-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F503O5jY8o5CTwFMbdd5j0y2V9FZafqkIrjnhyUdfgS1FOiAxXr1SZuRHix0VgIZ x6B/G+nVWQow0aqp2V0xfw== 0001047469-98-006987.txt : 19980220 0001047469-98-006987.hdr.sgml : 19980220 ACCESSION NUMBER: 0001047469-98-006987 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980219 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA CULINARY ACADEMY INC CENTRAL INDEX KEY: 0000858915 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 943042862 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-21932 FILM NUMBER: 98545841 BUSINESS ADDRESS: STREET 1: 625 POLK ST CITY: SAN FRANCISCO STATE: CA ZIP: 94102 BUSINESS PHONE: 4157713536 MAIL ADDRESS: STREET 1: 625 POLK ST CITY: SAN FRANCISCO STATE: CA ZIP: 94102 10QSB 1 FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] Quarterly report pursuant section 13 or 15(d) of the Securities and Exchange Act of 1934 for the quarterly period ended December 31, 1997. [ ] Transition report pursuant to section 13 or 15(d) of the Securities and Exchange Act of 1934 for the transition period from _________ to _________. COMMISSION FILE NUMBER: 0-21932 CALIFORNIA CULINARY ACADEMY, INC. (Exact name of small business issuer in its charter) California 94-3042862 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 625 Polk Street San Francisco, CA 94102 (Address of principal executive offices) (Zip Code) Issuer's Telephone Number: (415) 771-3536 Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . ----- ----- The number of shares outstanding of the registrant's Common Stock as of December 31, 1997, was 3,771,020. Transitional Small Business Disclosure Format. Yes No X . ----- ----- PART I - FINANCIAL INFORMATION Item 1. Financial Statements CALIFORNIA CULINARY ACADEMY, INC. BALANCE SHEETS (IN THOUSANDS)
December 31, June 30, December 31, 1997 1997 1996 ------------ ---------- ------------- (UNAUDITED) (NOTE 1) (UNAUDITED) ASSETS Current Assets: Cash and cash equivalents $ 1,293 $2,308 $ 2,264 Accounts receivable 3,397 2,847 3,378 Inventories 291 341 325 Prepaid expenses and other assets 581 531 280 ------------ ---------- ------------- Total Current Assets 5,562 6,027 6,247 ------------ ---------- ------------- Property and equipment, net 7,000 4,965 4,935 Other assets 646 634 1,082 ------------ ---------- ------------- TOTAL ASSETS $13,208 $11,626 $12,264 ------------ ---------- ------------- ------------ ---------- ------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued liabilities $1,056 $1,188 $ 982 Deferred revenue 4,011 3,212 3,980 Current portion of long term debt 89 117 77 Other current liabilities 401 444 393 ------------ ---------- ------------- Total Current Liabilities 5,557 4,961 5,432 ------------ ---------- ------------- Long term debt 1,324 148 226 Other non-current liabilities 438 Convertible Preferred stock 91 953 976 Common stock 10,635 9,649 9,144 Accumulated deficit (4,399) (4,085) (3,952) ------------ ---------- ------------- Total Shareholders' Equity 6,327 6,517 6,168 ------------ ---------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,208 $11,626 $12,264 ------------ ---------- ------------- ------------ ---------- -------------
See notes to condensed financial statements 2 CALIFORNIA CULINARY ACADEMY, INC. CONDENSED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended Six Months Ended December 31, December 31, --------------------- --------------------- 1997 1996 1997 1996 -------- -------- -------- -------- Revenues: Culinary arts education $3,231 $3,022 $6,514 $6,032 Restaurants & catering and other 951 767 1,603 1,286 ----------- ---------- ---------- ---------- Total revenues 4,182 3,789 8,117 7,318 Cost of sales Food & beverage 460 415 886 786 Other cost of sales 390 398 802 729 ----------- ---------- ---------- ---------- 850 813 1,688 1,515 ----------- ---------- ---------- ---------- Gross Margin 3,332 2,976 6,429 5,803 Operating expenses Occupancy 514 430 958 875 Depreciation & amortization 282 299 551 564 Compensation & benefits 1,684 1,308 3,305 2,639 Outside services 181 180 385 302 Advertising & promotion 209 118 394 266 Legal & other 617 451 1,204 886 ----------- ---------- ---------- ---------- 3,487 2,786 6,797 5,532 Interest income (expense) (11) 20 5 14 ----------- ---------- ---------- ---------- Income (loss) before provision for income taxes (166) 210 (363) 285 Income tax provision (benefit) (34) 84 (70) 114 ----------- ---------- ---------- ---------- Net income (loss) $(132) $126 $(293) $171 ----------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- Basic Earnings Per Share $(0.04) $0.03 $0.09 $0.04 ----------- ---------- ---------- ---------- ----------- ---------- ---------- ----------
See notes to condensed financial statements 3 CALIFORNIA CULINARY ACADEMY, INC. CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS, UNAUDITED)
Six Months Ended December 31, ----------------------------- 1997 1996 -------------- ------------ Cash flows from operating activities: Net income (loss) $(293) $171 Adjustments to reconcile net income (loss) to net cash provided by used in operating activities: Depreciation and amortization 551 565 Tax provision (Benefit) (70) 114 Provision for losses on accounts receivable 54 13 Deferred rent (82) 9 Stock issued for services 31 Gain on disposal of property (10) Changes in assets and liabilities: Accounts receivable (604) (605) Inventories 50 (117) Prepaid expenses and other assets 27 (136) Accounts payable and accrued and other liabilities (86) (122) Deferred revenue 799 184 -------------- ------------ Net cash provided by (used in) operating activities 377 66 -------------- ------------ Cash flows from investing activities: Acquisition of property and equipment (2,523) (1,319) Decrease in long-term investments 646 -------------- ------------ Net cash used in investing activities (2,523) (673) -------------- ------------ Cash flows from financing activities: Borrowings under long term debt agreements 1,230 Principal payments on long term debt (81) (803) Proceeds from exercise of stock options and warrants* (Net a Note Receivable) 61 1,119 Repurchase of common stock (717) Payment of Preferred Stock dividends (76) Cost of offering - preferred stock (3) (11) -------------- ------------ Net cash provided by (used in) financing activities 1,131 (412) -------------- ------------ Net decrease in cash and cash equivalents (1,015) (1,019) Cash and cash equivalents, beginning of period 2,308 3,283 -------------- ------------ Cash and cash equivalents, end of period $1,293 $2,264 -------------- ------------ -------------- ------------
See notes to condensed financial statements 4 CALIFORNIA CULINARY ACADEMY, INC. CONDENSED STATEMENT OF CASH FLOWS Supplemental disclosure of cash paid for:
For the Six Months Ended December 31, ------------ 1997 1996 ------- ------- Interest $41,000 $93,000 Income taxes 1,000 1,000
Supplemental disclosure of non-cash investing and financing activities: The Academy issued 254,541 shares of Series A Preferred Stock upon conversion of $1,400,000 of Convertible Subordinated Debt for the six months ended December 31, 1996. The Academy issued a promissory note of approximately $157,000 for the repurchase of Common Stock for the three months ended December 30, 1996. The Academy received promissory notes of approximately $529,000 in exchange for the exercise of stock options for the six months ended December 31, 1997. 5 CALIFORNIA CULINARY ACADEMY, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS NOTE 1 -- BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared from the records of the California Culinary Academy, Inc. (the "Academy") without audit and, in the opinion of management, include all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position at December 31, 1997, and the interim results of operations and cash flows for the six months ended December 31, 1997 and December 31, 1996. The balance sheet at June 30, 1997, presented herein, has been derived from the audited financial statements of the Academy for the fiscal year then ended. Accounting policies followed by the Academy are described in Note 1 to the audited financial statements for the fiscal year ended June 30, 1997. