1
EXHIBIT 10.67
FIRST AMENDMENT TO
CONCESSION AGREEMENT FOR
XXXX XXXXXX STATE BEACH PARK RESTAURANT
THIS FIRST AMENDMENT TO CONCESSION AGREEMENT
("Amendment") is made and entered into as of the 9th day of February, 1999, by
and between the COUNTY OF LOS ANGELES ("County"), and SEA VIEW RESTAURANTS,
INC., a California corporation ("Concessionaire").
W I T N E S S E T H
WHEREAS, County has been authorized to exercise the power
conferred by California Government Code Section 25907 to contract for
concessions and services that are consistent with public park and recreation
purposes within Xxxx Xxxxxx State Beach Park pursuant to the provisions of the
Joint Powers Agreement Between the City of Los Angeles and the County of Los
Angeles Providing for Lifeguard and Maintenance Services to be Rendered by the
County on Beaches Located Within the City, dated May 20, 1975 ("Joint Powers
Agreement");
WHEREAS, in the exercise thereof, County and Concessionaire
executed that certain Concession Agreement (the "Agreement") dated as of
November 1, 1997;
WHEREAS County and Concessionaire have agreed, as more
specifically provided herein, to amend certain terms and conditions contained in
the Agreement; and,
WHEREAS, Section 16.13 of the Agreement provides that it may
only be amended in writing executed by duly authorized officials of
Concessionaire and County.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, agreements and conditions set forth herein, and of other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto and each of them do agree as follows:
1. Defined Terms. All capitalized terms not defined in this Amendment shall have
the meanings ascribed to them in the Agreement.
2. Amendment of Agreement. Sections 4.6, 4.7 and 4.8 of the Agreement are hereby
amended as follows, with deleted text stricken through and added text double
underlined:
-1-
2
"4.6. Changes of Ownership and Financing Events. [strike through
begin] {Except as otherwise provided in this Section 4.6, each} [strike
through end] [double underline begin] Each [double underline end] time
Concessionaire proposes either (a) a Change of Ownership or (b) a
Financing Event, County shall be paid [strike through begin] {(1)} [strike
through end] an Administrative Charge equal to the Actual Cost incurred by
County in connection with its review and processing of said Change of
Ownership or Financing Event, including without limitation the cost of
investigating the acceptability of the proposed transferee or lender as
well as any and all other reasonable administrative, financial, economic,
accounting and/or legal costs and fees (including without limitation the
reasonable value of services provided by in-house counsel, lease
administrators and/or lease auditors) incurred or expended in connection
with any such proposed Change of Ownership or Financing Event
("Administrative Charge") [strike through begin] {and (2) in the event
County approves such proposed Change of Ownership or Financing Event and
such transaction is consummated, a Net Proceeds Share; provided, however,
that in the event County disapproves a proposed Change of Ownership or
Financing Event, the Administrative Charge shall not exceed Thirty
Thousand and 00/100 Dollars ($30,000) and, in the event County approves a
Change of Ownership or Financing Event, that portion, if any, of the
Administrative Charge that exceeds Thirty Thousand and 00/100 Dollars
($30,000) shall be paid out of, and shall reduce, the Net Proceeds Share.
"Net Proceeds Share" shall mean the applicable amount determined pursuant
to Section 4.8 of this Agreement} [strike through end]. Changes of
Ownership and Financing Events are further subject to County approval as
provided in Articles 12 and 13 of this Agreement. [double underline begin]
A deposit of Fifteen Thousand and 00/100 Dollars ($15,000) toward the
Administrative Charge shall be due and payable upon Concessionaire's
notification to County of the proposed Change of Ownership or Financing
Event and request for County's approval thereof. [double underline end]
4.6.1.Change of Ownership. "Change of Ownership" shall mean
(a) any transfer by Concessionaire of a five percent (5%) or greater
direct ownership interest in this Agreement or in any Major
Sublease, (b) Concessionaire's granting of a Major Sublease [strike
through begin] {and} [strike through end] [double underline begin]
or [double underline end] (c) any transaction or series of related
transactions not described in subsections 4.6.1(a) or (b) which
constitute [strike through begin] {an Aggregate Transfer of fifty
percent (50%) or more of the beneficial interests in, or} [strike
through end] a Change of Control of [strike through begin] {,}
[strike through end] Concessionaire, this Agreement or a Major
Sublease. For the purposes of this Agreement, "Change of Control"
shall refer to a transaction whereby the transferee acquires a
beneficial interest in Concessionaire, this Agreement or a Major
Sublease which brings its cumulative beneficial interest in
Concessionaire, this Agreement or a Major Sublease, as appropriate,
to over fifty percent (50%).
4.6.2.Excluded Transfers. Notwithstanding anything to
-2-
3
the contrary contained in this Agreement, Changes of Ownership
resulting from the following transfers shall not be deemed to create
an obligation to pay County an Administrative Charge [strike through
begin] {or a Net Proceeds Share} [strike through end], nor shall
County have any discretion under Articles 12 and 13 of this
Agreement to disapprove such transfers:
(1) a transfer to a spouse in connection with a property
settlement agreement or decree of dissolution of
marriage or legal separation;
(2) a transfer, directly or through any trust, by way of
gift, devise, intestate succession or operation of law
for the benefit of any member or members of the
transferor's immediate family (which for the purposes of
this subsection shall be limited to the transferor's
spouse, children, parents, siblings and grandchildren);
(3) a transfer of a beneficial interest resulting from
public trading in the stock or securities of an entity,
where such entity is a corporation whose stock is traded
publicly on a national stock exchange or is traded in
the over-the-counter market and whose price is regularly
quoted in recognized national quotation services;
provided, however, that this exclusion shall not apply
to a single transaction or series of related
transactions whereby fifty percent (50%) or more of the
beneficial interests in such entity are transferred, or
which otherwise effects a Change of Control in such
entity;
(4) a mere change [double underline begin] or conversion
[double underline end] in the form, method or status of
ownership; it shall not include a transfer between or
among individuals and/or entities controlled by such
individuals, provided that this exclusion shall not
apply to a single transaction or series of related
transactions whereby [strike through begin] {an
Aggregate Transfer of} [strike through end] fifty
percent (50%) or more of the beneficial interests in
Concessionaire, this Agreement or a Major Sublease has
[strike through begin] {occurred;} [strike through end]
[double underline begin] been transferred; or, [double
underline end]
(5) any transfer resulting from a Condemnation by County;
or,
(6) any transfer of the beneficial interest in Concessionaire
[double underline begin] which is consummated prior to May 1, 1999,
which results in no change in the management of Concessionaire or
the day-to-day
-3-
4
operations of the Premises and where the transferee of such
beneficial interest is, as of January 1, 1999, a beneficial interest
holder in Concessionaire other than [double underline end] [strike
through begin] {currently held by} [strike through end] Bank of
America and its affiliates [strike through begin] {; provided,
however, that (1) such transfer is consummated prior to {November 1,
1997, (2) such transfer is effected at a net loss to Bank of America
and/or its affiliates (without taking into account prior writedowns
of any debt extended to Concessionaire by Bank of America or its
affiliates), and (3) the transfer of the beneficial interest is made
to one or more of the existing persons or entities currently holding
beneficial interests in Concessionaire} [strike through end].
