guarantor of this
Security Agreement, or if any such approval, notice, registration or
action is required, it has been duly given or obtained,
e) there are no suits or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or
affecting Guarantor, which will have a material adverse effect on the
ability of Guarantor to fulfill its obligations under this Security
Agreement,
f) each financial statement and other related information furnished to
Secured Party by Guarantor has been prepared in accordance with
generally accepted accounting principles and, since the date of the most
recent financial statement so delivered, there has been no material
adverse change (as that term is defined in paragraph 12 (k) below),
g) this Security Agreement shall be effective against all creditors of
Guarantor under applicable law, including, without limitations,
fraudulent conveyance and bulk transfer laws, and
h) the Collateral will at all times be used solely in the conduct of the
business of Guarantor and be and remain in the possession and control of
Guarantor.
3
<PAGE> 25
5. LIENS: Unless owned by Borrower, Guarantor is the lawful owner of the
Collateral. Guarantor shall keep the Collateral free and clear from all liens,
charges, encumbrances and security interests of any kind ("Liens") , except for
a) the Lien of Secured Party, as provided in this Security
Agreement or in the Borrower Security Agreement,
b) Liens for taxes either not yet due or being contested by
Guarantor in good faith with due diligence and by appropriate
proceedings, so long as such proceedings do not, in the opinion
of Secured Party, involve any material danger of sale,
forfeiture or loss of Collateral or any part thereof or title
thereto or interest therein,
c) inchoate materialmen's, mechanics', workmen's, repairmen's,
employees', carriers', warehousemen's or other like Liens
arising in the ordinary course of business of Guarantor and not
delinquent and Guarantor shall be maintaining adequate reserves
therefor. Secured Party shall, at its own cost and expense,
promptly take such action as may be necessary to discharge duly
all Secured Party's Liens upon full payment and satisfaction of
all Indebtedness.
6. USE AND OPERATION:
a) Guarantor shall not assign, sublet, mortgage, hypothecate or
alter any of the Collateral or any interest in this Security
Agreement, nor shall Guarantor remove any of the Collateral from
the specified place of Collateral location, without the prior
written consent of Secured Party, and any attempt so to assign,
sublet, mortgage, hypothecate, alter or remove any of the
Collateral without the prior written consent of the Secured
Party shall be void and without effect.
b). Guarantor will not, without the prior written consent of Secured
Party, affix or install any accessory, equipment, or device on
any Collateral if such addition will impair the originally
intended function or use of any such Collateral or its value in
place. Guarantor agrees that each Item of Collateral shall prior
to its installation be personal property under applicable law.
Guarantor agrees to take such action as shall be required by
Secured Party from time to time to
4
<PAGE> 26
protect the rights and interests of Secured Party in each such
Item. Guarantor will not, without the prior written consent of
Secured Party and subject to such conditions as Secured Party
may impose for its protection, affix or install any Collateral
to or in any other personal property. Secured Party and
Guarantor agree that each Item of Collateral and every part
thereof is severed from any real property and, even if
physically attached to any real property, it is the intention of
Secured Party and Guarantor that such Item
i. shall retain the character of personal property,
ii. shall be removable,
iii. shall be treated as personal property with respect to
the rights of all persons and entities,
iv. shall not become part of any real property, and
v. by virtue of its nature as personal property, shall not
be affected in any way by any instrument dealing with
any real property.
Guarantor represents that it has not entered into, and agrees that it will not
enter into, any agreement or other arrangement which prohibits or restricts in
any manner the right of Secured Party or Guarantor to sever Items of Collateral
from the real property on which they are located, to sever Items of Collateral
from any other equipment or personal property to which such Items are attached
or to remove Items of Collateral from the place where they are then located.
7. MAINTENANCE AND SERVICE:
a) Items of Collateral shall be used only in the manner for which
they were designed and intended and Guarantor will at its sole
expense at all times maintain Collateral in good operating
order, repair, condition and appearance and keep Collateral
protected from the elements, ordinary wear and tear excepted.
Guarantor shall, if at any time requested to do so by Secured
Party, affix in a prominent position on
5
<PAGE> 27
each Item of Collateral plates, tags or other identifying labels
showing the interest of Secured Party in the Collateral.
Guarantor will, at all times, operate and maintain each Item of
Collateral in accordance with
i. the standards applied by Guarantor with respect
to similar equipment owned or leased by it and
ii. prudent operating and maintenance standards and
manufacturer's requirements. Guarantor will not
use or operate any Item of Collateral in
violation of applicable laws and regulations
(including all applicable environmental and
occupational safety laws).
b) Any alterations or modifications with respect to Collateral that
may at any time prior to full repayment of the Indebtedness
secured hereby be required to comply with any applicable law or
any governmental rule or regulation shall be made by Guarantor
as required and at the sole expense of Guarantor.
8. REPORTS:
a) Guarantor agrees that Secured Party shall not be responsible for
any loss or damage to Guarantor, its customers or any other
third parties caused by the Collateral, any failure thereof or
defect therein, or otherwise. Nevertheless, Guarantor will
immediately notify Secured Party of each accident arising out of
any alleged or apparent improper manufacturing, functioning or
operation of any Collateral, the time, place and nature of the
accident and damage, the names and addresses of parties
involved, persons injured, witnesses and owners of property
damaged, and such other information as may be known, and
promptly advise Secured Party of all correspondence, papers,
notices and documents whatsoever received by Guarantor in
connection with any claim or demand involving or relating to
improper manufacturing, operation or functioning of any
Collateral or charging Secured Party with liability;
b) Guarantor will notify Secured Party in writing within ten (10)
days after any day in which any Lien shall attach to any
Collateral not expressly permitted hereby of the full
particulars thereof and of the then location of such Collateral
on such day;
6
<PAGE> 28
c) Guarantor will notify Secured Party forthwith in writing of the
location of any Collateral moved by Guarantor from the place
where delivered to Guarantor or from the location specified in
this Security Agreement or any subsequent agreement executed by
the parties and Guarantor will not change or discontinue its
place or places of business and/or residence and/or name;
d) Guarantor will within ninety (90) days of the close of each of
its fiscal years deliver to Secured Party Guarantor's balance
sheet and profit and loss statement prepared in accordance with
generally accepted accounting principles and, to the extent
available, certified to by a recognized firm of certified public
accountants. Guarantor will deliver to Secured Party, within
sixty (60) days of the close of each of its fiscal quarters,
Guarantor's quarterly financial report (which shall be in
reasonable detail) prepared in accordance with generally
accepted accounting principles and certified to by the chief
financial officer of Guarantor; and
e) Guarantor will permit Secured Party to inspect and examine
Collateral at such times and from time to time during normal
business hours as Secured Party may wish (and at such other
times as may be mutually agreeable) and without any requirement
for advance notice, provided that such examination and
inspection shall not unreasonably interfere with Guarantor's
normal business operations.
9. RISK OF LOSS:
a) Guarantor is solely responsible for the entire risk of use and
operation, and for each and every cause or hazard, and all loss
and damage to any and all Collateral whether arising through
operation or otherwise. In the event of damage to any Item of
Collateral, Guarantor, at its cost and expense, shall promptly
repair the Item, restoring it to its previous condition or the
condition in which it was required to be assuming Guarantor had
met all its obligations for maintenance of the Collateral. Upon
the occurrence of an Event of Loss (defined below) with respect
to any Item, Guarantor shall prepay to Secured Party an amount
of Indebtedness under the Note relating to the Schedule hereto
in which such Item is described equal to the sum of
7
<PAGE> 29
i. all interest theretofore accruing, and unpaid thereon,
with respect to such Item, plus
ii. the unpaid principal balance of the Note with respect
such item, plus
iii. an amount equal to two (2%) percent of the unpaid
principal balance of the Note with respect to such Item.
Provided Guarantor is not in breach or default of this Security Agreement, any
proceeds of insurance received by Secured Party with respect to any such loss
shall be paid to Guarantor to the extent necessary to reimburse Guarantor costs
incurred and paid by Guarantor in repairing damaged Equipment or as a credit
against total amount payable by Guarantor with respect to the Collateral
involved, as the case may be, all as provided in this Security Agreement.
(b) For the Purpose hereof "Event of Loss" shall mean, with respect
to any Item of Collateral, if such Item is
i. destroyed, condemned, irreparably damaged or damaged
beyond economic repair,
ii. requisitioned for use by a governmental entity for an
indefinite period or stated period extending beyond a
period in excess of ninety (90) consecutive days or the
final installment payment date stated on the applicable
Note, whichever is earlier,
iii. the subject of an insurance settlement with respect to
such Item of Collateral on the basis of a constructive
total loss,
iv. stolen or lost and not recovered within thirty (30)
days,
v. the subject of a condemnation or requisition of title by
a governmental entity, or
8
<PAGE> 30
vi. prohibited by applicable law from being used by
Guarantor for a period of ninety (90) consecutive days
or the final installment payment date on the applicable
Note, whichever is earlier.
10. INSURANCE:
(a) Guarantor, at its own cost and expense shall obtain, or shall
cause Borrower, at Borrower's own cost and expense, to (i)
maintain and keep the Collateral insured against all risks of
loss or damage from every cause whatsoever in an amount not less
than the greater of actual cash value or the aggregate amount of
all unpaid Indebtedness as at any time, without deductible and
without co-insurance (except as Secured Party may approve in
writing) and (ii) obtain and maintain, until repayment in full
of the Indebtedness public liability insurance covering
liability for bodily injury, including death, and property
damage resulting from the purchase, ownership, leasing,
maintenance, use or operation of the Collateral in an amount of
at least $1,000,000, or in such greater amounts as Secured Party
may from time to time require. Secured Party shall be the sole
named loss-payee with respect to damage or loss to the
Collateral and shall be a named additional insured on the public
liability insurance. All insurance shall be with insurers and in
form satisfactory to Secured Party; shall provide for at least
thirty (30) days advance written notice to Secured Party before
any cancellation or material modification thereof; shall waive
any claim for premium against Secured Party; and shall not be
invalidated or the insurer's liability to or for or on behalf of
Secured Party be diminished or affected by any breach of
warranty or representation or other act or omission of the
Guarantor. Guarantor shall deliver to Secured Party the original
policy or policies of insurance, certificates of insurance or
other evidence satisfactory to Secured Party evidencing the
insurance required hereby along with proof satisfactory to
Secured Party of the payment of the premium therefor. Secured
Party may, at its option, apply proceeds of insurance, in whole
or in part, to (A) repair or replace Collateral or any portion
thereof, or (B) satisfy any obligation of Guarantor to Secured
Party hereunder.