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted for the purposes of the interim condensed financial statements. The interim condensed financial statements should be read in conjunction with the audited financial statements including notes thereto, for the year ended June 30, 1997. The results of operations for the three months presented herein are not necessarily indicative of the results to be expected for the full year. Certain prior year amounts have been reclassified to conform to current year presentation. NOTE 2 -- PREFERRED STOCK During March 1996 and July 1996, the Board of Directors and shareholders, respectively, authorized the Academy to issue up to 5,000,000 shares of Preferred Stock in one or more series to be determined by the Board of Directors from time to time. An amendment to the Articles of Incorporation authorizing the issuance of Preferred Stock was filed with the California Secretary of State in August 1996. On August 23, 1996, the Academy became legally authorized to issue up to 700,000 shares of Series A Preferred Stock. On the same date, the entire issue of Convertible Subordinated Notes in the aggregate principal amount of $1,400,000 automatically converted to 254,500 shares of Series A Preferred Stock. The preferred stock was recorded net of $447,000 of issuance costs. The non-redeemable Series A Preferred Stock into which the Notes converted provides for quarterly dividends at an annual rate of 7.5% per share from the date of first issuance, when and if declared by the Board of Directors, with a liquidation preference of $5.50 per share, plus accrued dividends. Although the Series A Preferred Stock is nonvoting, in the event the Academy fails to pay a quarterly dividend, a meeting of the Board of Directors can be called at which the holders of the Series A Preferred Stock will be entitled to elect one-third of the Academy's Board of Directors. Upon payment of the missed dividend(s), the right to elect one- 6 third of the Board will be rescinded. Each share of Series A Preferred Stock is convertible at the option of the holder into the Academy's Common Stock at the conversion price of $5.50 per share. After February 23, 1997, each share of Series A Preferred Stock will convert automatically if the closing price of the Common Stock equals or exceeds $8.00 for 20 consecutive trading days. Certain provisions for price protection are set forth in the terms of the Series A Preferred Stock, but in no event will the conversion price be less than $3.50. The Academy granted certain registration rights to the holders of the Convertible Notes (and subsequently, the Preferred shareholders). Certain penalties were payable to the holders of the Series A Preferred Stock if the Academy did not use its best efforts to file a registration statement to register for resale the Common Stock underlying the Series A Preferred Stock conversion right with an effective date not later than November 23, 1996. Such registration statement was declared effective on April 15, 1997. Penalties payable to the Series A Preferred shareholders were accrued as of June 30, 1997 and paid in July 1997. A total of 6,300 shares of Series A Preferred Stock and $35,000 in cash was distributed in connection with this penalty. During the three months and 6 months ended December 31, 1997, certain Series A Preferred Stock shareholders elected to convert approximately 165,000 and 73,000 shares into Common Stock, respectively. NOTE 3 -- MASTER LEASE AGREEMENT On July 21, 1997 the Academy entered into a master lease agreement for a 68 room hotel in San Francisco. This lease commenced on September 1, 1997 and expires August 31, 2012, and requires initial monthly payments of $27,083 with a step rent clause increasing payments to 33,333 by the end of the lease. The master lease also requires payment of a pro-rata share of common area maintenance. NOTE 4 -- RELATED PARTY TRANSACTIONS On December 15, 1997, the Chairman of the Board and another member of the Board elected to exercise approximately 108,000 and 15,000 vested stock options respectively. In exchange, as permitted by the Academy's 1992 Stock Option Plan, each director delivered to the Academy a promissory note for the value of the stock options in the amount of approximately $465,000 and $62,000, respectively. The notes bear an interest rate of 9.5% and are due no later than June 30, 1998. NOTE 5 -- ACQUISITION OF PROPERTY On October 3, 1997 the Academy purchased for approximately $1,900,000 a 70 room residential hotel adjacent to the Academy's main campus in San Francisco to provide student housing. In connection with this purchase, the Academy issued a promissory note of $1,200,000 with principal and interest payments due monthly. The initial monthly payment of $10,434 will commence on December 1, 1997. The note bears interest at a variable rate based on the LIBOR index rate plus 4.15% (9.75% as of October 3, 1997) and mature on November 1, 2007. 7 NOTE 6 - EARNINGS PER SHARE The components of basic and diluted earning per share are as follows:
THREE MONTHS ENDED THREE MONTHS ENDED DECEMBER 31, DECEMBER 31, 1997 1996 1997 1996 -------- ------ ------- ------- Net Income ($132) $125 ($293) $171 Less: preferred stock dividends (6) (27) (21) (37) Less: convertible note interest expense (9) (9) -------- ------ ------- ------- Income available to common shareholders (138) 89 (314) 125 Weighted average shares outstanding 3,636 3,229 3,581 3,229 -------- ------ ------- ------- BASIC EARNINGS PER SHARE ($0.04) $0.03 ($0.09) $0.04 -------- ------ ------- ------- -------- ------ ------- ------- EFFECT OF DILUTIVE SECURITIES Add: preferred stock dividends 6 27 21 37 Add: convertible note interest expense 0 9 0 9 -------- ------ ------- ------- Income available to common shareholders (132) 125 (293) 171 Weighted average shares outstanding 3,636 3,229 3,581 3,229 Add: Stock options and warrants 137 136 Add: convertible preferred stock 254 205 -------- ------ ------- ------- Weighted average shares outstanding 3,636 3,620 3,581 3,570 -------- ------ ------- ------- DILUTED EARNINGS PER SHARE ($0.04) $0.03 ($0.09) $0.04 -------- ------ ------- ------- -------- ------ ------- -------
8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following discussion should be read in conjunction with the financial statements and notes thereto. The Academy's revenues are derived primarily from culinary arts education as well as restaurant, retail and media operations. Culinary arts education primarily consists of the AOS Program, the B&P Certificate program, the College of Food Basic Professional Culinary Skills Program, and weekend professional skills program offerings. The AOS Program enrolls students on a two-week cycle. The program can accommodate up to 25 students per class. The 30-week B&P Program enrolls classes on a five week cycle typically ranging in size from 15 to 20 students with five classes enrolled as of December 31, 1997. The College of Food programs commenced October 14, 1996 at the Academy's prototype facility in Salinas, California. As of December 31, 1997, approximately 52 students are enrolled in the Basic Professional Culinary Skills program in Salinas. The College of Food enrolls students every three to four weeks. Weekend professional programs are currently offered every eight or fourteen weeks. As of December 31, 1997, the Academy has 35 students enrolled in various weekend professional programs. Consumer education consists of programs oriented to a part-time audience. The course length and content address the interests of food industry professionals, home cooks and career changers. These courses include single topic classes and various three or four class series current topics and basic skills. Restaurant and retail operations include two restaurants and a private dining room which is generally open to the public seven days per week, banquet services generally offered seven days per week and a small on-site retail shop offering student-prepared foods, beverages, cookbooks, video tapes, kitchen wares and selected clothing. Media operations primarily consist of the marketing of the Cooking at the Academy television series and cookbook royalties. Certain expenses such as food costs and costs of goods sold related to both educational services and retail restaurant operations. Revenues from the Academy's AOS Program and the B&P Program rely exclusively on enrollments in those programs. Tuition is initially recorded as deferred revenue at the commencement of each enrollment period and recognized over the