[strike through begin] 4.6.3. Aggregate Transfer. "Aggregate
Transfer" shall refer to the total percentage of the shares of stock,
partnership interests, membership interests or any other equity interests
(which constitute beneficial interests in Concessionaire, this Agreement
or a Major Sublease, as appropriate) transferred in all transactions
(other than those enumerated in subsection 4.6.2) occurring since the
later of (a) the execution by Concessionaire of this Agreement or a Major
Sublease, as appropriate, or (b) the most recent Change of Ownership upon
which an Administrative Charge was paid to County [strike through end].
[strike through begin] 4.6.4 [strike through end] [double underline
begin] 4.6.3 [double underline end]. Beneficial Interest. As used in this
Agreement, the "beneficial interest," "beneficial interest in this
Agreement," or "beneficial interest in a Major Sublease" shall refer to
the interests of the natural persons who comprise the ultimate owner or
owners of Concessionaire's interest in this Agreement or a Major Sublease,
or a Major Sublessee's interest in a Major Sublease, whichever is
appropriate, regardless of the form of such ownership and regardless of
whether such interests are owned through corporations, trusts,
partnerships, limited liability companies or layers thereof; provided,
however, that if an entity with an ownership interest in the Agreement or
a Major Sublease is a partnership, corporation or limited liability entity
(a) whose beneficial interest in this Agreement or a Major Sublease,
whichever is appropriate, comprises less than fifteen percent (15%) of its
total assets or (b) in which no ten (10) shareholders, partners or members
together own more than thirty percent (30%) of the partnership interests,
shares, membership interests or other equity interests in the entity, then
for the purposes of Sections 4.6 through 4.8 hereof, the entity itself
shall be deemed to be the ultimate owner of the beneficial interest in
this Agreement or a Major Sublease, as appropriate, and the owners of such
entity shall not be treated as the ultimate owners of such beneficial
interest.
[strike through begin] {4.6.4.1} [strike through end] [double
underline begin] 4.6.4. [double underline end] Interests Held By
Entities. Except as otherwise provided herein, an interest in
Concessionaire, this
-4-
5
Agreement or a Major Sublease held or owned by a partnership,
limited liability company, corporation or other entity shall be
treated as owned by the partners, members, shareholders or other
equity holders of such entity in proportion to their respective
equity interests, determined by reference to the relative values of
the interests of all partners, members, shareholders or other equity
holders in such entity. Where more than one layer of entities exists
between Concessionaire or a Major Sublessee, as appropriate, and the
ultimate owners, then the foregoing sentence shall be applied
successively to each such entity in order to determine the ownership
of the beneficial interests in Concessionaire, this Agreement or a
Major Sublease, as appropriate, and any transfers thereof.
[double underline begin] ** 1(text moved) 4.6.5. [double
underline end] Shareholder, Partner, Member, Trustee and Beneficiary
List. Prior to the execution of this Agreement by County, prior to
each subsequent Change of Ownership or Financing Event and upon the
request of County (which requests shall be no more frequent than
once per year), Concessionaire shall permit County to review an
updated schedule listing the names and mailing addresses of all
shareholders, partners, members and other holders of equity
interests in Concessionaire. In the event that such shareholder,
partner, member or other interest holder is a trust, Concessionaire
shall include in such schedule the name and mailing address of each
trustee of said trust, together with the names and mailing addresses
of each beneficiary of said trust with greater than a five percent
(5%) actuarial interest in distributions from, or the corpus of,
said trust; provided, however, that to the extent that
Concessionaire is prevented by Applicable Laws from obtaining such
information regarding the beneficiaries of said trust(s),
Concessionaire shall have complied with this provision if
Concessionaire uses its best efforts to obtain such information
voluntarily and provides County with the opportunity to review any
such information so obtained. Concessionaire agrees to use its best
efforts to provide County with any additional information reasonably
requested by County in order to determine the identities of the
holders of five percent (5%) or greater beneficial interests in
Concessionaire or its constituent shareholders, partners, members or
other interest holders, this Agreement or a Major Sublease.
[strike through begin] {4.6.4.2. Ownership of Multiple Assets.