(b) Secured Party is authorized, but under no duty, to obtain such
insurance upon failure of the Guarantor to do so. Guarantor
shall
9
<PAGE> 31
give immediate written notice to the Secured Party and to
insurers of loss or damage to the Collateral and shall promptly
file proofs of loss with insurers. Guarantor hereby irrevocably
appoints the Secured Party as attorney-in-fact, coupled with an
interest, for the Guarantor in obtaining, adjusting and
canceling any such insurance and endorsing settlement drafts and
hereby assigns to the Secured Party all sums which may become
payable under such insurance, including return premiums and
dividends, as additional security for the Indebtedness.
11. INDEMNIFICATION: Guarantor hereby agrees to indemnify, save and keep
harmless Secured Party, its agents, employees, successors and assigns, from and
against any and all losses, damages (including indirect, special or
consequential), penalties, injuries, claims, actions and suits including,
without limitation, legal expenses, of whatsoever kind and nature (including,
without limitation, costs and expenses incurred by Secured Party in defending
claims or suits brought against it by Guarantor in violation of or contrary to
the provisions of this Security Agreement), in contract or tort, including, but
in no way limited to, Secured Party's strict liability in tort, unless and
except to the extent Secured Party's gross negligence or willful misconduct is
the proximate cause of any such loss, damage, penalty, injury claim, action, or
suit, and Guarantor shall at its own expense defend any and all such actions,
arising out of the selection, modification, purchase, ownership, acceptance or
rejection of any Item of Collateral and the delivery, possession, maintenance,
use, condition (including, without limitation, latent and other defects, whether
or not discoverable by Secured Party or Guarantor, and any claim for patent,
trademark or copyright infringement), or operation of any Item of Collateral by
whomsoever used or operated or arising out of or resulting from the condition of
any Item of Collateral sold or disposed of after use by Guarantor, any lessee,
sublessee or employees of Guarantor. The indemnities and assumptions of
liability herein provided for shall continue in full force and effect
notwithstanding the termination of this Security Agreement whether by expiration
of time, operation or law or otherwise. GUARANTOR AGREES THAT SECURED PARTY
SHALL NOT BE LIABLE TO GUARANTOR FOR ANY CLAIM CAUSED DIRECTLY OR INDIRECTLY BY
THE INADEQUACY OF ANY ITEM OF COLLATERAL FOR ANY PURPOSE OR ANY DEFICIENCY OR
DEFECT THEREIN OR THE USE OR MAINTENANCE THEREOF OR ANY REPAIRS, SERVICING OR
ADJUSTMENTS THERETO OR ANY DELAY IN PROVIDING OR FAILURE TO PROVIDE ANY THEREOF
OR ANY INTERRUPTION OR LOSS OF SERVICE OR USE THEREOF OR ANY LOSS OF BUSINESS,
ALL OF WHICH SHALL BE THE SOLE RISK AND RESPONSIBILITY OF GUARANTOR.
12. DEFAULT; REMEDIES: If any of the following (herein an "Event of Default")
shall occur:
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<PAGE> 32
(a) Borrower shall default in the payment of Indebtedness to Secured
Party or in making any other payment hereunder or under any Note
when due, and such default shall continue for a period of ten
(10) days without its cure by Borrower, or Guarantor shall
default in the payment or performance of any of its obligations
under the Guaranty after demand is made by Secured Party under
the Guaranty, or
(b) Guarantor shall default in the payment when due of any
obligations of Guarantor, whether or not to Secured Party,
arising independently of this Security Agreement or any Note,
and such default shall continue for a period of ten (10) days
without its cure by Guarantor, or
(c) Guarantor shall default in the performance of any other covenant
contained herein or in the Guaranty or any other document
entered into in connection with this Security Agreement and such
default shall continue for five (5) days after written notice
thereof to Guarantor by Secured Party, or
(d) Guarantor shall breach any of its insurance obligations under
paragraph 10 hereof,
(e) any representation or warranty made by Guarantor in this
Security Agreement or any other documents entered into in
connection with this Security Agreement shall prove to be
incorrect in any material respect when any such representation
or warranty was made or given, or
(f) Guarantor shall become insolvent or make an assignment for the
benefit of creditors, or
(g) Guarantor shall apply for or consent to the appointment of a
receiver, trustee or liquidator for a substantial part of its
property or such receiver, trustee or liquidator is appointed
without the application or consent of Guarantor, or
(h) a petition shall be filed by or against Guarantor under the
Federal
11
<PAGE> 33
bankruptcy laws (including, without limitation, a petition for
reorganization, arrangement or extension) or under any other
insolvency law or law providing for the relief of debtors, or
(i) Secured Party shall deem the Collateral or the Indebtedness
insecure, or
(j) there is, without the prior consent of Secured Party, a change
in control (defined to be a change in the possession, directly
or indirectly, of the power to direct or cause the direction of
the management and policies of Guarantor, whether through the
ownership of voting securities, by contract or otherwise), or
(k) there is a material adverse change (defined to be a decrease of
at least one-third (1/3) of net worth, as determined in
accordance with generally accepted accounting principles) in
Guarantor's or any guarantor's financial condition, or
(l) there occurs any Event of Default under the Borrower Security
Agreement or a breach, event of default, or default, however
such terms are defined (but after giving any applicable grace
and/or notice of opportunity to cure period, if any, provided
thereunder) under the Loan Documents;
then, to the extent permitted by applicable law, Secured Party shall have the
right to exercise any one or more of the following remedies one or more times:
A) declare this Security Agreement in default, such declaration
being applicable to all Schedules hereunder except as
specifically excepted by Secured Party;
B) declare the entire amount of unpaid total Indebtedness
immediately due and payable;
C) declare due and payable in addition to any unpaid Indebtedness
due on or before Secured Party declares this Security Agreement
in default, as liquidated damages for loss of a bargain and not
as a penalty, an amount calculated in accordance with the
provisions of paragraph 9 as though the Collateral had suffered
an Event of Loss, as of the date that Secured Party declares
this Security Agreement in default;
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<PAGE> 34
D) declare due and payable the amount of any indemnification
hereunder if then determinable, with interest as provided
herein;
E) upon notice to any lessees or sublessees permitted pursuant to
paragraph 6(a) to obtain and retain all rentals thereafter due,
paid and/or payable;
F) without demand or legal process enter into premises where the
Collateral may be found and take possession of and remove the
same, whereupon all rights of Guarantor in the Collateral shall
terminate absolutely, and either
(i) retain all prior payments of Indebtedness and sell
the Collateral at public or private sale, with or
without notice to Guarantor, with or without having the
Collateral at the sale, at which sale Secured Party may
purchase all or any of the Collateral, the proceeds of
such sale, less expenses of retaking, storage, repairing
and reselling, and reasonable attorneys' fees incurred
by Secured Party, to be applied to the payment of the
unpaid total Indebtedness, Guarantor remaining liable
for the balance of said unpaid total Indebtedness, and
any surplus thereafter remaining to be for the account
of Guarantor (except as otherwise provided under
applicable law) or
(ii) retain the Collateral and all prior payments of
Indebtedness, in satisfaction of the remaining unpaid
Indebtedness;
G) pursue any other remedy then available to Secured Party at law
or in equity. Guarantor hereby covenants and agrees to notify
Secured Party immediately of the occurrence of any default
specified in this paragraph 12.
13. REMEDIES CUMULATIVE: Time of performance of Guarantor's obligations
hereunder is of the essence. All remedies of Secured Party hereunder are
cumulative, and may, to the extent permitted by law, be exercised concurrently
or separately, and the exercise of any one remedy shall not be deemed to be an
election of such remedy to the exclusion of any other remedy or to preclude the
exercise of any other remedy at any other time. Failure on the part of the
Secured Party to exercise, or delay in exercising, any right or remedy hereunder
or Secured Party's failure at any time to restrict performance by Guarantor of
any of the provisions hereof shall not operate as a waiver thereof; nor shall
any single or partial exercise by Secured Party of any right or remedy hereunder
13
<PAGE> 35
preclude any other further exercise thereof or the exercise of any other right
or remedy.
14. ASSIGNMENT: Guarantor acknowledges, and understands that Secured Party may
assign this Security Agreement, any Schedule or Certificate or any Note to a
bank or any other lending institution or any other person, organization or
agency, and Guarantor shall
(a) recognize any such assignment,
(b) accept the lawful demands of such assignee,
(c) surrender assigned Collateral only to such assignee,
(d) pay all Indebtedness payable hereunder and do any and all things
required of Guarantor hereunder, notwithstanding any default of
the Secured Party or the existence of any claim, defense or
offset between Guarantor and Secured Party, and
(e) not require any assignee of the Security Agreement to perform
any duty, covenant or condition required to be performed by
Secured Party under the terms of this Security Agreement
provided that Secured Party shall remain liable for such
performance. The obligations of Guarantor shall not be subject,
as against any such assignee or transferee, to any defense,
set-off or counterclaim available to Guarantor against Secured
Party and any such defense, set-off or counterclaim may be
asserted only against Secured Party.
15. FILINGS:
(a) Guarantor agrees to execute any instrument or instruments
necessary or expedient for filing, recording, perfecting, or
notifying of the interest of Secured Party upon request of, and
as determined by, Secured Party. Guarantor hereby specifically
authorizes Secured Party to file financing statements not signed
by Guarantor or to execute same for and on behalf of Guarantor
as Guarantor's agent and attorney-in-fact, irrevocably and
coupled with an interest, for such purposes. A carbon,
photographic or other reproduction of the Security Agreement or
a
14
<PAGE> 36
financing statement shall be sufficient as a financing statement
for filing purposes.
(b) Without limiting the foregoing paragraph (a), Guarantor hereby
acknowledges and agrees that the normal practice of Secured
Party is to electronically file financing statements through
computerized filing services such as Lexis Document Services
("Filing Service"). The Filing Service pursuant to a Power of
Attorney delivered by Secured Party will execute the financing
statements (whether one or more as applicable) on behalf of both
Guarantor (and Secured Party where applicable or where desired
by Secured Party as not all states require execution of Secured
Party on financing statements). The names of Guarantor and
Secured Party, addresses, and collateral description on the
computerized financing statement filings shall be the same as on
the financing statements executed by Guarantor but the format
and spacing may vary in non-material ways. Guarantor
acknowledges that the original financing statements executed by
Guarantor shall be retained in the collateral files of Secured
Party but may be filed by Secured Party should it deem it
necessary. In connection with the foregoing process, Guarantor
hereby authorizes and appoints Secured Party and the applicable
Filing Service as Guarantor's agent and attorney-in-fact,
irrevocably and coupled with an interest for the execution and
filing of the financing statements and fully acknowledges and
agrees and has initialed this paragraph as additional
affirmation as to the full enforceability of this power of
attorney for such purposes.