length of program as students complete course work required for graduation. The Academy has available housing for students enrolled in the AOS and B&P programs. In July 1997, the Academy entered into a master lease of a 68-room hotel in San Francisco, approximately one block from the main campus, to provide student housing. In October 1997, the Academy purchased for approximately $1,900,000 a hotel building in San Francisco, across the street from its main campus, which it intends to use for student housing. Management 9 believes available student housing will have a favorable impact on new student enrollments and student retention rates. The Academy believes that manageable growth is achievable through the addition of extension campuses offering selected courses from the AOS Program at training facilities such as its College of Food at Salinas, California and by the addition of contract training programs offered to the food industry. While management believes that this strategy will enable it to significantly increase revenues by providing additional educational and training resources to the food industry, there can be no assurance that management will be able to successfully implement such a strategy. Except for historical information contained herein, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The forward-looking statements contained herein are based upon current expectations, and actual results may differ materially. Forward-looking statements contained in this Report involve numerous risks and uncertainties, including those discussed in this Report and the Academy's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1997, that could cause actual results to differ materially from those projected. Investors are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Academy undertakes no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The primary risks and uncertainties that could affect future results include, without limitation, (i) the event of a net loss of $999,000 for the year ended June 30, 1996 from which there can be no assurance that the recent efforts will be successful in achieving profitable operations, or if achieved, that profitability can be sustained in future periods; (ii) the inability of management to successfully implement and manage the Academy's new growth strategy of adding more remote training facilities and new programs to be offered to the foodservice industry; (iii) uncertainties associated with overhauling the structure of the A.O.S. degree program enrollment process and the inability of the Academy to make appropriate adjustments in a timely manner; (iv) the increased competition from both for-profit and non-profit culinary arts education institutions; (v) the continued dependence on financial aid programs to fund a majority of Academy's students' education, thereby providing a significant portion of the Academy's revenues, together with the uncertainty that budgetary constraints or other factors in the future could impact the availability and amount of both public and private sources of financial aid; (vi) increase of the Academy's cohort default rate, the percentage of Academy students who have defaulted on repayment of government student loans, which could in the future impair or limit the Academy's participation in government financial aid programs; and (vii) the possibility that regulatory agencies that directly or indirectly impact aspects of the Academy's business could revise regulations in such a way that the Academy would not be able to comply with new regulations in a timely manner. Investors are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Academy undertakes no obligation to publicly release the results of any revision to these forward-looking statements that may be 10 made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. RESULTS OF OPERATIONS REVENUES Culinary arts education revenue increased 6.9% to $3,231,000 for the quarter ended December 31, 1997 from $3,022,000 reported in the same period last year. Culinary arts education revenue increased 8.0% to $6,514,000 for the six months ended December 31, 1997 from $6,032,000 reported in the same period last year. The increase in culinary arts education revenue is due primarily to a 16.8% increase in student enrollment in certificate and degree programs as of December 31, 1997; offset by a reduction in consumer education revenues as a result of the discontinuation of the program during the quarter ended June 30, 1997. Restaurant & catering and other revenue increased 24.0% to $951,000 for the quarter ended December 31, 1997 from $767,000 in the same period last year. Restaurant & catering and other revenue increased 24.7% to $1,603 for the six months ended December 31, 1997 from $1,286 in the same period last year. The increase is due primarily to increase banquet and catering activity in the Academy's two restaurants. COST OF SALES Food and beverage cost increased 10.8% to $460,000 for the quarter ended December 31, 1997 from $415,000 reported in the same period last year. Food and beverage cost increased 12.7% to $886,000 for the six months ended December 31, 1997 from $786,000 reported in the same period last year. Food and beverage cost increased in dollar amounts as the Academy incurred higher costs primarily associated with an increase in culinary arts education revenue and restaurant and catering revenue. The increase in food and beverage cost as a percent of related culinary arts education and restaurant revenue is consistent with the comparable periods last year. Other costs decreased 2.0% to $390,000 for the quarter ended December 3, 1997 from $398,000 reported in the same period last year. Other costs increased 10.0% to $802,000 for the six months ended December 31, 1997 from $729,000 for the same period last year. The decrease for the quarter ended December 31, 1997 is attributed to lower cost of merchandise associated with decreased merchandise sales in the Academy's retail store; offset by increased decoration and entertainment expenses associated with the increased restaurant revenue. The increase for the six months ended December 31, 1997 is due primarily to student program supplies costs as a result of increased enrollment levels and increased decoration and entertainment expenses associated with the increased restaurant revenue. OPERATING EXPENSES Occupancy cost increased 19.5% to $514,000 for the quarter ended December 31, 1997 from $430,000 for the same period last year. Occupancy cost increased 9.5% to $958,000 for the six months ended December 31, 1997 from $875,000 in the same period last year. The increase is 11 due primarily to the lease of a 68 room residential hotel in September 1997 and the purchase of a 70 room residential hotel on October 1997; offset by reduction in rent for the Academy's main campus facility as a result of lease renegotiation completed in May 1997. Depreciation and amortization decreased 5.7% to $282,000 for the quarter ended December 31, 1997 from $299,000 for the same period last year. Depreciation and amortization decreased 2.3% to $551,000 for the six months ended December 31, 1997 from $564,000 for the same period last year. The decrease is due primarily to lower expense as a result of the renegotiated lease for the Academy's main campus facility offset by the depreciation expense associated with the purchase of a 70 room residential hotel and continued investment to improve kitchen facilities and information systems. Compensation and benefits cost increased 28.7% to $1,684,000 for the quarter ended December 31, 1997 from $1,308,000 for the same period last year. Compensation and benefits cost increased 25.2% to $3,305,000 for the quarter ended December 31, 1997 from $2,639,000 for the same period last year. The increase is due primarily to addition of faculty as a result of the increase in student enrollments; addition of staff in the College of Food to support increase enrollment and the opening of a second campus in San Diego in February 1998; addition of administrative and marketing staff to support growth in enrollments and revenue; and normal cost increases for wages. Outside services cost increased 0.6% to $181,000 for the quarter ended December 31, 1997 from $180,000 for same period last year. Outside services cost increased 27.5% to $385,000 for the six months ended December 31, 1997 from $302,000 for same period last year. The increase is due primarily to increased board of directors fees begun in June 1997 and retention of consultants to assist with documentation of new education programs and filing with Federal Department of Education and State regulatory agencies. Advertising and promotion cost increased 77.1% to $209,000 for the quarter ended December 31, 1997 from $118,000 for the same period last year. Advertising and promotion cost increased 48.1% to $394,000 for the quarter ended December 31, 1997 from $266,000 for the same period last year. The increase is due primarily to additional expenditures for convention and conferences attended to promote enrollments; and the sponsorship of a week-end street fair at the San Francisco campus to celebrate the Academy's twentieth anniversary. Legal and other cost increased 36.8% to $617,000 for the quarter ended December 31, 1997 from $451,000 for the same period last year. Legal and other cost increased 35.9% to $1,204,000 for the six months ended December 31, 1997 from $886,000 for the same period last year. The increase is primarily due to legal representation and settlement costs related to a wrongful termination lawsuit, which was settled in September 1997. INTEREST INCOME (EXPENSE), NET Interest income (expense), net consists primarily of interest earned on cash equivalents and short-term investments and interest expense incurred on a $1,200,000 promissory note issued in connection with the Academy's purchase of a 70 room residential hotel in October 1997 12 INCOME TAX PROVISION (BENEFIT) The Academy has provided for federal and state income taxes at 20% for the quarter and six months ended December 31, 1997 and compared to a effective tax rate of 40% for the same comparable periods last year. The decrease in effective tax rate is the result of net operating losses incurred through December 31, 1997. LIQUIDITY AND CAPITAL RESOURCES Historically, the Academy financed its growth from the issuance of equity securities in private and public transactions, borrowings from related parties, lease and debt financing obligations and through cash flow provided by operations. At December 31, 1997, the Academy's principal sources of liquidity included cash and cash equivalents of $1,293,000 and net accounts receivable of $3,397,000 compared to $2,308,000 and $2,847,000 as of June 30, 1997, respectively. The decrease in cash and cash equivalents is due primarily to the Academy's using cash and cash flow from operations to fund capital expenditures and the acquisition of a hotel to be used for student housing. The increase in net accounts receivable is due primarily to increased enrollments. The Academy has long-term obligations of $1,324,000 and working capital of $534,000 at December 31, 1997 compared to $148,000 and $1,066,000 as of June 30, 1997, respectively. As of December 31, 1997, the Academy had $1,200,000 outstanding loans with banks. As of June 30, 1997, the Academy had no outstanding term loans with banks and $50,000 in other term loans. 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings There are various legal claims and lawsuits pending by and against the Academy that, in the opinion of management, after consultation with legal counsel, are not expected to have in any material adverse effect on the results of operations or financial position of the Academy. Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibits Exhibit No. Description ----------- -------------------------------------------------- 10.35 Real estate purchase agreement for 622-632 Polk Street, San Francisco, California 10.36 Promissory note with Imperial Thrift Savings 10.37 Promissory note from Theodore Crocker 10.38 Promissory note from Grover Wickersham 11.0 Statement re: Computation of Earnings per Share 27.0 Financial Data Schedule (b.) Reports on Form 8-K None
14 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CALIFORNIA CULINARY ACADEMY, INC. February 19, 1998 By: /s/ Keith H. Keogh --------------------------------------------- President February 19, 1998 By: /s/ Thomas Spanier --------------------------------------------- Chief Financial Officer (Principal Financial and Accounting Officer) February 19, 1998 By: /s/ Peter Richmond --------------------------------------------- Director of Finance 15 EX-10.35 2 EXHIBIT 10.35 REAL ESTATE PURC. AGR. 622-632 POLK SUBJECT PROPERTY: 622-632 POLK PAGE 3 OF 3 ------------------------------------------------- I. COMMON INTEREST DEVELOPMENT. Where applicable to the property, within twenty (20) days of acceptance, Seller shall furnish Buyer, at Seller's expense, copies of the subject property's current Covenants, Conditions, and Restrictions; articles of incorporation; bylaws; rules and regulations; financial statements; current budget, including delinquent assessments, penalties and attorney fees and shall advise Buyer of pending special assessments or potential or pending litigation. Buyer shall have seven (7) days from date of receipt of the above information to notify Seller of his/her approval. Seller to pay all homeowners' association transfer fees. NOTE: Buyer acknowledges that inspections and repairs required by this contract may be subject to the approval of, and limited in scope by the homeowners' association. J. ENTIRE AGREEMENT. This contract contains the entire agreement of the parties and any agreement or representation respecting the property or the duties of Buyer and Seller not expressly set forth herein is null and void. Each party represents that they have not relied on any statements of the real estate agent or Broker which are not contained in this contract. Each party acknowledges that they have thoroughly read and approved each of the provisions prior to signing this document. 8. LIQUIDATED DAMAGES AS SPECIFIED IN OFFER. A. LIQUIDATED DAMAGES REQUESTED: Seller: ( /s/ [ILLEGIBLE] ) ------------------ Buyer: ( ) ------------------ B. LIQUIDATED DAMAGES DECLINED: Seller: ( /s/ [ILLEGIBLE] ) ------------------ Buyer: ( ) ------------------ ACKNOWLEDGEMENT: FUNDS PLACED IN ESCROW OR OTHER TRUSTEE ACCOUNT MAY NOT BE AUTOMATICALLY RELEASED UPON ANY DISPUTE BETWEEN THE PARTIES. STANDARD PRACTICE REQUIRES A RELEASE SIGNED BY ALL PARTIES PRIOR TO ANY DISBURSEMENT. 9. ARBITRATION OF DISPUTES AS SPECIFIED IN OFFER. A. ARBITRATION OF DISPUTES REQUESTED: Seller: ( /s/ [ILLEGIBLE] ) ------------------ Buyer: ( ) ------------------ B. ARBITRATION OF DISPUTES DECLINED: Seller: ( ) ------------------ Buyer: ( ) ------------------ 10. AGENCY CONFIRMATION. The following agency relationship(s) are hereby confirmed for this transaction: LISTING AGENT: COLDWELL BANKER is the agent of (check one): / / the seller exclusively; or /X/ both the Buyer and the Seller. SELLING AGENT: (Broker's Name) COLDWELL BANKER (if not the same as Listing Agent) is the agent of (check one): / / the Buyer exclusively; or / / the Seller exclusively; or /X/ both the Buyer and Seller. 11. ADDITIONAL TERMS; 1. SELLER HAS MADE COUNTEROFFERS TO MORE THAN ONE PROSPECTIVE PURCHASER AND ACCEPTANCE IS NOT EFFECTIVE UNLESS AND UNTIL SELLER GIVES WRITTEN NOTIFICATION OF ACCEPTANCE TO ONE OF THE BUYERS. 2. AMERICAN HOTELS, INC. STATES THAT ALL FURNITURE, FURNISHINGS, CARPETS AND PERSONAL PROPERTY IN THE BUILDING BELONG TO AMERICAN HOTELS, INC. THUS, AND NEGOTIATIONS REGARDING FURNITURE, FURNISHINGS, CARPETS AND PERSONAL PROPERTY SHOULD BE DIRECTED TO AMERICAN HOTELS, INC. 3. ATTACHED 2 PAGE ADDENDUM FOR CDL 14 IS INCORPORATED AND MADE A PART HEREIN OF THIS CONTRACT. 4. THIS IS AN "AS IS" SALE. BUYER SHOULD PAY FOR ALL COSTS FOR REPORTS, INSPECTIONS, AND INVESTIGATIONS, AS WELL AS ANY COSTS FOR REPAIRS RECOMMENDED FROM SAID REPORTS. 12. ADDITIONAL ADDENDA ________________________________________ to be signed by Buyer and Seller, are attached and made a part hereof. 