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AT&T LOAN
AGREEMENT
2
SECOND AMENDMENT
TO
LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Second Amendment") is
entered into as of the 11th day of October, 1996 between AT&T COMMERCIAL
FINANCE CORPORATION, a Delaware corporation ("Lender"), and L.A./IRVINE SPORTS
CLUBS, LTD., a California Limited Partnership ("Borrower").
RECITALS
A. Borrower and Lender have entered into a Loan Agreement dated
March 9, 1996 as amended by a First Amendment to Loan Agreement dated March 12,
1996 ("Loan Agreement").
B. Borrower has requested Lender to lend to Borrower an
additional $500,000 for use by Borrower in acquiring real property commonly
known as ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇ Avenue Property")
for use in connection with the Real Property (as defined in the Loan
Agreement).
C. Lender and Borrower desire to amend the Loan Agreement to
provide for the loan to Borrower of such additional $500,000 on the terms and
conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency is hereby acknowledged, the parties agree as follows:
1. AMENDMENTS TO LOAN AGREEMENT:
A. The following "Definitions" contained in Article I of
the Loan Agreement are each amended to read as follows:
"AGREEMENT: the Loan Agreement between Borrower and
Lender dated as of March 9, 1996, as amended by a First
Amendment to Loan Agreement dated as of March 12, 1996 and a
Second Amendment to Loan Agreement dated as of October 11,
1996, as the same may be amended or extended from time to
time."
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"NOTE": the Secured Promissory Note of the Borrower
dated as of March 9, 1996, as amended by a First Amendment to
Secured Promissory Note dated as of October ___, 1996, as the
same may be amended or extended from time to time."
"REAL PROPERTY": the land and improvements known as
The Sports Club/LA, being (a) an approximately 108,073 sq.
foot health club facility located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, (b) Parcel No. 6 as shown on the Anacal
Engineering Co. Survey dated February 16, 1996 located at ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, and (c) a parcel
consisting of approximately 7,000 sq. feet located at ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, all as legally
described in Schedule 1.01A."
B. Section 2.01, Term Loan, of the Loan Agreement is
amended in its entirety to read as follows:
"SECTION 2.01 TERM LOAN:
Subject to the terms and conditions contained in this
Agreement, the Lender agrees to make a loan (the "Term Loan")
to the Borrower, and the Borrower agrees to borrow from the
Lender, the aggregate principal amount of up to TWENTY-FOUR
MILLION DOLLARS ($24,000,000.00) for uses as specified in
Schedule 2.09. The Term Loan shall be evidenced by the Note."
C. Section 2.02(a), Principal in Respect of Term Loan,
is amended in its entirety to read as follows:
"(a) PRINCIPAL IN RESPECT OF TERM LOAN. The Term
Loan shall be payable without setoff, deduction or
counterclaim in eighty-four (84) consecutive monthly
installments on the first day of each month (the "Monthly Due
Dates") commencing May 1, 1996, and continuing until April 1,
2003, on which date all remaining outstanding principal and
accrued interest thereon shall be due and payable in full
without setoff, deduction or counterclaim. Monthly payments
of principal in respect of the initial funding advanced under
the Term
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Loan ("initial payment amount") shall, for the monthly
payments due May 1, 1996 through October 1, 1996, be, when
combined with the corresponding interest payment, a fixed
payment calculated based on a fifteen (15) year mortgage
amortization schedule. Monthly payments of principal for the
monthly payment due November 1, 1996 and thereafter, shall be,
when combined with the corresponding interest payment,
comprised of the initial payment amount plus a fixed payment
calculated based on a fourteen (14) year six (6) month
mortgage amortization schedule of the second funding of
$500,000 under the Term Loan."
