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EXHIBIT 10.2
AGREEMENT REGARDING LETTERS OF CREDIT
This AGREEMENT REGARDING LETTERS OF CREDIT ("Agreement") is
executed as of December 10, 1998, by and among MDA-SAN BERNARDINO ASSOCIATES,
LLC, a Delaware limited liability company ("Borrower"), GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation ("Lender"), and CINEMASTAR LUXURY
THEATERS, INC., a Delaware corporation ("Tenant").
R E C I T A L S :
A. Lender and Borrower have entered into that certain
Construction Loan Agreement of even date herewith (the "Loan Agreement")
pursuant to which Lender has agreed to make a construction loan to Borrower (the
"Loan") in the maximum principal amount of Three Million Six Hundred Thousand
Dollars ($3,600,000). The Loan is evidenced by a Promissory Note Secured By
Construction Deed of Trust of even date herewith ("Note") in the amount of
$3,600,000. The Note is secured by, among other things, (i) a Construction Deed
of Trust, Security Agreement, Agreement of Rents, and Fixture Filing of even
date herewith (the "Deed of Trust") encumbering certain real property located in
the City of San Bernardino, County of San Bernardino, California, and more
particularly described in the Deed of Trust (the "Property") and (ii) an
Assignment of Leases and Rents ("Lease Assignment") of even date herewith
executed by Borrower in favor of Lender. Pursuant to the Loan Agreement,
Borrower, Lender, the Redevelopment Agency of the City of San Bernardino
("Agency") and First American Title Insurance Company ("Fiscal Agent") have also
entered into a Fiscal Agent Construction Loan Disbursement Agreement
("Disbursement Agreement"). Unless otherwise expressly defined herein all
capitalized terms used herein shall have the meanings ascribed to them in the
Theater Lease (defined below).
B. Pursuant to that certain Multi-Plex Theater Lease dated
December 20, 1996, by and between Borrower and Tenant, as amended by a First
Amendment to Multi-Plex Lease ("First Amendment"), dated December 10, 1998 for
identification purposes (collectively, the "Theater Lease"), Tenant is required
to obtain the following letters of credit ("Letters of Credit") in order to
provide assurances that Tenant will be financially able to commence and complete
Tenant's obligations with respect to construction of the Building (as Theater
defined in the Theater Lease) and installation of the FF&E (as defined in the
Theater Lease).
1. An unconditional and irrevocable standby letter of credit
("$2 Million LC") issued to and in a form approved by Lender and which
may be drawn upon from time to time upon a default by Tenant under the
Theater Lease which is not cured within the applicable grace period
provided under the Theater Lease ("Tenant Default") as provided in
Section 2.3(a) of the Theater Lease, as amended by the First Amendment
("$2 Million LC Draw Event") .
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2. An unconditional and irrevocable standby letter of credit
in the amount of $275,000 ("Contingency LC") issued to and in a form
approved by Lender which may be drawn upon from time to time upon
Tenant's failure to deposit with the Fiscal Agent or Lender (as
hereinafter provided below) an amount equal to the Tenant Work Cost
Deficiency Amount as provided in Section 2.2.2.6 of the Theater Lease,
as amended by the First Amendment ("Contingency LC Draw Event"). As used
herein, the term "Tenant Work Cost Deficiency Amount" means the amount
by which the unpaid balance of the Tenant Work Costs exceed or will
exceed the remaining balance of the Tenant Improvement Allowance, as
reasonably determined by Landlord (or Lender upon the occurrence of an
Event of Default (as defined in the Deed of Trust) ).
A fully executed copy of the First Amendment is attached hereto as Exhibit A.
C. Lender is not willing to make the Loan, or otherwise extend
credit, to Borrower unless Borrower assigns and pledges all of its right, title
and interest in and to the Letters of Credit and the Letter of Credit Funds
(defined below) upon the terms and subject to the limitations provided herein.
A G R E E M E N T :
NOW, THEREFORE, as an inducement to Lender to make the Loan to
Borrower, and to extend such additional credit as Lender may from time to time
agree to extend under the Loan Documents, and for other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties do hereby agree as follows:
1. Creation of Security Interest. This Agreement is intended to
create, and Borrower does hereby grant, assign and set-over to Lender, a
first-lien security interest in all of Borrower's right, title and interest now
or hereafter acquired in and to (a) the Letters of Credit and Borrower's rights
under the Theater Lease with respect to the Letters of Credit, and (b) any funds
comprising the Letters of Credit which may hereafter be drawn upon and deposited
with the Fiscal Agent or with Lender ("Letter of Credit Funds"). In order to
perfect Lender's security interest in the Letters of Credit and the Letter of
Credit Funds, Borrower has concurrently herewith delivered to Lender the
original Letters of Credit issued to and approved by Lender. Lender hereby
approves the forms of Letters of Credit attached to the First Amendment as
Exhibit "1" and "9", respectively.