GUARANTOR ___________
INT.
16. NOTES:
(a) Upon written notice by Secured Party to Guarantor that Secured Party
intends to transfer any Note, Guarantor shall, in exchange for the Note
to be transferred, promptly execute a new note in the amount of the
exchanged Note, naming the transferee as payee thereunder, and deliver
to same to such transferee.
(b) If any Note shall become mutilated or shall be destroyed, lost or
stolen,
15
<PAGE> 37
Guarantor shall, upon the written request of payee under of such Note,
execute and deliver in replacement thereof, the new Note payable in the
same amount and dated the same date as the Note so mutilated, destroyed,
lost or stolen.
17. MISCELLANEOUS:
(a) In case of failure of Guarantor to comply with any provision of this
Security Agreement, Secured Party shall have the right, but shall not be
obligated, to effect such compliance in whole or in part, and all moneys
spent and expenses and obligations incurred or assumed by Secured Party
in effecting such compliance (including but not limited to, attorneys'
fees and costs incurred in attempting to effect compliance against
Guarantor and/or others) shall constitute additional Indebtedness hereby
secured due to Secured Party five (5) days after the date Secured Party
sends notice to Guarantor requesting payment. Secured Party's effecting
such compliance shall not be waiver of Guarantor's default. Interest on
any payments made by Secured Party hereunder on amounts due after
Secured Party declares default under paragraph 12 and interest on any
overdue payment under paragraph 11 shall be at the default rate
prescribed in the Note, (or, if there is more than one Note, at the
highest among the default rates prescribed in such Notes), but not to
exceed the maximum lawful rate. Any provisions in this Security
Agreement, any Schedule hereto or Certificate in respect hereof which
are in conflict with any statute, law or rule applicable shall be deemed
omitted, modified or altered to conform thereto.
(b) If any provision of this Security Agreement shall contravene or be
invalid under applicable law or regulation (including federal law and
regulation), such contravention or invalidity shall not affect the
entire Security Agreement, the provisions held to be invalid to be
deemed deleted or modified and the Security Agreement interpreted and
construed as though such invalid provision or provisions were not part
hereof or conformed thereto.
(c) Secured Party may give notice to Guarantor or make a request of
Guarantor by depositing such notice or request in the U.S. mail, first
class postage prepaid, addressed to the Guarantor at its address above,
an address furnished by Guarantor to Secured Party, a mailing address of
Guarantor or a place of business of Guarantor. All notices required to
be given by Guarantor hereunder shall be deemed adequately given if sent
16
<PAGE> 38
by registered or certified mail to Secured Party at the address of
Secured Party stated herein, or at such other place as Secured Party may
designate to Guarantor in writing.
(d) This Security Agreement, any addendum hereto attached and signed by
Secured Party and Guarantor, any Schedule hereto and any Certificate in
respect hereof, constitute the entire agreement of the parties with
respect to the subject matter hereof. THIS SECURITY AGREEMENT, ANY
VARIATION OR MODIFICATION OF THIS SECURITY AGREEMENT, ANY WAIVER OF ANY
OF ITS PROVISIONS OR CONDITIONS AND ALL SCHEDULES SHALL NOT BE VALID
UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED OFFICER OR MANAGER OF
SECURED PARTY.
(e) GUARANTOR WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY LITIGATION ARISING
HEREFROM OR IN RELATION HERETO
(f) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CONNECTICUT, WITHOUT REGARD TO
CONFLICT OF LAW PRINCIPLES
(g) GUARANTOR SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY NOTE, OR FOR RECOGNITION
AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NONEXCLUSIVE
GENERAL JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE STATE
OF CONNECTICUT AND APPELLATE COURTS FROM ANY THEREOF; CONSENTS THAT ANY
SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING
WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME; AND AGREES THAT SERVICE MAY BE MADE ON GUARANTOR IN ANY SUCH
PROCEEDING BY DELIVERING A COPY OF PROCESS TO GUARANTOR AT GUARANTOR'S
ABOVE ADDRESS, SUCH SERVICE TO BE EFFECTIVE UPON RECEIPT.
(h) This Security Agreement supplements and is in addition to the Borrower
Security Agreement, and it shall not, and is not in anyway meant to,
limit, impair, replace, or in anyway negate any of the obligations of
Borrower under the Security Agreement, it being understood that the
obligations of
17
<PAGE> 39
Guarantor as to the Collateral and the representations, warranties,
covenants, and agreements set forth hereunder are joint and several with
the Borrower's obligations. All rights and remedies as to both parties
shall be cumulative, and exercise of one or more remedies as to one
party shall in no way limit the exercise of one or more remedies against
the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.
Sea View Restaurants, Inc.
dba: Gladstones 4 Fish
as Guarantor
By: /s/ Samuel E. Chilakos
---------------------------------
Printed Name: Samuel E. Chilakos
-----------------------
Title: Vice President, Finance
------------------------------
Affix Corporate Seal here
Attest/Witness:
By: /s/ Martin Sniewski
---------------------------------
Printed Name: Martin Sniewski
-----------------------
Title:
------------------------------
LYON CREDIT CORPORATION
as Secured Party
By: /s/ Stephen B. Peterson
---------------------------------
Printed Name: Stephen B. Peterson
-----------------------
Title: Assistant Vice President
------------------------------
18
<PAGE> 1
EXHIBIT 10.70
SANTA MONICA BANK
Member FDIC
[SANTA MONICA BANK LOGO]
BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000.00 07-07-1999 07-06-2000 2000314557 5015 RDB [Not Legible]
- ------------------------------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------------------------------
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
====================================================================================================================================
</TABLE>
THIS BUSINESS LOAN AGREEMENT between CALIFORNIA BEACH RESTAURANTS, INC., A
CALIFORNIA CORPORATION ("Borrower") and SANTA MONICA BANK ("Lender") is made and
executed on the following terms and conditions. Borrower has received prior
commercial loans from Lender or has applied to Lender for a commercial loan or
loans and other financial accommodations, including those which may be described
on any exhibit or schedule attached to this Agreement. All such loans and
financial accommodations, together with all future loans and financial
accommodations from Lender to Borrower, are referred to in this Agreement
individually as the "Loan" and collectively as the "Loans." Borrower understands
and agrees that: (a) in granting, renewing, or extending any Loan, Lender is
relying upon Borrower's representations, warranties, and agreements, as set
forth in this Agreement; (b) the granting, renewing, or extending of any Loan by
Lender at all times shall be subject to Lender's sole judgment and discretion;
and (c) all such Loans shall be and shall remain subject to the following terms
and conditions of this Agreement.
TERM. This Agreement shall be effective as of JULY 6, 1999, and shall continue
thereafter until all Indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.
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 Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Business Loan
Agreement from time to time.
BORROWER. The word "Borrower" means CALIFORNIA BEACH RESTAURANTS, INC., A
CALIFORNIA CORPORATION. The word "Borrower" also includes, as applicable,
all subsidiaries and affiliates of Borrower as provided below in the
paragraph titled "Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
CASH FLOW. The words "Cash Flow" mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization.
COLLATERAL. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan, whether
real or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a
security interest, mortgage, deed of trust, assignment, pledge, chattel
mortgage, chattel trust, factor's lien, equipment trust, conditional sale,
trust receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
DEBT. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt. ERISA. The word "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended.
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 and includes without limitation each and
all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all
Borrowers granting such a Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well as
all claims by Lender against Borrower, or any one or more of them; whether
now or hereafter existing, voluntary or involuntary, due or not due,
absolute or contingent, liquidated or unliquidated; whether Borrower may
be liable individually or jointly with others; whether Borrower may be
obligated as a guarantor. surety, or otherwise; whether recovery upon such
Indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such Indebtedness may be or hereafter may become
otherwise unenforceable.
LENDER. The word "Lender" means SANTA MONICA BANK, its successors and
assigns.
LIQUID ASSETS. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's readily marketable securities.
LOAN. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
NOTE. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations
in favor of Lender, as well as any substitute, replacement or refinancing
note or notes therefor.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender; (b) liens for
taxes, assessments, or similar charges either not yet due or being
contested in good faith; (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are not yet delinquent;
(d) purchase money liens or purchase money security interests upon or in
any property acquired or held by Borrower in the ordinary course of
business to secure indebtedness outstanding on the date of this Agreement
or permitted to be incurred under the paragraph of this Agreement
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07-07-1999 BUSINESS LOAN AGREEMENT Page 2
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titled "Indebtedness and Liens"; (e) liens and security interests which,
as of the date of this Agreement, have been disclosed to and approved by
the Lender in writing; and (f) those liens and security interests which in
the aggregate constitute an immaterial and insignificant monetary amount
with respect to the net value of Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean 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.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
SECURITY INTEREST. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended
as a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
SUBORDINATED DEBT. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement
to indebtedness owed by Borrower to Lender in form and substance
acceptable to Lender.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible
items, but including leaseholds and leasehold improvements) less total
Debt.
WORKING CAPITAL. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current liabilities.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory to
Lender the following documents for the Loan: (a) the Note, (b) Security
Agreements granting to Lender security interests in the Collateral, (c)
Financing Statements perfecting Lender's Security Interests; (d) evidence
of insurance as required below; and (e) any other documents required under
this Agreement or by Lender or its counsel, including without limitation
any guaranties described below.
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the
Related Documents, and such other authorizations and other documents and
instruments as Lender or its counsel, in their sole discretion, may
require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in
this Agreement or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
NO EVENT OF DEFAULT. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of California
and is validly existing and in good standing in all states in which
Borrower is doing business. Borrower has the full power and authority to
own its properties and to transact the businesses in which it is presently
engaged or presently proposes to engage. Borrower also is duly qualified
as a foreign corporation and is in good standing in all states in which
the failure to so qualify would have a material adverse effect on its
businesses or financial condition.