D. Section 2.08 is hereby amended in its entirety to
read as follows:
"The Borrower's obligations and the Indebtedness to
the Lender hereunder and under the Note shall be secured at
all times by:
(a) a Deed of Trust and Security Agreement and
Fixture Filing of the Borrower dated as of March 9, 1996 as
amended by a First Amendment to Deed of Trust and Security
Agreement and Fixture Filing dated as of October 11, 1996
("Initial Deed of Trust") encumbering Parcels 1 through 7,
inclusive, of the Real Property as a first priority lien,
subject only to any prior liens expressly permitted under this
Agreement, together with mortgagee's title insurance policy
acceptable to the Lender;
(b) a Deed of Trust and Security Agreement and
Fixture Filing of the Borrower dated as of October 11, 1996
("Subsequent Deed of Trust") encumbering Parcel 8 of the Real
Property as a first priority lien, subject only to any prior
liens expressly permitted under this Agreement, together with
mortgagee's title insurance policy acceptable to the Lender
(the Initial Deed of Trust and the Subsequent Deed of Trust,
collectively the "Deed of Trust");
(c) a Security Agreement of the Borrower dated as
of March 9, 1996 as amended by a First Amendment to Security
Agreement dated as of October 11, 1996 ("Security Agreement")
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granting to the Lender a continuing first priority perfected
security interest in all presently owned and hereafter
acquired tangible and intangible personal property and
fixtures of the Borrower, subject only to any prior liens
expressly permitted under this Agreement in Schedule 2.08A,
but excluding that equipment financed by Bank of America and
described in Exhibit "B" to the Security Agreement;
(d) an Assignment of Leases and Rents of the
Borrower dated March 9, 1996 as amended by a First Amendment
to Assignment of Leases and Rents dated as of October 11, 1996
("Initial Assignment of Rents") granting to Lender a first
priority security interest in all leases of Parcels 1 through
7, inclusive, of the Real Property and other sources of income
relating to said parcels of the Real Property, subject only to
any prior liens permitted under this Agreement, together with
such third party consents, lien waivers, subordination
agreements and estoppel certificates as the Lender shall
reasonably require;
(e) an Assignment of Leases and Rents of the
Borrower dated as of October 11, 1996 ("Subsequent Assignment
of Rents") granting to the Lender a first priority security
interest in all leases of Parcel 8 of the Real Property and
other sources of income relating to said parcel of the Real
Property, subject only to any prior liens permitted under this
Agreement, together with such third party consents, lien
waivers, subordination agreements and estoppel certificates as
Lender shall reasonably require (the Initial Assignment of
Rents and the Subsequent Assignment of Rents, collectively the
"Assignment of Rents");
(f) Pledge Agreements executed by all Pledgors
dated as of March 9, 1996 ("Pledge Agreements") effecting
thereby a first priority perfected pledge of (i) all
partnership interests in the Borrower, (ii) all voting trust
certificates issued in respect of the partnership interests of
the Borrower, or any extension or renewal thereof, and (iii)
all options and other rights to
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acquire any such partnership interests;
(g) a Collateral Assignment of Operating
Contracts and Purchase Agreements dated as of March 9, 1996 as
amended by a First Amendment to Collateral Assignment of
Operating Contracts and Purchase Agreements dated as of
October 11, 1996 ("Collateral Assignment") granting to the
Lender a first priority perfected security interest in such
service contracts, construction contracts, management
agreements, franchise agreements, licenses, permits,
indemnification rights, leases, trademark licenses, accounts,
authorizations and agreements as the Lender shall deem
necessary to protect its interests, subject only to any prior
license expressly permitted under this Agreement, together
with such third party consents, lien waivers and estoppel
certificates as the Lender shall reasonably require;
(h) subordinations in favor of the Lender,
pursuant to subordination agreements satisfactory to the
Lender in form and substance (collectively the "Affiliate
Subordination Agreements"), of all indebtedness of the
Borrower to any Affiliates of the Borrower, designated by the
Lender;
(i) the subordination in favor of the Lender,
pursuant to subordination agreements satisfactory to the
Lender in form and substance (collectively, the "Subordination
Agreements"), of all indebtedness of the Borrower to any
lenders to the Borrower and any creditors of the Borrower
holding a note or non-competition agreement executed by the
Borrower, as obligor thereunder, designated by the Lender,
together with UCC-2 and such other lien subordination
documents as the Lender shall require;
(j) a Special Deposit Account Agreement executed
by the Borrower and its bank confirming the Lender's security
interest in the Borrower's bank account and providing for the
Lender's rights in such bank account upon the occurrence of an
Event of Default; and
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(k) those additional agreements, instruments,
certificates and documents described in Schedule 2.08B.
All agreements and instruments described or
contemplated in this Section 2.08, together with any and all
other agreements and instruments heretofore or hereafter
securing the Note and the Borrower's obligations hereunder or
otherwise executed in connection with this Agreement, shall in
all respects be acceptable to the Lender and its special
counsel in form and substance, and such agreements and
instruments, as the same may be amended from time to time, are
sometimes hereinafter referred to collectively as the
"Security Documents" and individually as a "Security
Document." The Borrower agrees to take such action as the
Lender may reasonably request from time to time in order to
cause the Lender to be secured at all times as described in
this Section 2.08, and the Lender's security interests to be
perfected at all times."
E. Schedule 1.01A to the Loan Agreement is amended and
restated in its entirety as set forth in Schedule 1.01A attached hereto as
Exhibit A.
F. Schedule 2.08A to the Loan Agreement is amended and
restated in its entirety as set forth in Schedule 2.08A attached hereto as
Exhibit B.
G. Schedule 2.08B to the Loan Agreement is amended and
restated in its entirety as set forth in Schedule 2.08B attached hereto as
Exhibit C.
H. Schedule 2.09 to the Loan Agreement is amended and
restated in its entirety as set forth in Schedule 2.09 attached hereto as
Exhibit D.
2. CONDITIONS TO EFFECTIVENESS. This Second Amendment shall
become effective on the date (such date being referred to herein as the "Second
Amendment Effective Date") on which each of the conditions set forth in Exhibit
E attached hereto have been fully satisfied or waived by the Lender.