The proceeds of any event constituting or giving rise to a Change of
Ownership shall be apportioned to this Agreement or a Major
Sublease, whichever is appropriate, and to any other assets
transferred in the same transaction in proportion to the relative
fair market values of the respective assets transferred. The Net
Proceeds Share shall be
-5-
6
calculated only by reference to the amount of such proceeds
apportioned to this Agreement, a Major Sublease or the beneficial
interests therein, whichever is appropriate.[strike through end]
[strike through begin] 4.7. Calculation and Payment. A deposit of Fifteen
Thousand and 00/100 Dollars ($15,000) toward the Administrative Charge
shall be due and payable upon Concessionaire's notification to County of
the proposed Change of Ownership or Financing Event and request for
County's approval thereof. If the transaction is approved, the balance of
the Administrative Charge, if any, and the Net Proceeds Share shall be due
and payable concurrently with the Change of Ownership or Financing Event
giving rise to the obligation to pay such fee. If County disapproves the
proposed transaction then, within thirty (30) days after notice of its
disapproval, County shall deliver to Concessionaire a written notice
setting forth the Administrative Charge, together with a refund of the
amount, if any, of the deposit in excess of the Administrative Charge
otherwise allowable under Section 4.6. In the event that the
Administrative Charge exceeds the deposit, then Concessionaire shall pay
County the balance of the Administrative Charge otherwise allowable under
Section 4.6. within thirty (30) days after receipt of the notice from
County setting forth the Administrative Charge and any supporting
documentation reasonably requested by Concessionaire within five (5) days
after its receipt of such notice. Together with its request for County
approval of the proposed transaction, Concessionaire, a Major Sublessee or
the holder of a beneficial interest in this Agreement or a Major Sublease,
whichever is appropriate, shall present to County its calculation of the
Net Proceeds Share (if any) to be derived therefrom, which shall include
the adjustment to Improvement Costs, if any, which may result from the
payment of such Net Proceeds Share ("Calculation Notice"). Each
Calculation Notice shall contain such detail as may be reasonably
requested by County to verify the calculation of the Net Proceeds Share.
Within sixty (60) days after the receipt of the Calculation Notice, County
shall notify the party giving the Calculation Notice as to County's
agreement or disagreement with the amount of the Net Proceeds Share set
forth therein or the related adjustment of Improvement Costs, if any.
Failure of County to approve the Calculation Notice in writing within such
sixty (60) day period shall be deemed to constitute County's disapproval
thereof. Failing mutual agreement within thirty (30) days after the
expiration of said sixty (60) day period, the dispute shall be resolved by
arbitration as set forth in Section 16.15 of this Agreement in a manner
similar to that prescribed herein for the resolution of disputes
concerning Fair Market Rental Value. In the event County approves a Change
of Ownership or Financing Event but a dispute exists as to the Net
Proceeds Share in respect thereof or the related adjustment, if any, in
Improvement Costs, then the transaction may be consummated; provided,
however, that (i) Concessionaire shall remit to County as otherwise
required
-6-
7
hereunder the undisputed portion of the Net Proceeds Share and (ii)
Concessionaire shall deposit the disputed portion of the Net Proceeds
Share into an escrow at the closing of the transaction, which portion
shall be distributed in accordance with the arbitration of the dispute
pursuant to Section 16.15 of this Agreement, in a manner similar to that
prescribed herein for the resolution of disputes concerning Fair Market
Rental Value. [strike through end]
[strike through begin] 4.7.1. Transfer of Less Than Entire Interest.
Where a Change of Ownership has occurred by reason of the transfer
of less than all of an owner's beneficial interest in
Concessionaire, this Agreement or a Major Sublease, the Net Proceeds
Share shall be due and payable with respect to those portions of
such beneficial interest that have been acquired by the transferee
since the later of (a) the date of the execution of this Agreement
(or a Major Sublease) by Concessionaire, (b) the most recent payment
of an Administrative Charge with respect to this Agreement (or a
Major Sublease), or (c) the date which is twelve (12) months prior
to the transfer which constitutes the Change of Ownership. [strike
through end]
[strike through begin] 4.7.2. Purchase Money Notes. If the
transferor of an interest accepts a note made by the transferee of
such interest in payment of all or a portion of the acquisition cost
(a "Purchase Money Note"), such note shall be valued at its face
amount. [strike through end]
[strike through begin] 4.7.3. Obligation to Pay Net Proceeds Share
and Administrative Charge. With respect to a Change of Ownership
giving rise to the Administrative Charge and Net Proceeds Share, the
obligation to pay the Administrative Charge and Net Proceeds Share
shall be the joint and several obligation of the transferor and
transferee. In the event that the Administrative Charge or Net
Proceeds Share is not paid when due with respect to the beneficial
interest in this Agreement, then County shall have the remedies set
forth in Section 14.3 hereof. [strike through end]
[strike through begin] 4.8. Net Proceeds Share. In the event of a Change
of Ownership, the Net Proceeds Share shall be a sum equal to the greater
of (a) five percent (5%) of the gross sale or transfer proceeds or other
consideration given for the interests transferred (but in the case of a
transfer to a party affiliated with or otherwise related to the
transferor, such consideration shall in no event be deemed to be less than
the fair value of the interests transferred), and (b) twenty percent (20%)
of the Net Transfer Proceeds from such transfer. With respect to a
Financing Event, the Net Proceeds Share (if any) shall be equal to twenty
percent (20%) of the Net Refinancing Proceeds from such Financing Event.
[strike through end]
[strike through begin] 4.8.1. Transaction by Original
Concessionaire. In the case of a
-7-
8
transfer by Concessionaire (but not a successor or assignee of
Concessionaire) constituting a Change of Ownership, "Net Transfer
Proceeds" shall mean the total cash and other consideration received
(but in the case of a transfer to a party affiliated with or
otherwise related to the transferor, such consideration shall in no
event be deemed to be less than the fair value of the interests
transferred), less the following costs with respect to
Concessionaire (but not its successors or assignees):
(1) The} [strike through end] [double underline begin] Supplemental Rent. In
addition to the Annual Minimum Rent, Percentage Rent and other monetary
obligations of Concessionaire to County as set forth more specifically in this
Agreement, Concessionaire shall pay to County "Supplemental Rent" as follows:
4.7.1. Monthly and Annual Payments. Supplemental Rent shall
consist of "Monthly Supplemental Rent" and "Annual Supplemental
Rent" or, if and as applicable, "Valuation Participation" and
"Excess Valuation Participation Payments".
4.7.2. Monthly Supplemental Rent. "Monthly Supplemental Rent"
shall consist of a monthly payment of one thousand two hundred fifty
dollars ($1,250.00), due and payable at the time and in the manner
set forth for Monthly Minimum Rent in the Agreement. Monthly
Supplemental Rent payments shall not be credited toward Annual
Supplemental Rent payments.