AUTHORIZATION. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of
any other person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a default under (a)
any provision of its articles of incorporation or organization, or bylaws,
or any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement. and there has been no material adverse change
in Borrower's financial condition subsequent to the date of the most
recent financial statement supplied to Lender. Borrower has no material
contingent obligations except as disclosed in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and
as accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrower's properties free and clear of all Security Interests, and has
not executed any security documents or financing statements relating to
such properties. All of Borrower's properties are titled in Borrower's
legal name, and Borrower has not used, or filed a financing statement
under, any other name for at least the last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this
Agreement, shall have the same meanings as set forth in the "CERCLA,"
"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 sect., or other
applicable state or Federal laws, rules, or regulations adopted pursuant
to any of the foregoing. Except as disclosed to and acknowledged by Lender
in writing, Borrower represents and warrants that: (a) During the period
of Borrower's ownership of the properties, there has been no use,
generation, manufacture, storage, treatment, disposal, release or
threatened release of any hazardous waste or substance by any person on,
under, about or from any of the properties. (b) Borrower has no knowledge
of, of reason to believe that there has been (j) any use, generation,
manufacture, storage, treatment, disposal, release, or threatened release
of any hazardous waste or substance on, under, about or from the
properties by any prior owners or occupants of any of the properties, or
(ii) any actual or threatened litigation or claims of any kind by any
person relating to such matters. (c) Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of the properties shall
use, generate, manufacture, store, treat, dispose of, or release any
hazardous waste of substance on, under, about or from any of the
properties; and any such activity shall be conducted in compliance with
all applicable federal, state,
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07-07-1999 BUSINESS LOAN AGREEMENT Page 3
Loan No 2000314557 (Continued)
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and local laws, regulations, and ordinances, including without limitation
those laws, regulations and ordinances described above. Borrower
authorizes Lender and its agents to enter upon the properties to make such
inspections and tests as Lender may deem appropriate to determine
compliance of the properties with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and for
Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any
other person. The representations and warranties contained herein are
based on Borrower's due diligence in investigating the properties for
hazardous waste and hazardous substances. Borrower hereby (a) releases and
waives any future claims against Lender for indemnity or contribution in
the event Borrower becomes liable for cleanup or other costs under any
such laws, and (b) agrees to indemnify and hold harmless Lender against
any and all claims, losses, liabilities, damages, penalties, and expenses
which Lender may directly or indirectly sustain or suffer resulting from a
breach of this section of the Agreement or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened release
of a hazardous waste or substance on the properties. The provisions of
this section of the Agreement, including the obligation to indemnify,
shall survive the payment of the Indebtedness and the termination or
expiration of this Agreement and shall not be affected by Lender's
acquisition of any interest in any of the properties, whether by
foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of
the Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable
Event nor Prohibited Transaction (as defined in ERISA) has occurred with
respect to any such plan, (ii) Borrower has not withdrawn from any such
plan or initiated steps to do so, (iii) no steps have been taken to
terminate any such plan, and (iv) there are no unfunded liabilities other
than those previously disclosed to Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business,
or Borrower's Chief executive office, if Borrower has more than one place
of business, is located at 17383 SUNSET BOULEVARD, #140, PACIFIC
PALISADES, CA 90272. Unless Borrower has designated otherwise in writing
this location is also the office or offices where Borrower keeps its
records concerning the Collateral.
YEAR 2000. Borrower warrants and represents that all software utilized in
the conduct of Borrower's business will have appropriate capabilities and
compatibility for operation to handle calendar dates falling on or after
January 1, 2000, and all information pertaining to such calendar dates, in
the same manner and with the same functionality as the software does
respecting calendar dates falling on or before December 31, 1999. Further,
Borrower warrants and represents that the data-related user interface
functions, data-fields, and data-related program instructions and
functions of the software include the indication of the century.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which
such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to
make such information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and
agrees that Lender, without independent investigation, is relying upon the
above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in full force
and effect until such time as Borrower's Indebtedness shall be paid in
full, or until this Agreement shall be terminated in the manner provided
above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings
or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial
condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at all
reasonable times.
ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and other
reports with respect to Borrower's financial condition and business
operations as Lender may request from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants and
ratios.
CURRENT RATIO. Maintain a ratio of Current Assets to Current
Liabilities in excess of 0.20 to 1.00. Except as provided above, all
computations made to determine compliance with the requirements
contained in this paragraph shall be made in accordance with
generally accepted accounting principles, applied on a consistent
basis, and certified by Borrower as being true and correct.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with
respect to Borrower's properties and operations, in form, amounts,
coverages and with insurance companies reasonably acceptable to
Lender. Borrower, upon request of Lender, will deliver to Lender
from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will
not be cancelled or diminished without at least ten (10) days' prior
written notice to Lender. Each insurance policy also shall include
an endorsement providing that coverage in favor of Lender will not
be impaired in any way by any act, omission or default of Borrower
or any other person. In connection with all policies covering assets
in which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually)
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Loan No 2000314557 (Continued)
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Borrower will have an independent appraiser satisfactory to Lender
determine, as applicable, the actual cash value or replacement cost of any
Collateral. The cost of such appraisal shall be paid by Borrower.
GUARANTIES. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, executed by the guarantor
named below, on Lender's forms, and in the amount and under the conditions
spelled out in those guaranties.
GUARANTOR AMOUNT
--------- ------
SEA VIEW RESTAURANTS, INC., A CALIFORNIA CORPORATION UNLIMITED
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
LOAN FEES AND CHARGES. In addition to all other agreed upon fees and
charges, pay the following: $2,500.00.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every kind
and nature, imposed upon Borrower or its properties, income, or profits,
prior to the date on which penalties would attach, and all lawful claims
that, if unpaid, might become a lien or charge upon any of Borrower's
properties, income, or profits. Provided however, Borrower will not be
required to pay and discharge any such assessment, tax, charge, levy, lien
or claim so long as (a) the legality of the same shall be contested in
good faith by appropriate proceedings, and (b) Borrower shall have
established on its books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with generally
accepted accounting practices. Borrower, upon demand of Lender, will
furnish to Lender evidence of payment of the assessments, taxes, charges,
levies, liens and claims and will authorize the appropriate governmental
official to deliver to Lender at any time a written statement of any
assessments, taxes, charges, levies, liens and claims against Borrower's
properties, income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely
manner, and promptly notify Lender if Borrower learns of the occurrence of
any event which constitutes an Event of Default under this Agreement or
under any of the Related Documents.
OPERATIONS. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable
federal, state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and operations, including
without limitation, compliance with the Americans With Disabilities Act
and with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans.
INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall notify such party
to permit Lender free access to such records at all reasonable times and
to provide Lender with copies of any records it may request, all at
Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
at least annually and at the time of each disbursement of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or
other officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true and
correct as of the date of the certificate and further certifying that, as
of the date of the certificate, no Event of Default exists under this
Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all
respects with all environmental protection federal, state and local laws,
statutes, regulations and ordinances; not cause or permit to exist, as a
result of an intentional or unintentional action or omission on its part
or on the part of any third party, on property owned and/or occupied by
Borrower, any environmental activity where damage may result to the
environment, unless such environmental activity is pursuant to and in
compliance with the conditions of a permit issued by the appropriate
federal, state or local governmental authorities; shall furnish to Lender
promptly and in any event within thirty (30) days after receipt thereof a
copy of any notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality concerning
any intentional or unintentional action or omission on Borrower's part in
connection with any environmental activity whether or not there is damage
to the environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money,
including capital leases, (b) except as allowed as a Permitted Lien, sell,
transfer, mortgage, assign, pledge, lease, grant a security interest in,
or encumber any of Borrower's assets, or (c) sell with recourse any of
Borrower's accounts, except to Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(b) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change ownership, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of business, (c)
pay any dividends on Borrower's stock (other than dividends payable in its
stock), provided, however that notwithstanding the foregoing, but only so
long as no Event of Default has occurred and is continuing or would result
from the payment of dividends, if Borrower is a "Subchapter S Corporation"
(as defined in the Internal Revenue Code of 1986, as amended), Borrower
may pay cash dividends on its stock to its shareholders from time to time
in amounts necessary to enable the shareholders to pay income taxes and
make estimated income tax payments to satisfy their liabilities under
federal and state law which arise solely from their status as Shareholders
of a Subchapter S Corporation because of their ownership of shares of
stock of Borrower, or (d) purchase or retire any of Borrower's outstanding
shares or alter or amend Borrower's capital structure.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money
or assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse
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change in Borrower's financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; or (d) any
Guarantor seeks, claims or otherwise attempts to limit, modify or, revoke such
Guarantor's guaranty of the Loan or any other loan with Lender.
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.
ADDITIONAL AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender
that, while this Agreement is in effect, Borrower will:
1OK'S AND 10Q'S. Furnish Lender with, 10k's due within one hundred five (105)
days of fiscal year end and 10q's due within sixty (60) days of quarter end.
GUARANTOR'S FINANCIAL STATEMENT. Cause to be delivered to Lender, as soon as
available but in no event later than one hundred five (105) days of each fiscal
year-end, Guarantor's Corporate balance sheet and profit and loss statement for
the period ended, audited by a certified public accountant acceptable to Lender.
DEBT SERVICE COVERAGE RATIO. Maintain a ratio of Earnings before Interest Tax
Depreciation and Amortization divided by Current Portion of Long-term Debt
(CPLTD) plus Interest of not less than 1.25 to 1.00 for the 2nd quarter ending
10/31/99 and 3rd quarter ending 1/31/2000, increasing AP 1.50 to 1.00
thereafter.
SUBLIMIT. Subject to the terms of this Agreement, Lender will issue commercial
letters of credit (each a "Letter of Credit") on behalf of Borrower to support
Borrower's purchase of inventory or for other business purposes agreed to by
Lender. At no time, however, shall the total face amount of all Letters of
Credit outstanding, less any partial draws paid under the Letters of Credit
exceed the sum of $450,000.00. There will be a 1.00% per annum fee for the
issuance of Letters of Credit.
(a) Upon Lender's request, Borrower promptly shall pay to Lender issuance fees
and such other fees, commissions, costs, and any out-of-pocket expenses charged
or incurred by Lender with respect to any Letter of Credit.
(b) The commitment by Lender to issue Letters of Credit shall, unless earlier
terminated in accordance with the terms of this Agreement, automatically
terminate on the Expiration Date and no Letter of Credit shall expire on a date
which is sixty (60) days after the Expiration Date.
(c) Each Letter of Credit shall be in form and substance satisfactory to Lender
and in favor of beneficiaries satisfactory to Lender, provided that Lender may
refuse to issue a Letter of Credit due to the nature of the transaction or its
terms or in connection with any transaction where Lender, due to beneficiary or
the nationality or residence of the beneficiary, would be prohibited by any
applicable law, regulation, or order from issuing such Letter of Credit. Under
no circumstances, however, will a Letter of Credit exceed one hundred twenty
(120) days from the issue date.
(d) Prior to the issuance of each Letter of Credit, and in all events prior to
any daily cutoff time Lender may have established for purposes thereof, Borrower
shall deliver to Lender a duly executed form of Lender's standard form of
application for issuance of letter of credit with proper insertions.