3. BORROWER'S REPRESENTATIONS AND WARRANTIES. In order to induce
the Lender to enter into this Second Amendment and to amend the Loan Agreement
in the manner provided herein, the Borrower represents and warrants to the
Lender that the following statements
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are true, correct and complete:
A. Borrower has all requisite corporate power and
authority to enter into this Second Amendment and to carry out the transactions
contemplated by and perform its obligations under, the amendments to the
Transaction Documents executed in connection with this Second Amendment and
more fully described in Exhibit F attached hereto (collectively, the
"Amendments to Transaction Documents").
B. The execution and delivery of this Second Amendment
and the performance of the Amendments to Transaction Documents have been duly
authorized by all necessary corporate action by Borrower.
C. The execution and delivery by Borrower of this Second
Amendment and the performance by Borrower of the Amendments to Transaction
Documents do not and will not (i) violate any provision of any law, rule or
regulation applicable to Borrower, the partnership agreement of Borrower, (ii)
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any material contractual obligation of Borrower,
(iii) result in or require the creation or imposition of any lien upon any of
their properties or assets, or (iv) require any approvals other than by the
partners of the Borrower.
D. The execution and delivery by Borrower of this Second
Amendment and the performance by Borrower of the Amendments to Transaction
Documents do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any Federal, state
or other governmental authority or regulatory body or other person.
E. This Second Amendment and the Amendments to
Transaction Documents are the legally valid and binding obligations of
Borrower, enforceable against it in accordance with their respective terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability.
F. The representations and warranties contained in
Article IV of the Loan Agreement are and will be true, correct and complete in
all material respects on and as of the date hereto to the same extent as though
made on and as of that date, except to the extent that such representations and
warranties specifically relate to an earlier date, in which case they are true,
correct and complete in all material respects as of such earlier date.
G. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Second
Amendment which would constitute an Event of Default
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(as defined in the Loan Agreement) or an event which with the passage of time
or the giving of notice or both which would constitute such an Event of
Default.
4. BORROWER COVENANTS. In order to induce the Lender to enter
into this Second Amendment and to amend the Loan Agreement in the manner
provided herein, the Borrower covenants and agrees as follows:
A. On or before December 31, 1996, the Borrower shall
cause all asbestos to be removed from the ▇▇▇▇▇▇▇ Avenue Property and the
delivery to the Lender of evidence satisfactory to the Lender confirming
completion of such asbestos removal in accordance with applicable law.
B. On or before December 31, 1996, the Borrower shall
complete the demolition of the building presently on the ▇▇▇▇▇▇▇ Avenue
Property and the paving of the ▇▇▇▇▇▇▇ Avenue Property as a parking lot. In
connection with such demolition and paving, the Borrower shall provided to the
Lender copies of all contracts, plans and other information related to such
demolition and/or paving reasonably requested by the Lender.
Failure to comply timely with either or both of the foregoing covenants shall
constitute an Event of Default under the Loan Agreement as amended by this
Second Amendment.
5. MISCELLANEOUS.
A. Reference to and effect on the Loan Agreement:
(i) On and after the Second Amendment Effective
Date, each reference in the Loan Agreement to "this
Agreement", "hereunder", "hereof", "herein", or words of like
import referring to the Loan Agreement shall mean and be a
reference to the Loan Agreement as amended by this Second
Amendment.
(ii) Except as specifically amended by this Second
Amendment, the Loan Agreement shall remain in full force and
effect and is hereby ratified and confirmed.
(iii) The execution, delivery and performance of
this Second Amendment shall not constitute a waiver of any
provision of, or operate as a waiver of any right, power or
remedy of the Lender under, the Loan Agreement or any of the
other Amended Transaction Documents.
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B. This Second Amendment may be executed in any number of
counterparts, and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts taken together shall constitute but one and the same instrument.
C. Section and subsection headings in this Second Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Second Amendment for any other purpose or be given any substantive
effect.
D. THIS SECOND AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO AND ALL OTHER ASPECTS HEREOF SHALL BE DEEMED TO BE MADE UNDER,
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF CALIFORNIA.
6. LIMITATION ON RECOURSE. Notwithstanding any of the foregoing,
Lender's recourse to Borrower for its failure to perform under the Loan
Agreement, as hereby amended, and Borrower's liability to Lender for such
failure to perform, are limited by the provisions of Section 11.01 of the Loan
Agreement, which Section 11.01 is expressly incorporated herein by reference as
though set forth in this Second Amendment in full.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to Loan Agreement as of the date first above written.
L.A./IRVINE SPORTS CLUBS, LTD.,
a California Limited Partnership
By: Sports Club, Inc. of California,
a California corporation
General Partner
By: ▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇, President
AT&T COMMERCIAL FINANCE CORPORATION,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Vice President
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