2. Letters of Credit.
(a) Until the occurrence of an Event of Default (as
defined in and pursuant to the Deed of Trust) but subject to the
limitations contained in this Agreement and in the consent agreement
attached hereto signed by Fiscal Agent, Borrower shall have all rights
under the Theater Lease to draw upon the Letters of Credit as otherwise
permitted under the Theater Lease. If prior to an Event of Default under
the Deed of Trust, Borrower has the right under the Theater Lease to
draw upon one or more of the
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Letters of Credit, Borrower shall deliver to Lender a written request
("Letter of Credit Draw Request"), certifying to Lender that Borrower
has the right to draw on such Letter of Credit and specifying in detail
the nature of the Draw Event (defined below) and the amount of the
requested draw amount ("Draw Amount"). Each Letter of Credit Draw
Request shall be accompanied by evidence reasonably satisfactory to
Lender that a Draw Event has occurred and that Borrower has a right
under the Theater Lease to draw upon such Letter of Credit. Within five
(5) days of Lender's receipt of a Letter of Credit Draw Request, Lender
shall draw down upon the applicable Letter of Credit in accordance with
the Letter of Credit Draw Request and will apply the Letter of Credit
funds so drawn as provided in Subsection (d) below. Tenant irrevocably
authorizes Lender, without notice to Tenant, to comply with any Letter
of Credit Draw Request received by Lender from Borrower. Borrower agrees
not to deliver such Letter of Credit Draw Request unless and until the
conditions precedent to such draw under the Theater Lease have been
satisfied.
(b) From and after the occurrence and during the
continuance of an Event of Default under the Deed of Trust, Lender (or
its nominee) shall have the automatic and immediate right, but not the
obligation, in its sole and absolute discretion, to exercise any and all
rights of Borrower under the Theater Lease with respect to the Letters
of Credit and/or the Letter of Credit Funds. Lender shall also have the
right, but not the obligation, to take in its name or in the name of the
Borrower such action as Lender may at any time (whether or not an Event
of Default has occurred) reasonably determine to be necessary or
advisable to protect the rights of Borrower or Lender with respect to
the Letters of Credit and/or the Letter of Credit Funds; provided
however, that so long as no Event of Default has occurred, Lender shall
not take any such action until it has given Borrower ten (10) prior days
written notice thereof and Borrower has failed to take such action
within such ten (10) day period, unless in Lender's reasonable judgment,
immediate action is necessary to protect the security provided hereby,
in which case no prior notice shall be required (provided, however,
Lender shall notify Borrower and Tenant of the actions taken by Lender
within five (5) days) after such action is taken). Lender shall incur no
liability if any action so taken by it, or on its behalf shall prove to
be inadequate or invalid, provided, however, Lender shall draw upon the
Letters of Credit only as and when Borrower would be entitled to do so
under the Theater Lease.
(c) Borrower shall at all times (i) provide Lender
with copies of all notices, requests and other communications concerning
any default by Tenant under the Theater Lease, the Letters of Credit,
and/or Borrower's request that a Tenant Work Cost Deficiency Amount be
deposited by Tenant concurrently if delivered to Tenant by Borrower or
within five (5) days if received by Borrower from Tenant; (ii)
immediately notify Lender in writing upon the occurrence of each and
every Tenant Default, and each and every $2 Million Draw Event and
Contingency Draw Event (collectively, a "Draw Event") (each defined
below).
(d) Notwithstanding anything contained in the Theater
Lease, any amounts drawn on either of the Letters of Credits shall be
deposited as follows:
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(i) Any amounts drawn on the Contingency LC
("Contingency Funds") shall not be delivered to Borrower but
shall be deposited: (a) so long as none of the Loan proceeds have
been disbursed, with the Fiscal Agent to be held and disbursed in
payment of Tenant Work Costs in accordance with the terms of the
Loan Agreement and the Disbursement Agreement, and (b) from and
after the initial advance of Loan proceeds, with Lender to be
held and disbursed in payment of Tenant Work Costs in accordance
with the terms of the Loan Agreement and the Disbursement
Agreement . The Contingency Funds so deposited with the Fiscal
Agent or Lender will be disbursed before any further Loan
proceeds in payment of Tenant Work Costs will be disbursed.