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 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 the Indebtedness against any and all such accounts.
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 Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due 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 other 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 creditor 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 Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at
any time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
Security Agreement to create a valid and perfected Security Interest) at
any time and for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the Indebtedness,
or by any governmental agency. This includes a garnishment, attachment, or
levy on or of any of 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 any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness.
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.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
Loan Advances or disbursements), and, at Lender's option, all Indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
<PAGE> 6
07-07-1999 BUSINESS LOAN AGREEMENT Page 6
Loan No 2000314557 (Continued)
================================================================================
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, 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.
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 Borrower under
this Agreement shall be joint and several, and all references to Borrower
shall mean each and every Borrower. This means that each of the persons
signing below is responsible for all obligations in this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any other
matter relating to the Loan, and Borrower hereby waives any rights to
privacy it may have with respect to such matters. Borrower additionally
waives any and all notices of sale of participation interests, as well as
all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interests will
be considered as the absolute owners of such interests in the Loans and
will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower
further waives all rights of offset or counterclaim that it may have now
or later against Lender or against any purchaser of such a participation
interest and unconditionally agrees that either Lender or such purchaser
may enforce Borrower's obligation under the Loans irrespective of the
failure or insolvency of any holder of any interest in the Loans. Borrower
further agrees that the purchaser of any such participation interests may
enforce its interests irrespective of any personal claims or defenses that
Borrower may have against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification and
collection of this Agreement or in connection with the Loans made pursuant
to this Agreement. Lender may pay someone else to help collect the Loans
and to enforce this Agreement, and Borrower will pay 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 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.
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 Borrower, notice to any Borrower will constitute
notice to all Borrowers. For notice purposes, Borrower will keep Lender
informed at all times of Borrower's current addresses).
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.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower"
as used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other
financial accommodation to any subsidiary or affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure
to the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made
by Lender or on Lender's behalf.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
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 Borrower, or between
Lender and any Grantor, shall constitute a waiver of any of Lender's
rights or of any obligations of Borrower or of any Grantor 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 in subsequent instances where such
consent is required, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
<PAGE> 7
07-07-1999 BUSINESS LOAN AGREEMENT Page 7
Loan No 2000314557 (Continued)
================================================================================
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF JULY
7, 1999.
BORROWER:
CALIFORNIA BEACH RESTAURANTS, INC., A CALIFORNIA CORPORATION
By: /s/ ALAN REDHEAD
------------------------------------
ALAN REDHEAD, PRESIDENT
LENDER:
SANTA MONICA BANK
By: /s/ RICK BERGER
------------------------------------
Authorized Officer
================================================================================
<PAGE> 8
SANTA MONICA BANK
Member FDIC
[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>
$500,000.00 07-07-1999 07-06-2000 2000314557 5015 RDB [Not Legible]
- ------------------------------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------------------------------
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
====================================================================================================================================
</TABLE>
THIS COMMERCIAL SECURITY AGREEMENT is entered into between CALIFORNIA BEACH
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.
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 any 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 CALIFORNIA BEACH RESTAURANTS, INC., A
CALIFORNIA CORPORATION, its successors and assigns.
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 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 note or credit agreement dated July 7,
1999, in the principal amount of $500,000,00 from CALIFORNIA BEACH
RESTAURANTS, INC., A CALIFORNIA CORPORATION to Lender, together with all
renewals of, extensions of, modifications of, refinancings of,
consolidations of and substitutions for the note or credit agreement.
RELATED DOCUMENTS. The words "Related Documents" mean 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.
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
<PAGE> 9
07-07-1999 COMMERCIAL SECURITY AGREEMENT Page 2
Loan No 2000314557 (Continued)
================================================================================
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 lime Grantor 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
Collateral from its existing locations without the 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
rights 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 Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the
California Health and Safety Code, Section 25100. et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant
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.
<PAGE> 10
07-07-1999 BUSINESS LOAN AGREEMENT Page 3
Loan No 2000314557 (Continued)
================================================================================
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 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 modified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.
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 Grantor to make any payment when due on the
Indebtedness.
OTHER DEFAULTS. Failure of Grantor 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 in any other agreement between Lender and
Grantor.
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 creditor 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 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 a valid and perfected security interest or
lien) at any time and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral
securing the Indebtedness. This includes a garnishment of any of Grantor's
deposit accounts with Lender.
<PAGE> 11
07-07-1999 COMMERCIAL SECURITY AGREEMENT Page 4
Loan No 2000314557 (Continued)
================================================================================
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 Grantor's financial
condition, or Lender believes the prospect of payment or performance of
the Indebtedness is impaired.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the California Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
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 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, choses 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 Grantor for any deficiency remaining
on the Indebtedness due to Lender after application of all amounts
received from the exercise of the rights provided in this Agreement.
Grantor shall be liable for a deficiency even if the transaction described
in this subsection is a sale of accounts or chattel paper.
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial Code,
as may be amended from time to time. In addition, Lender shall have and
may exercise any or all other rights and remedies it may have available at
law, in equity, or otherwise.
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 to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement,
after Grantor's failure to perform, shall riot 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
agrees 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 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 Agreement.
Lender may pay someone else to help enforce this Agreement, and Grantor
shall pay the costs and expenses of such enforcement. Costs and expenses
include Lender's attorneys' fees and legal expenses whether or not there
is a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. Grantor also shall pay all court costs and such additional fees
as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
MULTIPLE PARTIES; Corporate Authority. All obligations of Grantor under
this Agreement shall be joint and several, 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, notice to any Grantor will constitute
notice to all Grantors. For notice purposes, Grantor will keep Lender
informed at ail times of Grantor's current addressees).
POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
<PAGE> 12
07-07-1999 COMMERCIAL SECURITY AGREEMENT Page 5
Loan No 2000314557 (Continued)
================================================================================
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.
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.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JULY 7,
1999.
GRANTOR:
CALIFORNIA BEACH RESTAURANTS, INC., A CALIFORNIA CORPORATION
By: /s/ ALAN REDHEAD
------------------------------------
ALAN REDHEAD, PRESIDENT
================================================================================
<PAGE> 13
SANTA MONICA BANK
Member FDIC
[SANTA MONICA BANK LOGO]
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000.00 07-07-1999 07-06-2000 2000314557 5015 RDB [Not Legible]
- ------------------------------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------------------------------
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
====================================================================================================================================
Principal Amount: $500,000.00 Initial Rate: 9.000% Date of Note: July 7, 1999
</TABLE>
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 Five
Hundred Thousand & 00/100 Dollars ($500,000.00) 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 AUGUST 6, 1999, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE
ON THE SAME DAY OF EACH MONTH AFTER THAT. The annual interest rate for this Note
is computed on a 365/360 basis; that is, by applying the ratio of the annual
interest rate over a year of 360 days, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal balance is
outstanding. Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing. 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 Note 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 8.000%. THE INTEREST RATE TO BE APPLIED TO THE
UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE OF 1.000 PERCENTAGE
POINT OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 9.000%. NOTICE: Under no
circumstances will the interest rate on this Note 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 Note, 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, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, 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 Note. (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 Note 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 Note to 7.000 percentage points
over the Index. Lender may hire or pay someone else to help collect this Note 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 NOTE 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 NOTE 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 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 Note against any and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested either orally or in writing by Borrower or
<PAGE> 14
07-07-1999 PROMISSORY NOTE Page 2
Loan No 2000314557 (Continued)
==============================================================================
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
Note at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer printouts. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor
is in default under the terms of this Note or any agreement that Borrower or
any guarantor has with Lender, including any agreement made in connection with
the signing of this Note; (b) Borrower or any guarantor ceases doing business
or is insolvent; (c) any guarantor seeks, claims or otherwise attempts to
limit, modify or revoke such guarantor's guarantee of this Note or any other
loan with Lender; or (d) Borrower has applied funds provided pursuant to this
Note for purposes other than those authorized by Lender.
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.
GENERAL PROVISIONS. This Note 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 Note on its demand. Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses this Note, to
the extent allowed by law, waive any applicable statute of limitations,
presentment, demand for payment, protest and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length
of 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 NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER
CALIFORNIA BEACH RESTAURANTS, INC., A CALIFORNIA CORPORATION
By: /s/ ALAN REDHEAD
----------------------------------
ALAN REDHEAD, PRESIDENT
<PAGE> 15
SANTA MONICA BANK
Member FDIC
[SANTA MONICA BANK LOGO]
COMMERCIAL PLEDGE AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000.00 07-07-1999 07-06-2000 2000314557 5015 RDB [Not Legible]
- ------------------------------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------------------------------
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 PLEDGE 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").
GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to
Lender a security interest in the Collateral to secure the Indebtedness and
agrees that Lender shall have the rights stated in this Agreement with respect
to the Collateral, in addition to all other rights which Lender may have by
law.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement:
AGREEMENT. The word "Agreement" means this Commercial Pledge Agreement, as
this Commercial Pledge Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this Commercial
Pledge 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 specifically
described property, which Grantor has delivered or agrees to deliver (or
cause to be delivered) immediately to Lender, together with all Income and
Proceeds as described below:
LICENSE AGREEMENT ENTERED INTO AS OF APRIL 21, 1992 BY AND BETWEEN SEA
VIEW RESTAURANTS, INC., A CALIFORNIA CORPORATION ("LICENSOR") AND MCA
DEVELOPMENT VENTURE TWO, A CALIFORNIA CORPORATION ("LICENSEE").
In addition, the word "Collateral" includes all property of Grantor, in the
possession of Lender (or in the possession of a third party subject to the
control of Lender), whether now or hereafter existing and whether tangible
or intangible in character, including without limitation each of the
following:
(A) ALL PROPERTY TO WHICH LENDER ACQUIRES TITLE OR DOCUMENTS OF TITLE.
(B) ALL PROPERTY ASSIGNED TO LENDER.
(C) ALL PROMISSORY NOTES, BILLS OF EXCHANGE, STOCK CERTIFICATES,
BONDS, SAVINGS PASSBOOKS, TIME CERTIFICATES OF DEPOSIT, INSURANCE
POLICIES, AND ALL OTHER INSTRUMENTS AND EVIDENCES OF AN OBLIGATION.
(D) ALL RECORDS RELATING TO ANY OF THE PROPERTY DESCRIBED IN THIS
COLLATERAL SECTION, WHETHER IN THE FORM OF A WRITING, MICROFILM,
MICROFICHE, OR 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.