13. OFFER AND ACCEPTANCE. Seller reserves the right to continue to offer the herein described property for sale and to accept any offer at any time prior to delivery to Seller, or ___________________ of a copy of this Counteroffer duly accepted and signed by Buyer. Unless this Counteroffer is accepted on or before THUR. JULY 3, 1997 by 12:00 / / AM /X/ PM, it shall be deemed revoked and the deposit shall be returned to Buyer. This contract and any addendum or modification, including any photocopy or facsimile, may be executed in counterpart, all of which shall constitute one writing. In the event facsimile transmissions are used and followed up by signatures on original copies, the date and time references on the facsimile copy shall be the effective date and times for the contract. SIGNATURE OF AGENT DOES NOT CONSTITUTE ACCEPTANCE. RECEIPT OF A COPY IS HEREBY ACKNOWLEDGED. SELLER WELLS FARGO BANK, TRUSTEE ---------------------------- DATE 7/01/97 TIME 1:30 PM SELLER BY: /s/ Jeffrey Hisech ------- ------- ---------------------------- JEFFREY HISECH ---------------------------- ASSISTANT VICE PRESIDENT ---------------------------- BY: /s/ Maureen C. McCartin ---------------------------- MAUREEN C. McCARTIN ---------------------------- VICE PRESIDENT ---------------------------- The undersigned Buyer agrees to purchase the property on the terms and conditions set forth above , / / except as follows: PURCHASE PRICE TO BE $1,850,000.00. EXHIBIT B TO BE INCORPORATED INTO THIS CONTRACT. Unless this Counter to the Counteroffer is duly accepted on or before July 7, 1997 by 4:00 / / AM /X/ PM, it shall be deemed revoked and the deposit shall be returned to Buyer. RECEIPT OF A COPY IS HEREBY ACKNOWLEDGED. BUYER /s/ [ILLEGIBLE] ---------------------------- DATE July 3, 1997 TIME 12:00 NOON BUYER ------------ ---------- ---------------------------- Buyer's Counter to the Counteroffer is hereby accepted and Seller agrees to sell on the terms and conditions set forth above. SELLER WELLS FARGO BANK, TRUSTEE ---------------------------- DATE 7-3-97 TIME 4:00 PM SELLER BY: /s/ Maureen C. McCartin ------ ------- ---------------------------- MAUREEN C. McCARTIN ------- ------- ---------------------------- VICE PRESIDENT ------- ------- ---------------------------- PAGE 3 OF 3 EXHIBIT B 622-632 POLK STREET, SAN FRANCISCO REGARDING ITEM 10(a) OF ADDENDUM FORM CDL-14: BUYER INTENDS TO PURCHASE THE PROPERTY IN "AS IS" CONDITION. HOWEVER, THE BUYER STATES THAT THEY HAVE NOT INSPECTED THE PROPERTY TO THE FULL EXTENT DEEMED APPROPRIATE AND WISH TO CONDUCT FURTHER INSPECTIONS AFTER ACCEPTANCE OF THEIR OFFER TO PURCHASE THE ABOVE PROPERTY. THE BUYER SHALL HAVE 21 DAYS AFTER ACCEPTANCE TO CONDUCT ADDITIONAL INSPECTIONS. THIS CONTRACT IS CONTINGENT UPON BUYERS APPROVAL, IN WRITING, OF ALL OF THESE INSPECTIONS. SELLER IS TO ALLOW COMPLETE ACCESS TO THE VARIOUS INSPECTORS DURING THIS PERIOD. THE BUYER WILL USE BEST EFFORTS TO COMPLETE AND REVIEW ALL INSPECTION DATA WITHIN THIS TIME-FRAME. IF THERE ARE DELAYS IN RECEIVING REPORTS DUE TO FACTORS BEYOND THE BUYERS CONTROL, THE SELLER WILL GRANT A REASONABLE EXTENSION OF TIME UPON WRITTEN REQUEST OF THE BUYER. TO CLARIFY THE CONTRACT, ITEM 10(e) IS TO BE WAIVED. ESCROW TO CLOSE ON OR BEFORE SEPTEMBER 5, 1997. DATED July 3, 1997 BUYER /s/ [ILLEGIBLE] ----------------------- --------------------------------- WELLS FARGO BANK, TRUSTEE --------------------------------- DATED 7-3-97 SELLER By /s/ Maureen C. McCartin ----------------------- -------------------------------- MAUREEN C. McCARTIN -------------------------------- VICE PRESIDENT By: Jeffrey Hisech -------------------------------- ADDENDUM TO CALIFORNIA ASSOCIATION OF REALTORS COMMERCIAL REAL ESTATE PURCHASE CONTRACT, RECEIPT FOR DEPOSIT AND ESCROW INSTRUCTIONS (FORM CDL-14) The California Association of Realtors Commercial Real Estate Purchase Contract, Receipt for Deposit and Escrow Instructions (Form DLF-14) ("Agreement"), to which this Addendum is attached and incorporated into by this reference, is hereby modified and amended as follows, notwithstanding any provision of the Agreement to the contrary: 1. BROKER'S COMPENSATION: Wells Fargo Bank, N.A., in its fiduciary capacity, agrees to pay Broker as a commission, 6% of the selling price, if during the listing period or any extension thereof any anyone (exclusive right to sell listing) procure(s) a buyer on the terms stated in this listing agreement or any other terms acceptable to Wells Fargo Bank, N.A., in its fiduciary capacity. The commission shall be earned and payable, as specified by the Court approving the subject sale or as agreed upon, only on the close of escrow and recording of the deed. Any fee or commission due to any other broker in connection with the sale shall be paid by Broker prior to or concurrently with payment by Wells Fargo Bank, N.A., in its fiduciary capacity, to Broker. 2. PAYMENT OF PURCHASE PRICE: The purchase price shall be paid all in cash. 3. BUYER'S DEPOSIT: Broker is authorized to accept buyer's deposit only as buyer's agent until acceptance of the offer by Wells Fargo Bank, N.A., in its fiduciary capacity. Buyer's deposit shall be in the form of a cashier's check. All checks must be made payable to the order of the escrow company. 4. CONDITION OF TITLE/TITLE INSURANCE: Title will be subject to the exceptions shown on any preliminary title report. Evidence of title will be a California Land Title Association (CLTA) standard policy of title insurance to be paid for by Buyer. Wells Fargo Bank, N.A., in its fiduciary capacity, shall execute a quitclaim or trustee's deed only. If for any reason whatsoever title in the manner set forth herein cannot be conveyed by Wells Fargo Bank, N.A., in its fiduciary capacity, Wells Fargo Bank, N.A., in its fiduciary capacity, shall have the right to withdraw from the transaction, and shall be released from all liability hereunder. 5. EXCULPATION OF WELLS FARGO BANK, N.A.: It is understood and agreed by Buyer that Wells Fargo Bank, N.A. is executing this agreement in its fiduciary capacity only and Wells Fargo Bank, N.A., in all capacities, and Wells Fargo Bank, N.A.'s affiliates, shareholders, officers, directors, employees and agents are not and shall not be liable hereunder, directly or indirectly, except for willful misconduct, under or by execution of this Agreement. The rights and claims of Buyer as against Wells Fargo Bank, N.A., in any capacity, shall be limited exclusively to such rights as Buyer may have against the trust or other estate or entity represented herein by Wells Fargo Bank, N.A. Any liability of Wells Fargo Bank, N.A., in any capacity (including without limitation Wells Fargo Bank, N.A.'s shareholders, officers, directors, affiliates, agents, and employees) to Buyer or any other person shall be limited to the interest of the trust or other estate or entity represented herein by Wells Fargo Bank, N.A. in the Property. Buyer or any other person claiming through Buyer agrees to look solely to such interest for the recovery of any judgment against Wells Fargo Bank, N.A., in any capacity. It is the intent of the parties that neither (a) such trust or other estate or entity represented herein by Wells Fargo Bank, N.A., (b) its trustees or beneficiaries, nor (c) any other assets of such trust or other estate or entity represented herein by Wells Fargo Bank, N.A. or its trustees or beneficiaries shall be liable for any such judgment. Buyer hereby irrevocably and unconditionally releases and forever discharges Wells Fargo Bank, N.A., in all capacities, and its affiliates, shareholders, officers, directors, employees and agents ("Releasees"), from all liabilities, claims, rights, damages, losses, and expenses, including attorney's fees, of any nature whosoever, known or unknown, suspected or unsuspected, fixed or contingent, which it now has or claims to have, or at any time heretofore had or claimed to have, against the Releasees arising out of or related to the Property or the physical condition of the Property, including, without limitation, the content or accuracy of any report, study, opinion or conclusion of any person or entity who has examined the Property or any aspect thereof. BUYER EXPRESSLY WAIVES CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." 6. APPROVALS: The obligations of Wells Fargo Bank, N.A., in its fiduciary capacity, under this Agreement are expressly contingent upon obtaining court approval, if required, and approval of the required management persons or committee at Wells Fargo Bank, N.A., and all other owners of interests in the Property, if any. 7. AMENDMENTS: This Agreement cannot be altered, amended or modified in any way except in a writing signed by the party against whom which enforcement of such alteration, amendment or modification is sought. 