(ii) Any amounts drawn on the $2 Million LC ("$2
Million Funds") shall not be delivered to Borrower but shall be
deposited with Lender and applied as follows:
(A) to the extent any portion of the $2
Million Funds are drawn upon due to a Tenant Default with
respect to the cost of the acquisition and installation of
Theater Tenant FF&E (as defined in the Loan Agreement)
("FF&E Costs"), then such Letter of Credit funds shall be
deposited with Lender to be disbursed towards the payment
of FF&E Costs in accordance with the terms of the Loan
Agreement;
(B) to the extent any portion of the $2
Million Funds are drawn upon due to a Tenant Default with
respect to the failure to pay Tenant Work Costs or
complete the Building as required under the Theater Lease,
then such Letter of Credit Funds shall be deposited with
Lender to be disbursed in payment of Tenant Work Costs in
accordance with the terms of the Loan Agreement and the
Disbursement Agreement and before any further loan
proceeds in payment of Tenant Work Costs will be
disbursed;
(C) to the extent the $2 Million Funds are
drawn upon due to a Tenant Default other than with respect
to FF&E Costs or Tenant Work Costs ("Non-Construction
Default Funds"), then Lender shall apply up to $1,000,000
in the aggregate of the Non-Construction Default Funds to
cure or partially cure such Tenant Default in accordance
with the terms of the Theater Lease to be disbursed or
applied or as the case may be, in accordance with the
terms of the Loan Agreement.
(D) At such time as the earlier of (i) the
Loan is repaid, in full and all obligations of the
Borrower under the Loan Documents are fully satisfied, or
(ii) upon Borrower's notice to Lender that Tenant has
satisfied the conditions for the return of the Letters of
Credit set forth in the First Amendment, Lender shall
return the Letters of Credit, and any remaining Letter of
Credit Funds not previously disbursed pursuant to this
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Agreement to Borrower. Borrower agrees to give Lender such
notice promptly upon Tenant's satisfaction of such
conditions. Borrower agrees to return such Letters of
Credit and any remaining Letter of Credit Funds not
previously disbursed to the Tenant in accordance with the
terms of the Lease. Lender will execute such assignment
documents, including without limitation Annex A to the
Letters of Credit as Borrower may reasonably request to
transfer the Letters of Credit to Borrower.
(e) Neither this Agreement nor any action taken or not
taken by Lender hereunder shall constitute an assumption by Lender of
any obligations under the Theater Lease and Borrower and Tenant shall
continue to be liable for their respective obligations under the Theater
Lease. Borrower agrees to indemnify, defend (with counsel of Lender's
choice), protect and hold Lender free and harmless from and against any
loss, cost, liability or expense (including but not limited to
attorney's fees and costs) (collectively, "Losses") incurred by Lender
in connection with Lender's exercise of any of its rights under this
Agreement and/or in connection with any draw upon either of the Letters
of Credit made by Lender under this Agreement and/or in connection with
the disbursement of the Letter of Credit Funds, excluding any Losses
resulting solely from the gross negligence or willful misconduct of
Lender. Borrower and Tenant hereby agree to release and hold harmless
Lender, for any action (or inaction) taken by Lender with respect to the
Letters of Credit and/or the Letter of Credit Funds under this
Agreement, excluding any Losses resulting solely from the gross
negligence or willful misconduct of Lender.
(f) If Tenant fails to deposit renewal Letter(s) of
Credit as and when required under the Letters of Credit, Lender shall
immediately and without any notice to Borrower or Tenant have the right
to draw down the Letters of Credit and hold all Letter of Credit Funds
until replacement letters of credit issued to Lender from the same
issuing bank and in the same form as the Letters of Credit ("Replacement
Letters of Credit") are delivered to Lender. Until such time as
Replacement Letters of Credit are delivered to Lender, Lender shall hold
and disburse the Letter of Credit Funds in accordance with the terms of
this Agreement.
3. No Amendments to Lease. Neither Borrower nor Tenant will
agree to or enter into any amendment, restatement modification or termination of
the Theater Lease including without limitation with respect to the Letters of
Credit, without the prior written consent of Lender, which consent may be
withheld in Lender's sole and absolute discretion.