INCOME AND PROCEEDS. The words "Income and Proceeds" mean all present and
future income, proceeds, earnings, increases, and substitutions from or for
the Collateral of every kind and nature, including without limitation all
payments, interest, profits, distributions, benefits, rights, options,
warrants, dividends, stock dividends, stock splits, stock rights,
regulatory dividends, distributions, subscriptions, monies, claims for
money due and to become due, proceeds of any insurance on the Collateral,
shares of stock of different par value or no par value issued in
substitution or exchange for shares included in the Collateral, and all
other property Grantor is entitled to receive on account of such
Collateral, including accounts, documents, instruments, chattel paper, and
general intangibles.
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 Borrower or Grantor 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 note or credit agreement dated July 7,
1999, in the principal amount of $500,000.00 from Borrower to Lender,
together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of and substitutions for the note or credit
agreement.
OBLIGOR. The word "Obligor" means and includes without limitation any and
all persons or entities obligated to pay money or to perform some other act
under the Collateral.
<PAGE> 16
07-07-1999 COMMERCIAL PLEDGE AGREEMENT Page 2
Loan No 2000314557 (Continued)
===========================================================================
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 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 non action 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;
(1) 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 non judicial)
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.
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL.
Grantor represents and warrants to Lender that:
OWNERSHIP. Grantor is the lawful owner of the Collateral free and clear of
all security interests, liens, encumbrances and claims of others except as
disclosed to and accepted by Lender in writing prior to execution of this
Agreement.
RIGHT TO PLEDGE. Grantor has the full right, power and authority to enter
into this Agreement and to pledge the Collateral.
BINDING EFFECT. This Agreement is binding upon Grantor, as well as
Grantor's heirs, successors, representatives and assigns, and is legally
enforceable in accordance with its terms.
NO FURTHER ASSIGNMENT. Grantor has not, and will not, sell, assign,
transfer, encumber or otherwise dispose of any of Grantor's rights in the
Collateral except as provided in this Agreement.
NO DEFAULTS. There are no defaults existing under the Collateral, and
there are no offsets or counterclaims to the same. Grantor will strictly
and promptly perform each of the terms, conditions, covenants and
agreements contained in the Collateral which are to be performed by
Grantor, if any.
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.
LENDER'S RIGHTS AND OBLIGATIONS WITH RESPECT TO COLLATERAL. Lender may hold
the Collateral until all the Indebtedness has been paid and satisfied and
thereafter may deliver the Collateral to any Grantor. Lender shall have the
following rights in addition to all other rights it may have by law:
MAINTENANCE AND PROTECTION OF COLLATERAL. Lender may, but shall not be
obligated to, take such steps as it deems necessary or desirable to
protect, maintain, insure, store, or care for the Collateral, including
payment of any liens or claims against the Collateral. Lender may charge
any cost incurred in so doing to Grantor.
<PAGE> 17
07-07-1999 COMMERCIAL PLEDGE AGREEMENT Page 3
Loan No 2000314557 (Continued)
=============================================================================
INCOME AND PROCEEDS FROM THE COLLATERAL. Lender may receive all Income and
Proceeds and add it to the Collateral. Grantor agrees to deliver to Lender
immediately upon receipt, in the exact form received and without
commingling with other property, all Income and Proceeds from the
Collateral which may be received by, paid, or delivered to Grantor or for
Grantor's account, whether as an addition to, in discharge of, in
substitution of, or in exchange for any of the Collateral.
APPLICATION OF CASH. At Lender's option, Lender may apply any cash, whether
included in the Collateral or received as Income and Proceeds or through
liquidation, sale, or retirement, of the Collateral, to the satisfaction of
the Indebtedness or such portion thereof as Lender shall choose, whether or
not matured.
TRANSACTIONS WITH OTHERS. Lender may (a) extend time for payment or other
performance, (b) grant a renewal or change in terms or conditions, or (c)
compromise, compound or release any obligation, with any one or more
Obligors, endorsers, or Guarantors of the Indebtedness as Lender deems
advisable, without obtaining the prior written consent of Grantor, and no
such act or failure to act shall affect Lender's rights against Grantor or
the Collateral.
ALL COLLATERAL SECURES INDEBTEDNESS. All Collateral shall be security for
the Indebtedness, whether the Collateral is located at one or more offices
or branches of Lender and whether or not the office or branch where the
Indebtedness is created is aware of or relies upon the Collateral.
COLLECTION OF COLLATERAL. Lender, at Lender's option may, but need not,
collect directly from the Obligors on any of the Collateral all Income and
Proceeds or other sums of money and other property due and to become due
under the Collateral, and Grantor authorizes and directs the Obligors, if
Lender exercises such option, to pay and deliver to Lender all Income and
Proceeds and other sums of money and other property payable by the terms of
the Collateral and to accept Lender's receipt for the payments.
POWER OF ATTORNEY. Grantor irrevocably appoints Lender as Grantor's
attorney-in-fact, with full power of substitution, (a) to demand, collect,
receive, receipt for, sue and recover all Income and Proceeds and other
sums of money and other property which may now or hereafter become due,
owing or payable from the Obligors in accordance with the terms of the
Collateral; (b) to execute, sign and endorse any and all instruments,
receipts, checks, drafts and 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, execute and deliver
Grantor's release and acquittance for Grantor; (d) to file any claim or
claims or to take any action or institute or take part in any proceedings,
either in Lender's own name or in the name of Grantor, or otherwise, which
in the discretion of Lender may seem to be necessary or advisable; and (e)
to execute in Grantor's name and to deliver to the Obligors on Grantor's
behalf, at the time and in the manner specified by the Collateral, any
necessary instruments or documents.
PERFECTION OF SECURITY INTEREST. Upon request of Lender, Grantor will
deliver to Lender any and all of the documents evidencing or constituting
the Collateral. When applicable law provides more than one method of
perfection of Lender's security interest, Lender may choose the method(s)
to be used. Upon request of Lender, Grantor will sign and deliver any
writings necessary to perfect Lender's security interest. Grantor hereby
appoints Lender as Grantor's irrevocable attorney-in-fact for the purpose
of executing any documents necessary to perfect or to continue the security
interest granted in this Agreement. 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.
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.
LIMITATIONS ON OBLIGATIONS OF LENDER. Lender shall use ordinary reasonable care
in the physical preservation and custody of the Collateral in Lender's
possession, but shall have no other obligation to protect the Collateral or its
value. In particular, but without limitation, Lender shall have no
responsibility for (a) any depreciation in value of the Collateral or for the
collection or protection of any Income and Proceeds from the Collateral, (b)
preservation of rights against parties to the Collateral or against third
persons, (c) ascertaining any maturities, calls, conversions, exchanges, offers,
tenders, or similar matters relating to any of the Collateral, or (d) informing
Grantor about any of the above, whether or not Lender has or is deemed to have
knowledge of such matters. Except as provided above, Lender shall have no
liability for depreciation or deterioration of the Collateral.
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 Borrower or Grantor 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 creditor 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 Borrower or Grantor 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 a valid and perfected security interest or lien) at any
time and for any reason.
INSOLVENCY. The dissolution or termination of Borrower or Grantor's
existence as a going business, the insolvency of Borrower or Grantor, the
appointment of a receiver for any part of Borrower or Grantor's property,
any assignment for the benefit of creditors, any type of creditor workout,
or the commencement of any proceeding under any bankruptcy or insolvency
laws by or against Borrower or Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or Grantor or
by any governmental agency against the Collateral or any other collateral
securing the Indebtedness. This includes a garnishment of any of Borrower
or Grantor'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.
<PAGE> 18
07-07-1999 COMMERCIAL PLEDGE AGREEMENT Page 4
Loan No 2000314557 (Continued)
=============================================================================
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender may exercise any one or more of the
following rights and remedies:
ACCELERATE INDEBTEDNESS. Declare all Indebtedness, including any prepayment
penalty which Borrower would be required to pay, immediately due and
payable, without notice of any kind to Borrower or Grantor.
COLLECT THE COLLATERAL. Collect any of the Collateral and, at Lender's
option and to the extent permitted by applicable law, retain Possession of
the Collateral while suing on the Indebtedness.
SELL THE COLLATERAL. Sell the Collateral, at Lender's discretion, as a unit
or in parcels, at one or more public or private sales. Unless the
Collateral is perishable or threatens to decline speedily in value or is of
a type customarily sold on a recognized market, Lender shall give or mail
to Grantor, or any of them, notice at least ten (10) days in advance of the
time and place of any public sale, or of the date after which any private
sale may be made. Grantor agrees that any requirement of reasonable notice
is satisfied if Lender mails notice by ordinary mail addressed to Grantor,
or any of them, at the last address Grantor has given Lender in writing. If
a public sale is held, there shall be sufficient compliance with all
requirements of notice to the public by a single publication in any
newspaper of general circulation in the county where the Collateral is
located, setting forth the time and place of sale and a brief description
of the property to be sold. Lender may be a purchaser at any public sale.
REGISTER SECURITIES. Register any securities included in the Collateral in
Lender's name and exercise any rights normally incident to the ownership of
securities.
SELL SECURITIES. Sell any securities included in the Collateral in a manner
consistent with applicable federal and state securities laws,
notwithstanding any other provision of this or any other agreement. If,
because of restrictions under such laws, Lender is or believes it is unable
to sell the securities in an open market transaction, Grantor agrees that
Lender shall have no obligation to delay sale until the securities can be
registered, and may make a private sale to one or more persons or to a
restricted group of persons, even though such sale may result in a price
that is less favorable than might be obtained in an open market
transaction, and such a sale shall be considered commercially reasonable.
If any securities held as Collateral are "restricted securities" as defined
in the Rules of the Securities and Exchange Commission (such as Regulation
D or Rule 144) or state securities departments under state "Blue Sky" laws,
or if Borrower or Grantor is an affiliate of the issuer of the securities,
Borrower and Grantor agree that neither Grantor nor any agent of Grantor
will sell or dispose of any securities of such issuer without obtaining
Lender's prior written consent.
FORECLOSURE. Maintain a judicial suit for foreclosure and sale of the
Collateral.
TRANSFER TITLE. Effect transfer of title upon sale of all or part of the
Collateral. For this purpose, Grantor irrevocably appoints Lender as its
attorney-in-fact to execute endorsements, assignments and instruments in
the name of Grantor and each of them (if more than one) as shall be
necessary or reasonable.
OTHER RIGHTS AND REMEDIES. Have and exercise any or all of the rights and
remedies of a secured creditor under the provisions of the Uniform
Commercial Code, at law, in equity, or otherwise.