8. FINANCING WITH WELLS FARGO BANK, N.A.: Buyer does not intend to finance the purchase of the Property through Wells Fargo Bank, N.A. Buyer agrees to inform Wells Fargo Bank, N.A. of any change in financing plans. If financing is ultimately obtained through Wells Fargo Bank, N.A., this sale is contingent on approval of such financing by appropriate parties. 9. ACCEPTANCE BY WELLS FARGO BANK, N.A.: This offer will be null and void, and the Deposit shall be returned to Buyer, if not accepted by Wells Fargo Bank, N.A., in its fiduciary capacity. Buyer's offer and the acceptance hereof by Wells Fargo Bank, N.A., in its fiduciary capacity, will constitute the sale agreement ("Sale Agreement"). 10. ADDITIONAL TERMS AND CONDITIONS: This Agreement is subject to the following terms and conditions: (a) The Property, including all fixtures and any personal property, is being purchased by Buyer in its "AS IS" condition, without any express or implied warranties. Buyer waives any and all obligations or claims based on any patent or latent defects. Any documents or information furnished to Buyer is furnished as a courtesy only and is furnished without any warranty or representation whatsoever. Buyer hereby represents that Buyer or Buyer's agent has inspected the property to the full extent deemed appropriate and is satisfied with and accepts its condition, including without limitation all matters relating to land use restrictions, structural matters, soil conditions, hazardous materials and environmental conditions. (b) Buyer has not relied on any acts, including any written or oral statements, by Wells Fargo Bank N.A., in any capacity, or any person acting on Wells Fargo Bank, N.A.'s behalf, in submitting Buyer's offer, but rather has relied solely on his, her or its own independent investigation of the Property. (c) Buyer agrees to accept title to the Property subject to any and all covenants, conditions, restrictions, reservations, rights, rights-of-way, and easements or record, if any, and any unpaid taxes not delinquent at close of escrow. Any special assessments or bonds will be: ( ) assumed by Buyer without offset or ( ) paid by Wells Fargo Bank, N.A., in its fiduciary capacity. (d) Rental income, deposits, taxes, and any other related items will be prorated as of the date title to the Property is transferred to Buyer. Buyer will pay the cost of any termite report or repair work and all closing costs of this transaction, except transfer taxes, unless such taxes are customarily paid by Buyer in 1 the county where the Property is located. Buyer is responsible for obtaining all insurance coverage Buyer deems appropriate upon close of escrow. (e) Buyer will establish an escrow, subject to the approval of Wells Fargo Bank, N.A., in its fiduciary capacity, to close on or before 45 days after acceptance hereof by Wells Fargo Bank, N.A., in its fiduciary capacity, or, if applicable, after court confirmation of sale. (f) Possession of the Property will be delivered to Buyer (a) on close of escrow or (b) not later than ________ days after close of escrow or (c)__________________________________________________________________. (g) IF SALE CANNOT BE COMPLETED BY REASON OF ANY DEFAULT BY BUYER, WELLS FARGO BANK, N.A., IN ALL CAPACITIES, WILL BE RELEASED FROM ANY AND ALL OBLIGATIONS HEREUNDER AND MAY PROCEED UPON ANY CLAIM OR REMEDY WHICH IT MAY HAVE IN LAW OR EQUITY; PROVIDED, HOWEVER, THAT BY PLACING THEIR INITIALS HERE BUYER ( ) AND WELLS FARGO BANK, N.A., IN ITS FIDUCIARY CAPACITY, ( ) AGREE THAT WELLS FARGO BANK, N.A., IN ITS FIDUCIARY CAPACITY, WILL RETAIN THE DEPOSITS AS ITS LIQUIDATED DAMAGES. IF THE PROPERTY IS A DWELLING WITH NO MORE THAN FOUR UNITS, ONE OF WHICH THE BUYER INTENTS TO OCCUPY AS HIS OR HER RESIDENCE, WELLS FARGO BANK, N.A., IN ITS FIDUCIARY CAPACITY, WILL RETAIN AS LIQUIDATED DAMAGES THE DEPOSIT ACTUALLY PAID, OR AN AMOUNT THEREFROM NO MORE THAN 3% OF THE PURCHASE PRICE, AND PROMPTLY RETURN ANY EXCESS TO BUYER. IF SALE CANNOT BE COMPLETED BECAUSE OF THE INABILITY OF WELLS FARGO BANK, N.A., IN ITS FIDUCIARY CAPACITY, TO CONVEY TITLE, BUYER WILL BE RELEASED FROM ANY AND ALL OBLIGATIONS HEREUNDER AND THE DEPOSIT WILL BE PROMPTLY RETURNED TO BUYER. (h) The terms and conditions set forth in the attached Counter Offer and this Addendum supercedes any similar clauses that exist in the original contract. 11. GROSS/NET: This offer is a Gross offer, subject to the commission indicated above. Buyer holding Wells Fargo Bank, N.A. harmless should any commission arising out of Buyer's actions become subsequently payable. Broker agrees to look solely to Buyer for compensation. Signature of Broker: ------------------------------------------------------- 12. DISCLOSURE: California Civil Code Section 1102.1 states that the article requiring the statutory Real Estate Transfer Disclosure Statement specified in Civil Code Section 1102.6 does not apply to "(d) Transfers by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust." WELLS FARGO BANK N.A., in its BUYER: fiduciary capacity as Trustee By: /s/ Jeffery Hisech /s/ [ILLEGIBLE] -------------------------------- ----------------------------------- Buyer's Signature Title: JEFFERY HISECH ASSISTANT VICE PRESIDENT ------------------------------ By: /s/ Maureen C. McCartin -------------------------------- ----------------------------------- Buyer's Signature Title: MAUREEN C. McCARTIN VICE PRESIDENT ------------------------------ Dated: 7/1/97 Dated: July 3, 1997 ------------------------------ ------------------------------ OTHER OWNERS: ------------------------------ ------------------------------ ------------------------------ 2 [LOGO] RENTAL PROPERTY ADDENDUM BUYER: CALIFORNIA CULINARY ACADEMY SELLER: WELLS FARGO BANK, TRUSTEE ----------------------------- --------------------------------- BUYER: SELLER: ----------------------------- --------------------------------- SUBJECT PROPERTY: 622-632 POLK --------------------------------------------------------------- This ADDENDUM is made a part of the attached Real Estate Purchase Contract by and between the above referenced SELLER and BUYER dated___________________ 19__ and together with that document will constitute joint escrow instructions to the escrow holder and will supersede any comparable provisions in the Real Estate Purchase Contract. /X/ 1. Buyer agrees to take this property subject to existing leases and rights of the tenants. Seller to deliver copies of all leases and rental agreements (including notices sent to tenants), and income and expense statements to Buyer, within seven (7) days of acceptance. The contract is contingent upon Buyer's inspection and approval of all these documents within seven (7) day of receipt, and further conditioned upon inspection of all units within seven (7) days of acceptance of the contract. Seller to advise Buyer in writing of any oral or written modification to the written lease agreements. During escrow Seller agrees that no changes in leases or tenancies shall be made, nor new rental agreements entered into without prior written consent of Buyer. Seller shall transfer all tenants' deposits and a statement of accounting as to those deposits to Buyer at close of escrow, and send all requisite written notification of same to tenants. Buyer understands that a local rent control ordinance may exist which could regulate the rights and duties of owners and tenants. Buyer has not relied on any representations by Broker(s) as to the income producing potential of the property or its rentability. COLDWELL BANKER STRONGLY RECOMMENDS THAT BUYER AND SELLER REVIEW THE TAX AND LEGAL CONSEQUENCES OF THIS TRANSACTION WITH THEIR ATTORNEY AND/OR ACCOUNTANT PRIOR TO PROCEEDING WITH THIS TRANSACTION. / / 2. Buyer understands and acknowledges that the property is currently occupied by tenants(s) under the terms of a ______________________ agreement. The property shall be vacant at close or escrow. Seller agrees to accept full responsibility for providing proper notice to vacate to the tenant(s) and for removal of the tenant(s). If at the end of the notice period or at the time for closing, whichever occurs first, tenant(s) or any other person remain in possession of the subject property, then Buyer, at Buyer's sole option, may choose to either postpone the closing of escrow until the property is vacant, or void this contract and have all unused deposits returned to Buyer. COLDWELL BANKER STRONGLY RECOMMENDS THAT SELLER REVIEW THE TAX AND LEGAL CONSEQUENCES OF THIS