4.7.3. Annual Supplemental Rent. In addition to
Concessionaire's obligation to pay County Percentage Rent and
Monthly Supplemental Rent as set forth in this Agreement,
Concessionaire's Gross Receipts shall be measured for each twelve
month period commencing on the first day of the first calendar month
following County's execution of this Amendment and on each
anniversary thereafter (each a "Supplemental Rent Year"). "Annual
Supplemental Rent" for each Supplemental Rent Year shall consist of
a payment equal to one percent (1%) multiplied by the amount by
which Concessionaire's Gross Receipts for said Supplemental Rent
Year exceeded fourteen million dollars ($14,000,000). The amount of
Annual Supplemental Rent due and payable shall be documented by
Concessionaire and confirmed by County in the manner set forth in
this Agreement for Percentage Rent, including without limitation
those provisions in the Agreement concerning accounting procedures
and County audits. Annual Supplemental Rent payments shall be in
addition to the Monthly Supplemental Rent described above, and
Monthly Supplemental Rent payments shall in no event be credited
toward the Annual Supplemental Rent payments.
-8-
9
4.7.4. Partial Year at End of Term. For the final Supplemental
Rent Year which ends upon the expiration of the Term, the Gross
Receipts threshold for the Annual Supplemental Rent payment shall be
calculated by multiplying fourteen million dollars ($14,000,000) by
a fraction, the numerator of which shall be the sum of the total
Gross Receipts reported by Concessionaire in those same calendar
months (prorated daily for partial months) over the two then most
recent Lease Years, and the denominator of which shall be the sum of
the total Gross Receipts reported by Concessionaire for the two then
most recent Lease Years.
4.7.5. Valuation Participation. As provided below, County may
cause Concessionaire to pay County a "Valuation Participation" and,
if applicable, "Excess Valuation Participation Payments" (as defined
herein below). "Valuation Participation" shall mean, as of the
"Valuation Date", the greater of (a) five percent (5%) of the "Gross
Concession Value" or (b) twenty percent (20%) of the "Net Concession
Value".
4.7.5.1. Valuation Date. The "Valuation Date" may be
designated by County (a) prior to the end of the seventy
eighth (78th) month of the Term, within ten (10) days after
receipt by County of notice from Concessionaire that an
"Outright Sale" has occurred, in which event the Valuation
Date shall be deemed to be the date upon which the Outright
Sale transaction occurred, or (b) at any time from the first
day of the seventy ninth (79th) month of the Term until the
expiration of the one hundred fiftieth (150th) month of the
Term, provided that County delivers to Concessionaire written
notice of County's election to establish the Valuation Date
within ten (10) days after such election by County.
4.7.5.2. Outright Sale. An "Outright Sale" shall consist
of any one or more of the following: (a) a transfer by
Concessionaire of one hundred percent (100%) of its interest
in the Agreement or the Premises to a non-affiliated entity,
(b) a transfer by California Beach Restaurants, Inc.,
Concessionaire's parent company, of one hundred percent (100%)
of its beneficial interest in Concessionaire, the Agreement or
the Premises in a single transfer to a non-affiliated entity,
or (c) the sale of one hundred percent (100%) of the
outstanding common stock of California Beach Restaurants, Inc.
in a single transfer to a non-affiliated entity.
4.7.6. Gross and Net Concession Value. The "Gross
-9-
10
Concession Value" shall be determined by an appraiser selected by County.
The scope of the valuation conducted by the appraiser shall be limited to
determining the value of the concession which is the subject of the
Agreement (with the appraiser assuming that the concessionaire has the
right to use the Gladstone's name for the Premises for the balance of the
Term), together with the commercial and retail operations conducted on and
from the Premises, taking into account the uniqueness of the location of
the Premises and the character of the physical asset and operations there.
The valuation shall not include the value of the name "Gladstone's" or any
other trademarks or service marks owned by Concessionaire or its parent
company and used at another site, nor shall it take into account those
revenues and expenses of Concessionaire or its parent company which do not
directly result from the concession, the Premises or the operations
thereon. In the event of any dispute concerning such revenues and
expenses, the burden shall be on Concessionaire to demonstrate the lack of
any such direct relationship. Concessionaire shall make available to
County's appraiser any and all information reasonably requested by the
appraiser in order to conduct the valuation. "Net Concession Value" shall
mean the Gross Concession Value less unamortized "Improvement Costs" (as
hereinafter defined) expended by Concessionaire as of the Valuation Date
and, in the event of an Outright Sale, "Documented Transaction Costs" (as
hereinafter defined) in connection with such Outright Sale. In the event
that County elects to designate a Valuation Date, County shall notify
Concessionaire of the Valuation Participation determined by its appraiser
within thirty (30) days after its receipt from such appraiser. Any
disputes regarding the Gross Concession Value or Net Concession Value
shall be resolved by arbitration as provided in the Agreement. Prior to
the arbitration, Concessionaire shall cause an appraiser to conduct a
valuation using the Valuation Date designated by County and the appraisal
standards set forth above. Concessionaire and County shall negotiate in
good faith, after Concessionaire has notified County of the Valuation
Participation as determined by Concessionaire's appraiser, for a period of
no less than thirty (30) days to resolve any disputes regarding Gross
Concession Value and Net Concession Value prior to initiating the
arbitration procedure. All appraisals or valuations submitted or otherwise
offered into evidence by County or Concessionaire in any such arbitration
procedure must meet the standards set forth herein for Written Appraisal
Evidence. Notwithstanding the foregoing, In the event that (whether before
or after the seventy ninth (79th) month of the Term), prior to the
occurrence of an Outright Sale County elects to designate a Valuation Date
upon the occurrence of the Outright Sale, the Gross Concession Value shall
be deemed to be the total consideration paid in connection with the
Outright Sale, and the Valuation Participation payments shall commence on
the first day of the first calendar month immediately following the
closing of the Outright Sale Transaction. County may elect to cause an
appraisal of the concession within nine (9)
-10-
11
months after the occurrence of the Outright Sale as provided above, in
which event the remaining Valuation Participation payments may be
increased to reflect the Gross Concession Value as determined by the
appraiser. Disputes regarding the appraiser's conclusions shall be
resolved by arbitration as provided above.