APPLICATION OF PROCEEDS. Apply any cash which is part of the Collateral, or
which is received from the collection or sale of the Collateral, to
reimbursement of any expenses, including any costs for registration of
securities, commissions incurred in connection with a sale, attorney fees
as provided below, and court costs, whether or not there is a lawsuit and
including any fees on appeal, incurred by Lender in connection with the
collection and sale of such Collateral and to the payment of the
Indebtedness of Borrower to Lender, with any excess funds to be paid to
Grantor as the interests of Grantor may appear. Borrower agrees, to the
extent permitted by law, to pay any deficiency after application of the
proceeds of the Collateral to the Indebtedness.
CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether evidenced
by this Agreement or by any other writing, shall be cumulative and may be
exercised singularly or concurrently. Election by Lender to pursue any
remedy shall not exclude pursuit of any other remedy, and an election to
make expenditures or to take action to perform an obligation of Grantor
under this Agreement, after Grantor'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, BORROWER AND
GRANTOR AGREE 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.
ATTORNEYS' FEES; EXPENSES. Borrower and Grantor 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
Borrower and Grantor shall pay the costs and expenses of such enforcement.
Costs and expenses include Lender's attorneys' fees and legal expenses
whether or not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (and including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower and Grantor also shall pay all
court costs and such additional fees as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
MULTIPLE PARTIES; Corporate Authority. All obligations of Borrower and
Grantor 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 Borrower or Grantor, notice to any Borrower or
Grantor will constitute notice to all Borrower and Grantors. For notice
purposes, Borrower and Grantor will keep Lender informed at all times of
Borrower and Grantor's current addresses).
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.
<PAGE> 19
07-07-1999 COMMERCIAL PLEDGE AGREEMENT Page 5
Loan No 2000314557 (Continued)
============================================================================
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.
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.
BORROWER AND GRANTOR ACKNOWLEDGE HAVING READ ALL THE PROVISIONS OF THIS PLEDGE
AGREEMENT, AND BORROWER AND GRANTOR AGREE TO ITS TERMS. THIS AGREEMENT IS DATED
JULY 7, 1999.
BORROWER
CALIFORNIA BEACH RESTAURANTS, INC., A CALIFORNIA CORPORATION
By: /S/ ALAN REDHEAD
-------------------------------------------
ALAN REDHEAD, PRESIDENT
GRANTOR:
SEA VIEW RESTAURANTS, INC. CALIFORNIA CORPORATION
By: /S/ ALAN REDHEAD
-------------------------------------------
ALAN REDHEAD, PRESIDENT
============================================================================
<PAGE> 20
COMMERCIAL GUARANTY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000.00 07-07-1999 07-06-2000 2000314557 5015 RDB [Not Legible]
- ------------------------------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------------------------------
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>
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 July 7, 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 of 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 LIMES 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, FAIL 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> 21
07-07-1999 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 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; (1) 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 waiver 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> 22
07-07-1999 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 indemnities 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> 23
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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 JULY 7, 1999.
GUARANTOR:
SEA VIEW RESTAURANTS INC., A CALIFORNIA CORPORATION
By:/s/ ALAN REDHEAD
----------------------------------------
ALAN REDHEAD, PRESIDENT
<PAGE> 24
NOTICE OF FINAL AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000.00 07-07-1999 07-06-2000 2000314557 5015 RDB [Not Legible]
- ------------------------------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------------------------------
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
====================================================================================================================================
</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 9.000%), Nondisclosable Revolving Line of Credit
Loan to a Corporation for $500,000.00 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-I Agreement to Provide Insurance
Disbursement Request and Authorization Notice of Final Agreement
<PAGE> 25
07-07-1999 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 July 7. 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
GRANTOR
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
=============================================================================
<PAGE> 26
SANTA MONICA BANK
Member FDIC
[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>
$500,000.00 07-07-1999 07-06-2000 2000314557 5015 RDB [Not Legible]
- ------------------------------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------------------------------
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 any 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 note or credit agreement dated July 7,
1999, in the principal amount of $500,000.00 from Borrower to Lender,
together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of and substitutions for the note or
credit agreement.
RELATED DOCUMENTS. The words "Related Documents" mean 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 that Lender need not
tell Borrower about any action or inaction Lender takes in connection with this
Agreement; (b) Borrower assumes the
<PAGE> 27
07-07-1999 COMMERCIAL SECURITY AGREEMENT Page 2
Loan No 2000314557 (Continued)
================================================================================
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, 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 as 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.
RIGHTS 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 or 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 Collateral from
its existing locations without the prior written consent of Lender.
<PAGE> 28
07-07-1999 COMMERCIAL SECURITY AGREEMENT Page 3
Loan No 2000314557 (Continued)
================================================================================
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the extend 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 rights 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 Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization act of
1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the
California Health and Safety Code, Section 25100, et seq., or other applicable
state or Federal laws, rules, or regulations adopted pursuant 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 contain 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 and 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 Indebtedness, and shall pay the balance to Grantor. Any proceeds
which have not been disbursed within six (6) months after their receipt and
<PAGE> 29
07-07-1999 COMMERCIAL SECURITY AGREEMENT Page 4
Loan No 2000314557 (Continued)
================================================================================
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 rights to collect the accounts and
to notify account debtors to make payments directly to Lender for application
to the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as
Lender, in Lender's sole discretion, shall deem appropriate under the
circumstances, but failure to honor any request by Grantor shall not of itself
be deemed to be a failure to exercise reasonable care. Lender shall not be
required to take any steps necessary to preserve any rights in the Collateral
against prior parties, nor to protect, preserve or maintain any security
interest given to secure the Indebtedness.
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 creditor 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 a 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 or Borrower's property,
any assignment for the benefit of creditors, any type of creditor workout,
of 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 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 ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the California Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following rights
and remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness,
including any prepayment penalty which 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
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
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07-07-1999 COMMERCIAL SECURITY AGREEMENT Page 5
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(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, choses 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
to pursue any remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an obligation of
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 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. Grantor and
Borrower also shall pay all court costs and such additional fees as may be
directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
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.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by
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07-07-1999 COMMERCIAL SECURITY AGREEMENT Page 6
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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 waivers, 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 JULY 7, 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> 1
EXHIBIT 10.71
II. STANDBY LETTER OF CREDIT AGREEMENT
In consideration of Santa Monica Bank issuing for the account of Applicant
the Letter of Credit, Applicant agrees to the following:
Section 1. Definitions.
As used in this Agreement, the following terms shall have the meanings set
forth after each term:
"STANDBY LETTER OF CREDIT AGREEMENT" OR "AGREEMENT" - shall mean this Standby
Letter of Credit Agreement as it may be revised or amended from time to time
pursuant to its terms.
"APPLICANT" - shall mean each signor of the Application and Agreement.
"APPLICATION" - shall mean the Application for Standby Letter of Credit on the
front of this Agreement and/or an application for amendment of the Letter of
Credit or any combination of such applications as the context may require.
"BENEFICIARY" - shall mean the person or entity named on the Application as the
beneficiary or, in the event the Application and Agreement is for a transferable
Letter of Credit, any person or entity who is the transferee of such
beneficiary.
"EXPIRATION DATE" - shall mean the date the Letter of Credit expires.
"LETTER OF CREDIT" - shall mean an instrument or document entitled irrevocable
Letter of Credit or any instrument or document whatever it is entitled or
whether or not it was titled functioning as a standby letter of credit issued
under or pursuant to the Application and all renewals, extensions and
amendments of such instrument or document.
"LOAN DOCUMENT" - shall mean each and any promissory note, credit agreement,
loan agreement, security agreement, pledge agreement, guaranty or other
agreement or writing signed by Santa Monica Bank and/or Applicant and/or
guarantor relating to, evidencing or guaranteeing any loan or other extension of
credit made by Santa Monica Bank to Applicant under or in connection with any
letter of credit document.
"SANTA MONICA BANK" - shall mean Santa Monica Bank, a California banking
corporation.
"UCP" - shall mean the Uniform Customs and Practice for Documentary Credits, an
International Chamber of Commerce publication, or any substitution therefor or
replacement thereof.
Section 2. Reimbursement Obligations.
Applicant shall pay Santa Monica Bank, on demand, all amounts paid by Santa
Monica Bank under or in respect of the Letter of Credit.
Section 3. Fees and Charges.
a. On each fee payment date, so long as any undrawn amount of the Letter of
Credit remains available, Applicant shall pay Santa Monica Bank a Letter of
Credit fee. The fee payment dates shall be the dates as Applicant and Santa
Monica Bank may agree, or in the absence of such agreement, the fee payment date
shall be the date on which the Santa Monica Bank issues such Letter of Credit.
The fee shall be at such rate per annum as Applicant and Santa Monica Bank may
agree, or in the absence of such agreement, at the rate customarily charged by
Santa Monica Bank at the time such fee is payable. The applicable Letter of
Credit fee shall be calculated and payable on the undrawn amount of the Letter
of Credit as of such fee payment date, and shall be for the period commencing on
such fee payment date and ending on the day preceding the next fee payment date
(or the expiration date of the Letter of Credit, as the case may be), both dates
inclusive. The Letter of Credit fee will be computed on the basis of a 360 day
year and actual days elapsed. Santa Monica Bank shall not be required to refund
any portion of the Letter of Credit fee paid for any period during which (a) the
Letter of Credit expires or otherwise terminates, or (b) the undrawn amount of
the Letter of Credit is reduced by drawings or by amendment.
b. Applicant shall pay Santa Monica Bank, on demand, commissions and fees for
amendments to the Letter of Credit, payments under the Letter of Credit,
extensions of the Letter of Credit, cancellation of the Letter of Credit, and
other services in the amounts Applicant and Santa Monica Bank may agree, or, in
the absence of such agreement, in the amounts customarily charged by Santa
Monica Bank on the date of the bank's demand.
c. All payments and deposits by Applicant under this Application and Agreement
shall be made at the Santa Monica Bank's main office at 1251 4th Street, Santa
Monica, California 90401. Santa Monica Bank shall have no obligation to pay
Applicant interest on any deposit made by Applicant under this Application and
Agreement. All payments and deposits by Applicant under this Application and
Agreement shall be United States Dollars.
PAGE 2
<PAGE> 2
Section 4. Extensions.
If the Credit has a provision concerning the automatic extension of the
Expiration Date of the Credit, Santa Monica Bank may, at its sole option, give
notice of nonrenewal of the Credit; and if Applicant does not at any time want
the Credit to be renewed, Applicant will so notify Santa Monica Bank fifteen
(15) calendar days before Santa Monica Bank is to notify the Beneficiary of the
Credit or any advising bank of such nonrenewal pursuant to the terms of the
Credit.
Section 5. Events of Default.