4. No Waiver of Rights. Borrower shall not waive, forgo or
otherwise diminish any rights with respect to the Letters of Credit or the
Letter of Credit Funds. Borrower shall enforce, at its sole cost and expense,
Tenant's obligations under the Theater Lease.
5. Transfer of Collateral. In addition to the restrictions
contained in the other Loan Documents, Borrower shall not sell, transfer,
convey, assign, or further hypothecate or encumber, either voluntarily or
involuntarily, all or any portion of its interests in and to the
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Theater Lease (including, without limitation, the Letters of Credit or the
Letter of Credit Funds), without the prior written consent of Lender which
consent may be withheld in Lender's sole and absolute discretion, excluding
assignments to the Agency pursuant to the Agency Second Loan Documents and
Agency Third Loan Documents (as defined in the Loan Documents) and approved by
Lender.
6. Notices. Borrower agrees to deliver to Lender a copy of any
notice, demand or other writing delivered to or received from Tenant under the
Theater Lease promptly following the giving or receiving of same.
7. Payment of Expenses. In the event that Borrower should
breach or fail to timely perform any provisions of this Agreement, Borrower
shall, immediately upon demand by Lender, pay Lender all costs and expenses
(including court costs and attorneys' fees) incurred by Lender in the
enforcement hereof or the preservation of Lender's rights hereunder, and
including attorneys' fees and costs incurred in connection with any and all
bankruptcy proceedings such as, for example and without limitation, relief from
stay proceedings brought by Lender. The covenant contained in this section shall
survive the payment of the Loan and performance of the Borrower's obligations
under the Loan Documents.
8. Waiver. No failure to exercise, and no delay in exercising,
on the part of Lender, any right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right. The rights of Lender
hereunder shall be in addition to all other rights provided by law. No
modification or waiver of any provision of this Agreement, nor consent to
departure therefrom, shall be effective unless in writing and no such consent or
waiver shall extend beyond the particular case and purpose involved. No notice
or demand given in any case shall constitute a waiver of the right to take other
action in the same, similar or other instances without such notice or demand.
9. Notice. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered or sent, as the
case may be, by any of the following methods: (i) personal delivery; (ii)
nationally recognized overnight commercial carrier or delivery service; (iii)
registered or certified mail (with postage prepaid and return receipt requested)
or (iv) by facsimile transmission with a "hard" copy delivered within the next
two (2) business days addressed as follows:
"Lender" GMAC Commercial Mortgage Corporation
100 South Wacker Drive, Suite 400
Chicago, Illinois 60606
Attention: Phillip J. Keel
Telecopier No.: (312) 845-8623
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"Borrower" MDA-San Bernardino Associates, LLC
300 Continental Boulevard, Suite 360
El Segundo, California 90245
Attention: Jason Kamm
Telecopier No.: (310) 416-8741
"Tenant" CinemaStar Luxury Theaters, Inc.
12230 El Camino Real, Suite 320
San Diego, California 92130
Attention: Frank Moreno, President
Notices shall be deemed given upon receipt at the address set
forth above. Notice of any change of address or of the person to whom notices
are to be sent shall be given in the manner set forth in this Section 10.
10. Governing Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California. Borrower hereby irrevocably submits to the jurisdiction of any court
of competent jurisdiction located in the State of California in connection with
any proceeding out of or relating to this Agreement.
11. Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be fully
severable and this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of this Agreement,
and the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Agreement, unless such continued
effectiveness of this Agreement, as modified, would be contrary to the basic
understandings and intentions of the parties as expressed herein.
12. Amendments. This Agreement may be amended only by an
instrument in writing executed by the party or an authorized representative of
the party against whom such amendment is sought to be enforced.
13. Parties Bound; Agreement. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives; provided, however, that Borrower
may not, without the prior written consent of Lender, assign any of its rights,
powers, duties or obligations hereunder. In the event Lender assigns its
interest in either or both of the Letters of Credit and/or to any Letter of
Credit Funds to a third party, Lender will provide any such third party with a
copy of this Agreement.
14. Headings. Section headings are for convenience of reference
only and shall in no way affect the interpretation of this Agreement.
15. Recitals. The recital and introductory paragraphs hereof are
a part hereof, form a basis for this Agreement and shall be considered prima
facie evidence of the facts and documents referred to therein.