4.7.7. Improvement Costs. "Improvement Costs" shall mean the
[double underline end] lesser of (i) book value or (ii) fair market
value of certain equipment installed and owned by Concessionaire and
existing on the Premises as of the commencement of the Term,
together with the final construction costs incurred by
Concessionaire in connection with the construction of the
Improvements as set forth in the Approved Final Plans,
Specifications and Costs, which costs shall be submitted to County
within thirty (30) days after the completion of the Improvements
described therein and which costs shall be approved in writing by
County, together with any subsequent expenditure incurred, whether
or not paid, by Concessionaire (but not a sublessee or other party),
for physical addition to or improvement or renovation of the
Premises [strike through begin] {(collectively, "Improvement
Costs")} [strike through end], provided that (a) with respect to
the book value or fair market value of such equipment installed and
owned by Concessionaire on the Premises [double underline begin] at
the commencement of the Term [double underline end], such costs,
which the parties agree shall in no event exceed three hundred
thousand and 00/100 dollars ($300,000), shall have been submitted to
County within ninety (90) days after the commencement of the Term
and are thereafter approved by Director in writing within sixty (60)
days after submission, (b) with respect to the construction of
improvements costing in excess of twenty five thousand dollars
($25,000), such costs have been submitted to County within thirty
(30) days after the completion of such addition, improvement or
renovation and approved by County in writing, and (c) with respect
to the construction of improvements costing less twenty five
thousand dollars ($25,000), such costs may be submitted in
accordance with (b) above, or submitted to County [strike through
begin] {as part of Concessionaire's Calculation Notice} [strike
through end] [double underline begin] or County's appraiser in
connection with County's election to establish a Valuation Date
[double underline end] and thereafter documented to County's
reasonable satisfaction, provided, however, that, if Concessionaire
elects to submit such costs in [strike through begin] {its
Calculation Notice,} [strike through end] [double underline begin]
connection with County's election to establish a Valuation Date,
[double underline end] such costs, taken cumulatively, shall not
exceed twenty five thousand dollars ($25,000).
[strike through begin] {(2) Commissions} [strike through end]
[double underline begin] 4.7.8. Documented Transaction Costs.
"Documented Transaction Costs" shall mean commissions [double
underline end], title and escrow costs, and other bona fide closing
costs actually paid
-11-
12
to third parties and documented to the satisfaction of County, which
costs were directly attributable to the consummation of the
particular transaction giving rise to the obligation to pay County a
[strike through begin] {Net Proceeds Share (collectively,
"Documented Transaction Costs").} [strike through end] [double
underline begin] Valuation Participation. [double underline end]
[strike through begin] 4.8.2. Transfer by
Concessionaire's Successor. In the case of a transfer by a
Concessionaire other than the original Concessionaire, "Net
Transfer Proceeds" shall mean the total cash and other
consideration received by that successor Concessionaire (but
in the case of a transfer to a party affiliated with or
otherwise related to the transferor, such consideration shall
in no event be deemed to be less than the fair value of the
interests transferred), minus the following costs with respect
to such successor Concessionaire: [strike through end]
[strike through begin] (1) The purchase price such successor
paid to Concessionaire or such successor's seller for the
interest acquired; [strike through end]
[strike through begin] (2) Improvement Costs actually paid by
such successor Concessionaire, provided that such costs have
been submitted to and approved by County to the extent
provided in subsection 4.8.1.1 with respect to Concessionaire;
and, [strike through end]
[strike through begin] (3) Documented Transaction Costs with
respect to the transfer of the interest by the successor.
[strike through end]
[strike through begin] 4.8.3. Transfers of Major Sublessee's
Interest. With respect to any Change of Ownership described in
subsection 4.6.1(b), subsections 4.8.1 and 4.8.2 shall apply, except
that any rents or other amounts received by Concessionaire from the
Major Sublessee and passed through to County under any provision of
this Agreement (other than payment of Net Proceeds Share) shall be
disregarded in the computation of Net Transfer Proceeds. [strike
through end]
[strike through begin] 4.8.4. Other Transfers. With respect to any
Change of Ownership not described in subsections 4.8.1 through 4.8.3
(i.e., a transfer of an interest in an entity holding a direct or
indirect ownership interest in this Agreement or in a Major
Sublease), subsections 4.8.1 and 4.8.2 shall apply to such Change of
Ownership, except that in lieu of deducting Improvement Costs in
determining Net Transfer Proceeds, the cost to the transferor of the
interest being transferred shall be deducted. Furthermore, in the
event that any such Change of Ownership produces a Net Proceeds
Share, the then existing Improvement Costs shall be increased by an
appropriate amount to
-12-
13
reflect such Net Proceeds Share, as if it had been realized by
Concessionaire upon a transfer of a comparable interest in this
Agreement or in a Major Sublease, as appropriate. [strike through
end]
[strike through begin] 4.8.5. Net Refinancing Proceeds. "Net
Refinancing Proceeds" shall mean the gross principal amount of any
Financing Event after the date of this Agreement, minus (i) the
principal amount of Concessionaire's existing financing, (ii)
Improvement Costs incurred by Concessionaire and not paid for or
repaid with the proceeds of any Financing Event and (iii) Documented
Transaction Costs with respect to such Financing Event [strike
through end].