TRANSACTION WITH THEIR ATTORNEY AND/OR ACCOUNTANT PRIOR TO PROCEEDING WITH THIS TRANSACTION. / / In the event escrow is delayed as a result of Seller's inability to remove the tenant or any other person from the property, and Buyer agrees to extend the close of escrow, then Seller agrees to pay Buyer $_____________ per day until escrow closes. BUYER AND SELLER UNDERSTAND AND ACKNOWLEDGE THAT THE REAL ESTATE AGENT OR BROKER IS NOT ASSUMING RESPONSIBILITY FOR THE ISSUES COVERED IN SECTION 2. / / 3. Buyer understands and acknowledges that the property is not currently being used for rental purposes but it is Buyer's intent to use this property as such. Buyer understands that a local rent control ordinance may exist which could regulate the rights and duties of owners and tenants. Buyer has been advised to satisfy Buyer's concerns as to the rentability of the property with all appropriate governmental agencies. Buyer acknowledges that Buyer has not relied on any representations by Broker(s) as to the income producing potential of the property or its rentability. COLDWELL BANKER STRONGLY RECOMMENDS THAT BUYER REVIEW THE TAX AND LEGAL CONSEQUENCES OF THIS TRANSACTION WITH THEIR ATTORNEY AND/OR ACCOUNTANT PRIOR TO PROCEEDING WITH THIS TRANSACTION. / / 4. Additional terms. ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- DATED July 3, 1997 BUYER /s/ [ILLEGIBLE] ---------------- ------------------------------------------------ DATED BUYER ---------------- ------------------------------------------------ DATED SELLER WELLS FARGO, BANK, TRUSTEE ---------------- ----------------------------------------------- DATED 7/1/97 SELLER BY:/s/ [ILLEGIBLE] BY:/s/ Maureen C. McCartin ---------------- ------------------------------------------------ EX-10.36 3 EXHIBIT 10.36 PROM. NOTE SECURED BY DEED OF TRUST [Logo] - ------------------------------------------------------------------------------ PROMISSORY NOTE SECURED BY DEED OF TRUST $1,200,000.00 Los Angeles, California SEPTEMBER 23, 1997 NOTICE TO BORROWER: THIS NOTE CONTAINS PROVISIONS FOR A VARIABLE INTEREST RATE AND FOR VARIABLE PAYMENT AMOUNTS. 1. PROMISE TO PAY. In installments and at the times stated in this Note, for value received, CALIFORNIA CULINARY ACADEMY, INC., A CALIFORNIA CORPORATION ("Maker"), promises to pay to IMPERIAL THRIFT AND LOAN ASSOCIATION, a California industrial loan company ("Holder"), or order, at 700 North Central Avenue, Suite 100, Glendale, California 91203, or at such other place as the Holder may from time to time designate in writing, the principal sum of ONE MILLION TWO HUNDRED THOUSAND AND 0/100 DOLLARS ($1,200,000.00), or so much thereof as may be disbursed by the Holder, with interest from the date of initial disbursement of all or any part of the principal of this Note (the "Disbursement Date") on unpaid principal at the interest rate or interest rates provided for in this Note. 2. INTEREST RATE: PAYMENT OF PRINCIPAL AND INTEREST. 2.1 CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following definitions: (a) "Note Rate" means the per annum interest rate on the principal sum of this Note which is outstanding from time to time. (b) "Index" means the six (6) month London Interbank Offered Rate (LIBOR) as published in The Wall Street Journal. (c) "Current Index" means, with respect to each Interest Change Date, the most recent Index figure available as of the tenth (10th) day prior to such Interest Change Date. (d) "Interest Change Date" means FEBRUARY 1, 1998 and each MAY 1ST, AUGUST 1ST, NOVEMBER 1ST, AND FEBRUARY 1ST thereafter to and including AUGUST 1, 2007. (e) "Payment Change Date" means MARCH 1, 1998 and each JUNE 1ST, SEPTEMBER 1ST, DECEMBER 1ST, AND MARCH 1ST thereafter to and including SEPTEMBER 1, 2007. (f) "Amortization Period" means a period of THREE HUNDRED SIXTY (360) months commencing on OCTOBER 1, 1997. (g) "Remaining Amortization Period" means, with respect to each Payment Change Date, the number of months remaining in the Amortization Period as of the Interest Change Date immediately preceding such Payment Change Date. (h) "Installment Payment Date" means DECEMBER 1, 1997 and the FIRST (1ST) day of each month thereafter to and including OCTOBER 1, 2007. (i) "Monthly Payment" means the total amount of the monthly installment payment of principal and interest due and payable under this Note on an Installment Payment Date. (j) "Loan Year" means (i) the period from the Disbursement Date to the first (1st) day of the first (1st) calendar month after the month in which the Disbursement Date occurs together with the consecutive twelve (12) calendar month period following such first (1st) day; and (ii) each consecutive twelve (12) calendar month period thereafter commencing on the anniversary of such first (1st) day. 2.2 INTEREST. The Note Rate shall be computed as follows: (a) From the Disbursement Date to the first Interest Change Date following the Disbursement Date, the Note Rate shall be equal to the rate of NINE AND THREE-QUARTERS PERCENT (9.75%) per annum. (b) Subject to the limitations contained in Section 2.3 below, the Holder shall increase or decrease the Note Rate in accordance with this Section 2.2 (b) effective on each Interest Change Date. The new Note Rate which becomes effective on each Interest Change Date shall be equal to the Current Index applicable to the Interest Change Date plus FOUR AND FIFTEEN HUNDREDTHS (4.15) percentage points per annum, rounded upward to the nearest one-thousandth (1/1,000) of one percentage point (0.001%). 2.3 LIMITATIONS ON INTEREST RATE CHANGES. Notwithstanding anything to the contrary contained in Section 2.2 above, and except as otherwise provided in Section 4 below, no change to the Note Rate shall be made on any Interest Change Date to the extent that such change (a) would result in an increase in the Note Rate above FOURTEEN AND THREE-QUARTERS PERCENT (14.75%) per annum; or (b) would result in an increase in the Note Rate of more than TWO PERCENT (2%) per annum in any Loan Year; or (c) would result in a decrease in the Note Rate to a rate which is less than NINE AND THREE-QUARTERS PERCENT (9.75%) per annum. 2.4 PAYMENTS. Principal and interest shall be due and payable as follows: (a) INITIAL INTEREST PAYMENT. A single installment payment of interest only for the period from the Disbursement Date to the first (1st) day of the first (1st) calendar month following the month in which the Disbursement Date occurs shall be due and payable on the Disbursement Date. (b) AMORTIZED PAYMENTS OF PRINCIPAL AND INTEREST. Principal and interest shall be due and payable on each Installment Payment Date as follows: (i) Commencing on DECEMBER 1, 1997 and continuing on the FIRST (1ST) day of each month thereafter to and including the FIRST (1ST) day of the month immediately preceding the first Payment Change Date, principal and interest shall be due and payable in an amount sufficient to repay the principal balance of this Note over the Amortization Period, together with interest thereon, in equal monthly installments at the Note Rate in effect as of the Disbursement Date; and (ii) The Holder shall increase or decrease the Monthly Payment in accordance with this Section 2.4(b) effective on each Payment Change Date. The Monthly Payment which shall be due and payable commencing on each Payment Change Date and on each Installment Payment Date thereafter until the next Payment Change Date shall be equal to the amount of the monthly payment that would be sufficient to repay the principal balance of this Note outstanding immediately preceding the Payment Change Date over the Remaining Amortization Period, together with interest 2 thereon, in equal monthly installments at the Note Rate in effect on the Interest Change Date immediately preceding the Payment Change Date. (c) PAYMENT ON MATURITY DATE. The entire unpaid principal balance of this Note and all accrued and unpaid interest thereon shall be due and payable on NOVEMBER 1, 2007. 