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16. WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER AND TENANT HEREBY
AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND
WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL
NOW OR HEREAFTER EXIST WITH REGARD TO THIS AGREEMENT, THE DEED OF TRUST, OR THE
OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY
AND VOLUNTARILY BY BORROWER AND TENANT, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
17. Exhibits Incorporated; Number and Gender. Any Exhibits
attached hereto are incorporated herein by reference and expressly made a part
of this Agreement for all purposes. References to any Exhibit in this Agreement
shall be deemed to include this reference and incorporation. As used in this
Agreement, the masculine gender shall include the feminine and neuter, and
singular number shall include the plural, and vice versa. Time is of the essence
of this Agreement. Each party hereto acknowledges, represents, and warrants that
(i) each party hereto is of equal bargaining strength; (ii) each such party has
actively participated in the drafting, preparation, and negotiation of this
Agreement; (iii) each such party hereto has had the opportunity to have such
party's independent counsel review this Agreement; and (iv) any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not apply in the interpretation of this Agreement, any
portion hereof, any amendments hereto, or any Exhibits attached hereto.
18. Remedies Cumulative. All rights and remedies of Lender
provided for herein and in any other Loan Document are cumulative and shall be
in addition to all other rights and remedies provided by law.
19. Third Party Transfers. Lender agrees that concurrently with
any transfer or assignment of either or both of the Letters of Credit and/or any
Letter of Credit Funds to a third party, Lender shall advise such transferee of
the conditions or draw set forth in the Lease and as an additional condition to
drawing upon the Letters of Credit, such third party shall give Tenant at least
five (5) days prior notice of intent to draw.
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EXECUTED as of the day and year first above written.
"Borrower" MDA-SAN BERNARDINO ASSOCIATES,
L.L.C., a Delaware limited liability company
By: MDA Investors No. 1, L.L.C.,
a Delaware limited liability Company
Its: Managing Member
By: MJL Associates,
a California limited partnership
Its: Managing Member
By: MJL Investments, Inc.,
a California corporation
Its: General Partner
By:___________________________
Name:_________________________
Title:________________________
[SIGNATURES CONTINUED]
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"Tenant" CINEMASTAR LUXURY THEATERS, INC., a Delaware
corporation
By:_________________________________
Name:___________________________
Title:__________________________
[SIGNATURES CONTINUED]
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"Lender" GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation
By:________________________________
Name:__________________________
Title:_________________________
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CONSENT TO AGREEMENT REGARDING LETTERS OF CREDIT
FIRST AMERICAN TITLE INSURANCE COMPANY ("Fiscal Agent") hereby
acknowledges and agrees that it has received a copy of the foregoing Agreement
Regarding Letters of Credit dated of even date herewith and Fiscal Agent and
Tenant each acknowledges and agrees further as follows:
1. Consent to Assignment. To the extent that the grant of the
security interest and assignment by Borrower of its right, title and interest in
and to the Letters of Credit and the Letter of Credit Funds and the enforcement
of the terms hereof with respect thereto require the consent, approval or action
of Fiscal Agent or Tenant, Fiscal Agent and Tenant hereby grant such consent and
approval.
2. Notice of Security Interest. Notice is hereby given to Fiscal
Agent under California Commercial Code Section 9302(1)(g)(ii) of Borrower
granting to Lender a first-lien security interest in, among other collateral,
Borrower's right, title and interest in and to the Letters of Credit and the
Letter of Credit Funds some of which may be deposited from time to time with
Fiscal Agent pursuant to the terms of the Agreement to be held and disbursed by
Fiscal Agent pursuant to the terms of the Disbursement Agreement.
3. Notices. All notices or other communications required or
permitted pursuant to this consent agreement shall be delivered in the same
manner as required under Paragraph 10 of the Agreement. If such notice or
communication is to be delivered to Escrow Holder, it shall be addressed as
follows:
"Fiscal Agent" First American Title Insurance Company
323 Court Street
San Bernardino, California 92412
Attention: Lee Ann Adam
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IN WITNESS WHEREOF, the parties hereto have executed this Consent
to Agreement Regarding Letters of Credit effective as of the date and year first
written above under the Agreement.
"Fiscal Agent" FIRST AMERICAN TITLE INSURANCE COMPANY
By:________________________________
Print Name: _________________________
Title: ______________________________
[SIGNATURES CONTINUED]
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"Tenant" CINEMASTAR LUXURY THEATERS, INC., a Delaware
corporation
By:__________________________________
Name:_____________________________
Title:____________________________
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