[strike through begin] 4.8.6. Effect of Refinancing on Improvement
Costs. Upon payment to County of a Net Proceeds Share in connection
with a Financing Event, then the Improvement Costs incurred by
Concessionaire prior to such Financing Event shall be increased by
the amount of Net Refinancing Proceeds derived from such Financing
Event and the Documented Transaction Costs incurred with respect
thereto and} [strike through end] [strike through begin] {addition
to Improvement Costs incurred by Concessionaire after such Financing
Event. [strike through end]
[strike through begin] 4.8.7. Transfers to which Sections 4.6
through 4.8 Apply. The provisions of Sections 4.6 through 4.8 hereof
shall apply to all transfers of beneficial interests in this
Agreement or a Major Sublease which constitute a Change of
Ownership, unless such transfers are otherwise excluded pursuant to
subsection 4.6.2. Furthermore, the provisions of Sections 4.6
through 4.8 of this Agreement, and the principles set forth therein,
shall apply to any transfer or series of transfers which County can
demonstrate was primarily structured for the purpose of avoiding the
obligation to pay Net Proceeds Share set forth in Sections 4.6
through 4.8 of this Agreement and which, viewed together, would
otherwise constitute a Change of Ownership. [strike through end]
[strike through begin] 4.8.8. Payment. Net Proceeds Share shall be
due and payable concurrently with the transfer giving rise to the
obligation to pay such fees and shall be the joint and several
obligation of the transferee and transferor. In the event that the
proceeds of the transaction giving rise to the obligation to pay Net
Proceeds Share are comprised, in whole or in part, of assets other
than cash, then the cash payment of the Net Proceeds Share shall
reflect the fair market value of such non-cash assets as of the date
of the Change of Ownership, which shall be set forth in the
Calculation Notice} [strike through end]. Notwithstanding the
foregoing, [strike through begin] {in the case of a Change of
Ownership described in subsection 4.6.1(b), the Net Proceeds Share
shall be payable to County as and when the Net Transfer Proceeds
-13-
14
are received, with the Net Proceeds Share being equitably
apportioned to the payments derived by Concessionaire from said
Change of Ownership (other than any payments passed through to
County under this Agreement).} [strike through end]
[double underline begin] 4.7.9. Payment of Valuation Participation.
Where County elects to designate a Valuation Date which is a date
upon which an Outright Sale occurs, whether before or after the
seventy ninth (79th) month of the term, the Valuation Participation
shall be payable by Concessionaire in equal monthly installments of
principal and interest beginning on the first calendar month after
the occurrence of such Outright Sale. In all other events, the
Valuation Participation shall be payable by Concessionaire in equal
monthly installments of principal and interest beginning on the
first calendar month after receipt by Concessionaire of notice of
the Valuation Participation determined by County or by agreement of
the parties or by arbitration and continuing through the expiration
of the Term. Each monthly installment [double underline end] shall
be in [double underline begin] an amount necessary to amortize the
Valuation Participation, with interest at nine percent (9%) per
annum in equal payments over the remaining months of the Term. In
addition, in the event that Concessionaire has not commenced making
Valuation Participation payments to County, interest on the
Valuation Participation shall accrue at the higher of (a) eight
percent (8%) per annum or (b) the County Pool Rate, from the first
day of the first month following notice to Concessionaire of the
Valuation Participation as determined by County. Accrued interest on
the Valuation Participation shall become due and payable together
with the first of the Valuation Participation payments.
4.7.10. Credit Toward Valuation Participation. In calculating
the Valuation Participation payments, Concessionaire shall be
credited with, and the Valuation Participation reduced by, the
cumulative amount of Monthly Supplemental Rent and Annual
Supplemental Rent paid by Concessionaire to County through the end
of the month prior to the first monthly Valuation Participation
payment. The foregoing credit shall be applied, without interest, to
the Valuation Participation which is amortized for the remainder of
the Term.
4.7.11. Greater of Supplemental Rent and Valuation
Participation. From and after the date upon which the Valuation
Participation is established, County shall receive the greater of
(1) the Valuation Participation payments as determined by subsection
4.7.7. above or (2) the Monthly Supplemental Rent and Annual
Supplemental Rent payments as set forth above. For and at the end
-14-
15
of each Supplemental Rent Year, Concessionaire shall compare the
cumulative Supplemental Rent which would have been payable from the
execution of this Amendment by County to the sum of (a) the
Supplemental Rent payments actually made to County, (b) the
Valuation Participation payments actually made to County and (c)
"Excess Valuation Participation Payments" as defined herein below,
each through the end of said Supplemental Rent Year. If the
cumulative Supplemental Rent payments (including Monthly
Supplemental Rent and Annual Supplemental Rent), calculated from the
date of execution of this Amendment by County through the end of
said Supplemental Rent Year, exceed the aforementioned sum of
clauses (a), (b) and (c), Concessionaire shall pay such excess
amount (each such payment an "Excess Valuation Participation
Payment") to County within thirty (30) days following the end of
said Supplemental Rent Year.
4.7.12. Exclusion from Fair Market Rental Value.
Notwithstanding anything to the contrary in this Agreement,
Concessionaire's obligation to pay Supplemental Rent shall not be
taken into account in the renegotiation or adjustment of Annual
Minimum Rent and Percentage Rent or the determination of Fair Market
Rental Value as provided in Section 4.4 of this Agreement.
4.8. Supplemental Rent Commencement Date. Monthly Supplemental Rent
payments shall commence on the first day of the first calendar month
following execution of this Amendment by County and thereafter shall be
due and payable on the first day of each calendar month for the remainder
of the Term. Annual Supplemental Rent Payments, if any, shall be due and
payable on the first day of the second calendar month following the
expiration of each Supplemental Rent Year, with the final Annual
Supplemental Rent Payment becoming due and payable on the last day of the
Term for the final Supplemental Rent Year." [double underline end]
3. Subsection 4.2.2.9 is amended as follows, with deleted text stricken and
added text double underlined:
"4.2.2.9. Excess Payments Credit. If rent payments actually made by
Concessionaire in a particular Lease Year exceed the total rentals
actually due for that year as computed on an annual basis,
Concessionaire shall be permitted to credit that excess amount
("Excess Percentage Rent Payment") against the succeeding monthly
installments of [double underline begin] Monthly Minimum and [double
underline end] Percentage Rent otherwise due under this Section 4.2
until such time as the entire Excess Percentage Rent Payment has
been recouped. If Concessionaire makes an Excess Percentage
-15-
16
Rent Payment in the final Lease Year of the Term, County shall
refund such amount to Concessionaire within ninety (90) days of the
expiration of the Term."