Upon the occurrence of any of the following events, Applicant shall deposit with
Santa Monica Bank, on demand and as cash security for Applicant's obligations to
Santa Monica Bank under this Application and Agreement, an amount equal to the
undrawn amount of the Letter of Credit:
a. Applicant defaults under any provision of this Application and Agreement;
b. Any bankruptcy or similar proceeding is commenced with respect to
Applicant;
c. Any default occurs under any other agreement involving the borrowing of
money or the extension of credit under which Applicant may be obligated as
borrower, installment purchaser or guarantor, if such default consists of
the failure to pay any indebtedness when due or if such default permits or
causes the acceleration of any indebtedness or the termination of any
commitment to lend or to extend credit;
d. Applicant defaults on any other obligation to the Santa Monica Bank;
e. In the opinion of Santa Monica Bank, any material adverse change occurs in
Applicant's business, operations, financial condition or ability to perform
its obligations under this Application and Agreement;
f. Any court order, injunction or other legal process is issued restraining or
seeking restrain drawing or payment under the Letter of Credit.
g. Any person other than Beneficiary attempts, or in any way claims any right,
to draw under the Letter of Credit, including, without limitation, any
debtor in possession, custodian, receiver, trustee, assignee for the
benefit of creditors, personal representatives or other successor.
h. The death of the undersigned or any guarantor hereunder.
Section 6. Interest.
Applicant shall pay interest, on demand, on any amount not paid when due under
this Application and Agreement from the due date until payment in full at a rate
per annum equal to the reference rate of the Wall Street Journal prime rate,
plus five percentage points. Interest will be computed on the basis of a 360-day
year and actual days elapsed.
Section 7. Additional Agreements of Applicant.
Applicant authorizes Santa Monica Bank to charge any of Applicant's accounts
with Santa Monica Bank for all amounts then due and payable to Santa Monica Bank
under this Application and Agreement. Applicant additionally agrees that:
a. Unless otherwise specifically provided in any Loan Document, Santa Monica
Bank shall not be obligated at any time to issue any credit for the account
of Applicant;
b. Unless otherwise specifically provided in any Loan Document, if any credit
is issued by Santa Monica Bank for the account of Applicant, Bank shall not
be obligated to issue any further credit for the account of Applicant or to
make outer extensions of credit to Applicant or in any other manner to
extend any financial consideration to Applicant;
c. Santa Monica Bank has not give Applicant any legal or other advice with
regard to any Letter of Credit;
d. If Santa Monica Bank at any time discusses with Applicant the wording for
any Letter of Credit or document pertaining thereto, any such discussion
will not constitute legal or other advice by Santa Monica Bank or any
representation or warranty of Santa Monica Bank that any wording or credit
will satisfy Applicant's needs;
e. Applicant accepts all of the language contained in the Application.
Applicant is responsible for the wording of any drawing conditions of the
Letter of Credit and will not rely on Santa Monica Bank in any way in
connection with the wording of the drawing conditions of the Letter of
Credit or the structuring of any transaction related to the Letter of
Credit;
f. Santa Monica Bank shall not be deemed the agent of Applicant, any
Beneficiary or any other user of the Letter of Credit, and neither
Applicant nor any Beneficiary nor any other user of the Letter of Credit
will be deemed an agent of Santa Monica Bank.
PAGE 3
<PAGE> 3
g. All directions and correspondence relating to the Letter of Credit on any
document pertaining thereto are to be sent at the risk of Applicant;
h. Applicant will not seek to obtain, apply for, or acquiesce in any temporary
restraining order, restraining order, preliminary injunction, permanent
injunction or any type of pretrial or permanent injunctive relief or any
similar relief, however named, restraining, prohibiting or enjoining the Santa
Monica Bank, any of Santa Monica Bank's correspondents or any advising,
confirming, negotiating, paying, accepting or other bank from paying or
honoring any obligation under or in connection with the Letter of Credit.
Section 8. Security Agreement.
Applicant acknowledges that Applicant's obligations under this Standby Letter of
Credit Agreement are secured by that collateral described in that Security
Agreement executed by [ ] as Grantor on or
about even date herewith. Applicant agrees to immediately reimburse Santa Monica
Bank for all expenditures incurred by Santa Monica Bank pertaining to that
collateral or that Security Agreement. In the event of a default under that
Security Agreement, Applicant agrees to deposit on demand as cash security for
the Applicant's obligations to Santa Monica Bank under this Standby Letter of
Credit Agreement an amount equal to the undrawn amount of the Letter of Credit.
Section 9. Limitation of Liability.
Notwithstanding any other provision of this Agreement, neither Santa Monica
Bank nor any of its agents or correspondents will have any liability to
Applicant for any action, neglect or omission, if done in good faith, under or
in connection with the Letter of Credit or any document pertaining thereto,
including but not limited to the issuance of any amendment to the Letter of
Credit, the failure to issue or amend any Credit or the honoring or dishonoring
of any Demand under the Letter of Credit. Notwithstanding any other provision in
the Letter of Credit or any document pertaining thereto, in no event shall
Santa Monica Bank or its officers or directors be liable or responsible
regardless of whether any claim is based on contract or tort, or any other
legal theory, for:
a. any special, consequential, indirect or incidental damages, including but not
limited to lost profits arising out of or in connection with the issuance of
the Letter of Credit or any action taken or not taken by Santa Monica Bank in
connection with the Letter of Credit, any amendment thereto, or any document
pertaining thereto;
b. the honoring of any draft with any order or directive of any court or
government or regulatory body or entity requiring such honor despite any
temporary restraining order, restraining order, preliminary injunction,
permanent injunction or any type of pretrial or permanent injunctive relief or
any similar relief, however, named, restraining, prohibiting or enjoining such
honor;
c. the dishonoring of any draft in accordance with any legal or other
restriction in force at the time and in the place of presentment, payment or
acceptance;
d. verifying the existence or reasonableness of any act or condition referenced,
or any statement made, in connection with any drawing or presentment under the
Letter of Credit;
e. the use which may be made of the Letter of Credit;
f. any acts or omissions of any Beneficiary or any other user of the Letter of
Credit;
g. any errors, inaccuracies, omissions, interruptions, or delays in
transmission or delivery of any messages, directions or correspondence by mail,
cable, telegraph, wireless or otherwise, whether or not they are in encrypted.
Section 10. Attorney's Fees.
Applicant shall pay, on demand, all costs, expenses and attorney's fees
incurred by Santa Monica Bank in connection with (a) any dispute concerning the
Letter of Credit or this Application and Agreement, or (b) the enforcement of
this Application and Agreement.
Section 11. Joint and Several Liability.
The word "Applicant" in this Application and Agreement refers to each signer
(other than Santa Monica Bank) of this Application and Agreement. If this
Application and Agreement is signed by more than one Applicant, their
obligations under this Application and Agreement shall be joint and several.
Section 12. Set-off.
Upon the occurrence of any Event of Default, you may to the fullest extent
permitted by law set off and apply all deposits of the undersigned to you under
this Agreement, irrespective of whether you have made demand for payment of
such obligations and although such obligations may be contingent or unmatured.
Section 13. Obligations Absolute.
The payment of obligations of the undersigned under this agreement shall be
unconditional and irrevocable, and shall not be affected by any lack of
validity or enforceability of the Letter of Credit; the existence of any claim,
set-off or defense that the undersigned may have against the beneficiary, you
or any other person; any statement or other document presented under the Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect; or payment by you under the Letter of Credit against presentation of a
draft or certificate that does not comply with the Letter of Credit.
PAGE 4
<PAGE> 4
Section 14. The UCP.
Subject to the laws, customs and practices of the trade in the area where
Beneficiary is located, the Letter of Credit will be subject to, and
performance under the Letter of Credit by Santa Monica Bank, and Beneficiary
will be governed by, the "Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce, Publication No. 500," or by
later Uniform Customs and Practice fixed by later Congresses of the
International Chamber of Commerce as in effect on the date the Letter of Credit
is issued.
Section 15. Choice of Law.
This Application and Agreement shall be governed by and construed under the
laws of the State of California, to the jurisdiction of which the parties
hereto submit.
Section 16. Binding Effect; Waiver of Trial by Jury.
This Agreement shall be binding on the undersigned, the heirs, executors,
administrators, successors and assigns of the undersigned and shall inure to
the benefit of, and be enforceable by you, your successors, transferees and
assigns. The undersigned hereby waives the right to trial by jury in any action
or proceeding between us and further waives the right to assert in any such
action or proceeding any defenses, offsets or counterclaims which the
undersigned may have.
Section 17. Date of the Agreement.
This Application and Agreement is executed by Applicant on: July 9 (Month/Day),
1999 (Year) and the undersigned Applicant has read the Agreement and agrees to
its terms and conditions.
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Name of Applicant Signed by: Title
California Beach Restaurants, Inc. /s/ ALAN REDHEAD President
---------------------------------------------------------------------
Signed by: Title
- -------------------------------------------------------------------------------------------------------------
Direct inquiries to: Debit Drawing to:
Samuel E. Chilakos, V.P. Finance Telephone (310) 459-9676 Account No. 14021620
FAX (310) 459-9356 Bank Office No. Encino #14
- -------------------------------------------------------------------------------------------------------------
Are additional sheets attached? [X] Yes [ ] No
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
FOR BANK USE ONLY
- -------------------------------------------------------------------------------------------------------------
Accepted and agreed to by an authorized officer of the Bank:
Approving Officer's Signature: ___________________________, Title ________________, Date ______________
Applicant's Total Liability: $ ___________________________
Original to: Loan Servicing Center - Copy to: Credit Administration
- -------------------------------------------------------------------------------------------------------------
</TABLE>
N-365 (rev 6-24-99) Page 5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF CALIFORNIA BEACH RESTAURANTS, INC., AS OF JULY 31,
1999 AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS AND CASH FLOWS FOR
THE THREE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 356,000
<SECURITIES> 0
<RECEIVABLES> 43,000
<ALLOWANCES> 0
<INVENTORY> 201,000
<CURRENT-ASSETS> 993,000
<PP&E> 6,392,000
<DEPRECIATION> (3,242,000)
<TOTAL-ASSETS> 4,881,000
<CURRENT-LIABILITIES> 1,888,000
<BONDS> 2,499,000
0
0
<COMMON> 34,000
<OTHER-SE> (90,000)
<TOTAL-LIABILITY-AND-EQUITY> 4,881,000
<SALES> 3,140,000
<TOTAL-REVENUES> 3,140,000
<CGS> 2,783,000
<TOTAL-COSTS> 3,048,000
<OTHER-EXPENSES> 252,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 86,000
<INCOME-PRETAX> (160,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (160,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (160,000)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