4. The first sentence of Subsection 5.6.4 of the Agreement is amended as
follows, with deleted text stricken through and added text double
underlined:
"5.6.4 Performance and Payment Bonds. [double underline begin] If
the two million dollar ($2,000,000) letter of credit required by Section 8
of this Agreement has been reduced as provided therein, [double underline
end] Concessionaire shall, at its own cost and expense, have furnished
County with the following separate corporate surety bonds not less than
ten (10) days prior to the [strike through begin] Construction
Commencement Date (as defined herein below) [strike through end] [double
underline begin] commencement of construction [double underline end],
which bonds must be in form and content reasonably satisfactory to County
or with other security for the construction of the Improvements as set
forth in subsection 5.6.5 below:"
5. Subsection 5.8.1 of the Agreement is amended as follows, with deleted text
stricken through and added text double underlined:
"5.8.1. Substantial [strike through begin] {Commencement} [strike
through end] [double underline begin] Completion [double underline end] of
Construction. It is a condition of this Agreement that, except to the
extent Concessionaire is prevented from so doing by the events identified
in subsection 5.8.3, Concessionaire shall cause the [strike through begin]
{Substantial Commencement of Construction} [strike through end] [double
underline begin] completion of construction of the Improvements [double
underline end] to have occurred in accordance with the Approved Final
Plans, Specifications and Costs no later than [strike through begin]
{December 31, 1998 ("Anticipated Commencement Date") and shall
substantially complete same by May 1, 1999} [strike through end] [double
underline begin] six (6) months after the execution of the First Amendment
to this Agreement by County [double underline end] ("Anticipated
Completion Date"). [strike through begin] {For the purposes of this
Agreement, "Substantial Commencement" or "Substantial Commencement of
Construction" shall mean that (1) all "Exterior Parking Lot Area and
Asphalt Concrete (AC) Beach Access" action items, as set forth in the
Proposal for Concession Agreement for the Renovation and Operation of a
Restaurant at Pacific Coast Highway at Sunset Boulevard, prepared by
Concessionaire and dated November 4, 1996, have been completed, and (2)
all demolition and excavation, including without limitation the removal of
the existing center steel structure on the north side of the Premises
which constitutes the covered patio area, has been completed in conformity
with the Approved Final Plans, Specifications and Costs. The Anticipated
Commencement Date and} [strike through end] [double underline begin] The
[double underline end] Anticipated Completion Date [strike through begin]
{will} [strike through end] [double underline begin] may [double underline
end] only be extended under the specific circumstances set forth in this
Section 5.8, and under no other circumstances. Notwithstanding the
foregoing, the parties hereto specifically agree that so long as
Concessionaire is otherwise
-16-
17
diligently and in good faith attempting to satisfy such condition, and as
long as it would have been extremely unlikely that any other restaurant
operator could have caused the Improvements to be Substantially [strike
through begin] {Commenced and/or completed} [strike through end] [double
underline begin] Completed [double underline end] within such timeframe,
then Concessionaire will not be in breach of this subsection and not
subject to termination of this Agreement for its failure to achieve
[strike through begin] {Substantial Commencement or} [strike through end]
completion [double underline begin] of the Improvements [double underline
end] by the [strike through begin] {Anticipated Commencement Date or}
[strike through end] Anticipated Completion Date [strike through begin] {,
respectively} [strike through end]."
6. The second sentence of Subsection 5.8.2 of the Agreement is amended as
follows, with deleted text stricken through and added text double
underlined:
"During this period, delays due to fire, earthquake, [double underline
begin] unusually severe winter storms, [double underline end] flood,
tornado, civil disturbance, war, organized labor dispute or other
unforeseeable event reasonably beyond the control of Concessionaire
("Force Majeure") or a hidden condition relating to the foundation of the
Premises which is not known to Concessionaire as of the Anticipated
Commencement Date shall extend the time in which said construction must be
completed by the length of time of such delay, although Concessionaire
shall commence and complete the portions, if any, of the Improvements not
impacted by such delay within the timeframe set forth in this Agreement."
7. Section 8.1 of the Agreement is amended as follows, with deleted text
stricken through and added text double underlined:
"8.1. Decrease in Deposit. [strike through begin] {Beginning on the third
anniversary of the commencement of the Term, and on each subsequent
anniversary date, the} [strike through end] [double underline begin] The
[double underline end] amount of the irrevocable [strike through begin]
{letter} [strike through end] [double underline begin] Letter [double
underline end] of [strike through begin] {credit} [strike through end]
[double underline begin] Credit [double underline end] may be decreased by
Concessionaire upon fifteen (15) days' advance notice to County if
Concessionaire has satisfied both of the following conditions: (1)
Concessionaire has completed construction of the improvements in
substantial conformity with the Approved Final Plans, Specifications and
Costs and the Premises, as improved, are open to the public; and, (2)
Concessionaire has provided County with audited financial statements
certified by a Certified Public Accountant [double underline begin],
together with quarterly reports, certifications by officers and principals
of Concessionaire and any additional information reasonably requested by
County, [double underline end] evidencing that Concessionaire has
maintained a net worth in excess of Three Million and 00/100 Dollars
($3,000,000.00) [strike through begin] {for the most recent twelve
consecutive months} [strike through end] [double underline begin] at all
times from and after April 30, 1999. [double underline end] If
Concessionaire has satisfied both of the foregoing conditions, the amount
of the [strike through begin] {letter} [strike through end] [double
underline begin] Letter [double underline end] of [strike through begin]
{credit} [strike through end] [double underline begin] Credit [double
underline end] may be reduced [strike through begin] {to} [strike through
end] [double underline begin] and thereafter maintained at [double
underline end] an amount which represents three (3) times the
Monthly Minimum Rent then in effect. If, at any time after the amount of
the [strike through begin] {letter} [strike through end] [double underline
begin] Letter [double underline end] of [strike through begin] {credit}
-17-
18
[strike through end] [double underline begin] Credit [double underline
end] has been reduced as provided in this Section 8.1, Concessionaire's
net worth falls below Three Million and 00/100 Dollars ($3,000,000.00)
then, within ten (10) days after it receives notice of such fact,
Concessionaire shall reinstate the letter of credit to the amount of Two
Million and 00/100 Dollars ($2,000,000). Failure to so reinstate the
letter of credit shall constitute an Event of Default hereunder. For
purposes of computing Concessionaire's net worth hereunder, value may be
attributed to the undepreciated amount of the Improvements, inventory,
furniture and fixtures at the Premises, but no value shall be attributed
to the value of the name "Gladstones" or to "goodwill"."
8. Subsection 12.1.2 of the Agreement is amended as follows, with deleted text
stricken through and added text double underlined:
"12.1.2. Approval Required. At least thirty (30) days prior to the
proposed effective date of any Sublease that is not a Major Sublease or of
any amendment or assignment of such Sublease, Concessionaire shall submit
a copy of such Sublease, amendment or assignment to Director for approval,
which approval shall be given or withheld at Director's sole and absolute
discretion. To the extent practical, Director shall approve or disapprove
said proposed Sublease [double underline begin] or [double underline end]
amendment [double underline begin] thereof [double underline end]
amendment { [strike through begin] or assignment [strike through end] }
within thirty (30) days after receipt thereof. [double underline begin]
With respect to an assignment, including without limitation a Change of
Ownership and/or Outright Sale, Director shall give or withhold his
approval of said assignment, which approval shall take into account the
factors set forth in subsection 12.3.1 hereof and shall not be
unreasonably withheld or delayed, within thirty (30) days after receipt of
the materials set forth in subsection 12.2.3.1 hereof; if not given in
writing prior to the expiration of said thirty (30) day period, Director's
consent to the proposed assignment shall be deemed to be withheld. [double
underline end]
9. The final sentence of Section 12.3 of the Agreement is amended as follows,
with deleted text stricken through and added text double underlined:
"Any approved assignment of this Agreement shall release the assignor of
all liability arising on or after the effective date of such assignment,
provided the assignee assumes all of such liability. Provided, further,
the assignor shall not be relieved of any liability for the payment of the
Administrative Charge [strike through begin] {or the required portion of
any Net Proceeds Share or Net Refinancing Proceeds which arise upon}
[strike through end] [double underline begin] in connection with [double
underline end] such assignment as provided herein."
10. The final sentence of Section 13.1. is amended as follows, with deleted text
stricken through and added text double underlined:
-18-
19
"For the purposes of this Agreement, including without limitation the
provisions of Sections 4.6 through 4.8 hereof, a "Financing Event" shall
mean [strike through begin] {any financing or refinancing consummated by
Concessionaire, whether with private or institutional investors or
lenders, where such financing or refinancing is (a) [strike through end] }
an Encumbrance (as defined below) [strike through begin] { or (b) has been
underwritten based upon, or is intended to be repaid from, the proceeds of
Concessionaire's operation of the Premises or the sale, assignment or
transfer of Concessionaire's interest as provided herein} [strike through
end]."
11. Section 13.1.3.3. is amended as follows, with deleted text stricken through
and added text double underlined:
"13.1.3.3. [double underline begin] No [double underline end]
[strike through begin] {(1) Neither an} [strike through end]
Administrative Charge [strike through begin] {nor any Net Proceeds Share}
[strike through end] shall be payable in respect of or charged against any
amount payable under the Encumbrance to or for the benefit of the
Encumbrance Holder in a foreclosure proceeding [double underline begin],
nor shall such foreclosure proceeding (or any deed in lieu of such
proceeding) be deemed an Outright Sale. [double underline end] "
12. Subsection 14.4.3 is amended as follows, with deleted text stricken through
and added text double underlined:
"14.4.3. Other Amounts. The amounts necessary to compensate County
for the sums and other obligations which under the terms of this Agreement
become due prior to, upon or as a result of the expiration of the Term or
sooner termination of this Agreement, including without limitation, those
amounts of unpaid taxes, insurance premiums and utilities for the time
preceding surrender of possession, the cost of removal of rubble, debris
and other above-ground improvements, attorney's fees, court costs, and
unpaid Administrative Charges [strike through begin] {, Net Proceeds
Shares and Net Refinancing Proceeds.} [strike through end]."
13. Section 15.1 is hereby amended as follows, with deleted text stricken
through and added text double underlined:
"15.1. Maintenance of Records. In order to determine the amount of
and provide for the payment of the rent, Administrative Charge, [strike
through begin] {Net Proceeds Share, Net Refinancing Proceeds and } [strike
through end] [double underline begin] Supplemental Rent, Valuation
Participation, Excess Valuation Participation Payments and any and all
[double underline end] other sums due under this Agreement, Concessionaire
and all Sublessees, if any, shall at all times during the Term of this
Agreement, and for thirty six (36) months thereafter, keep, or cause to be
kept, locally, to the reasonable satisfaction of Director, true, accurate,
and complete records and double-entry books of account for the current and
five (5) prior Accounting Years, such records to show all transactions
relative to the
-19-
20
conduct of operations, and to be supported by data of original entry."
14. On or prior to June 30, 1999, Concessionaire shall provide County with
reasonably satisfactory written evidence that the State has consented to and
approved in writing the terms of this Amendment.
15. All other terms and conditions contained in the Agreement shall remain in
full force and effect and are hereby reaffirmed and ratified.
IN WITNESS WHEREOF, County has, by order of its Board of
Supervisors, caused this Amendment to be subscribed by the Chairman of said
Board and attested by the Clerk thereof, and Concessionaire has executed the
same on the day and year hereinbelow written.
THE COUNTY OF LOS ANGELES
By /s/ XXX XXXXX
------------------------------
Chairman, Board of Supervisors
APPROVED AS TO FORM: (CORPORATE SEAL)
XXXXX X. XXXXXXX
County Counsel ATTEST: XXXXXX XXXXXXX
--------------------------------
By /s/ XXXXXXX XXXXX EXECUTIVE OFFICER
------------------------- CLERK OF THE BOARD OF SUPERVISORS
ADOPTED By [SIG]
BOARD OF SUPERVISORS -----------------------------
COUNTY OF LOS ANGELES
SEA VIEW RESTAURANTS, INC.,
FEB 09, 1999 a California corporation
/s/ XXXXXX XXXXXXX By /s/ XXXX REDHEAD
--------------------------- ------------------------------
XXXXXX XXXXXXX Its President
EXECUTIVE OFFICER
By /s/ XXXXXX X. XXXXXXXX
-----------------------------
Its Secretary
Dated: 1/28/1999
-20-