3. INTEREST COMPUTATION. Notwithstanding anything to the contrary contained in this Note (including any references in this Note to amortized payments or the calculation of monthly principal and interest payments over the Amortization Period or Remaining Amortization Period), interest at the rates provided for in this Note shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days during which the principal balance of this Note is outstanding. Maker acknowledges and agrees that the calculation of interest on the basis described in the preceding sentence may result in the accrual and payment of interest in amounts greater than those which would be payable if interest were calculated on the basis of a three hundred sixty-five (365) day year. All payments under this Note shall be made in immediately available funds and shall be credited first to accrued interest then due and thereafter to unpaid principal and then impound charges and other charges, fees, costs and expenses payable by Maker under this Note or in connection with the loan evidenced by this Note (the "Loan") in such order as the Holder may determine in its sole and absolute discretion. If any payment of interest is not made when due, at the option of the Holder of this Note, such interest payment shall bear interest at the same rate as principal from and after the due date of the interest payment. Principal and interest shall be payable only in lawful money of the United States of America. 4. AFTER MATURITY/DEFAULT RATE OF INTEREST. From and after either (a) the occurrence of an Event of Default (whether or not the Holder has elected to accelerate unpaid principal and interest under this Note as a result of such Event of Default); or (b) the maturity of this Note (whether the stated maturity date of this Note or the maturity date resulting from the Holder's acceleration of unpaid principal and interest), then in either of such circumstances, interest on the unpaid principal balance of this Note shall accrue at a rate equal to the greater of (i) eighteen percent (18%) per annum; or (ii) five percent (5%) per annum above the otherwise applicable rate of interest under Section 2.2 above. 5. LATE CHARGE. If any installment of interest, principal, or both principal and interest under this Note is not paid within ten (10) days after the date on which it is due, Maker shall immediately pay a late charge equal to ten percent (10%) of such installment to the Holder to compensate the Holder for administrative costs and expenses incurred in connection with such late payment. Maker agrees that the actual damages suffered by the Holder because of any late installment payment are extremely difficult and impracticable to ascertain, and the late charge described in this Section represents a reasonable attempt to fix such damages under the circumstances existing at the time this Note is executed. The Holder's acceptance of any late charge shall not constitute a waiver of any of the terms of this Note and shall not affect the Holder's right to enforce any of its rights and remedies against any Person liable for payment of this Note. 6. WAIVERS. Maker and all sureties, guarantors, endorsers and other Persons liable for payment of this Note (a) waive presentment, demand for payment, protest, notice of demand, dishonor, protest and nonpayment, and all other notices and demands in connection with the delivery, acceptance, performance, default under, and enforcement of this Note; (b) waive the right to assert any statute of limitations as a defense to the enforcement of this Note to the fullest extent permitted by law; (c) consent to all extensions and renewals of the time of payment of this Note and to all modifications of this Note by the Holder and Maker without notice to and without in any way affecting the liability of any Person for payment of this Note; (d) consent to any forbearance by the Holder and to the release, addition, and substitution of any Person liable for payment of this Note and of any or all of the security for this Note without notice to and without in any way affecting the liability of any Person for payment of this Note; and (e) consent to personal jurisdiction over each of them by the courts of the State of California in connection with any action arising under this Note and to service of process by any means authorized by California law. Without limiting the generality of the preceding sentence, (i) any notice which the Holder may elect to give regarding any adjustment in the Note Rate made pursuant to the terms of this Note (any such 3 adjustment is referred to as a "Note Rate Adjustment") (including any such notice contained in any billing statement issued by the Holder) shall not be construed as obligating Holder to notify Maker of any Note Rate Adjustment; and (ii) the Holder's failure to give, or delay in giving, notice of any Note Rate Adjustment to Maker shall not in any way impair or otherwise affect the validity or enforceability of such Note Rate Adjustment or Maker's obligation to pay interest pursuant to such Note Rate Adjustment under the terms of this Note. 7. DEFAULT. The Holder, at its option and without notice to or demand on Maker or any other Person, may terminate any or all obligations which it may have to extend further credit to Maker and may declare the entire unpaid principal balance of this Note and all accrued interest thereon to be immediately due and payable upon the occurrence of any Event of Default. 8. APPLICATION OF PAYMENTS; OTHER OBLIGATIONS. Upon the occurrence of any Event of Default, the Holder, at its option, (a) shall have the right to apply all payments made under this Note to principal, interest, impound charges, and other charges, fees, costs and expenses payable by Maker under this Note or in connection with the Loan in such order and amounts as the Holder may determine in its sole and absolute discretion; and (b) shall have the right to declare Maker to be in default under any or all other existing or future notes, obligations or agreements of Maker in favor of the Holder related to the property. 9. ACCELERATION; TRANSFER OF PROPERTY. Reference is made to the deed of trust securing this Note (the "Deed of Trust") and the other documents executed by Maker in connection with the Loan for additional rights of the Holder to accelerate the unpaid principal balance and accrued interest under this Note. The Deed of Trust provides, in part, as follows: "Beneficiary shall have the right, at its option and without notice to or demand on Trustor, to declare any or all Obligations to be immediately due and payable if any of the following events occurs without Beneficiary's prior written consent: (a) the sale, conveyance, transfer, mortgage, encumbrance, lease or alienation of all or any part of the Property or any interest in the Property, whether voluntary or involuntary, or Trustor's grant of any option or agreement to effect any such transaction; (b) if Trustor or any General Partner or Manager of Trustor is a partnership, the admission, withdrawal, retirement or removal of any General Partner of Trustor or any of Trustor's General Partners or Managers, or the sale or transfer of more than twenty-five percent (25%) of the beneficial interests in Trustor or any of Trustor's General Partners or Managers; (c) if Trustor or any General Partner or Manager of Trustor is a limited liability company, the appointment, withdrawal, retirement or removal of any Manager of Trustor or any of Trustor's General Partners or Managers or the sale or transfer of more than twenty-five percent (25%) of the beneficial interests in Trustor or any of Trustor's General Partners or Managers; (d) if Trustor or any of Trustor's General Partners or Managers is a corporation, partnership, or limited liability company, the dissolution or liquidation of Trustor or any of Trustor's General Partners or Managers; or (e) any change in the character or use of all or part of the Property, including drilling for or the extraction of oil, gas or any other hydrocarbon substance or the lease of all or any part of the Property for any such purpose. Without limiting the generality of any provision of this Deed of Trust (including Section 6.8 below), Beneficiary's consent to any or all of the events described in this Section may be withheld by Beneficiary in its sole and absolute discretion. Beneficiary's consent to any event described in this Section shall not be deemed to be a consent to, or a waiver of the right to require such consent for, any other event. For purposes of this Section, (i) the term 'partnership' includes a general partnership, limited partnership, limited liability partnership, and joint venture; and (ii) the term 'Manager' means any Person who is acting as a manager of a limited liability company, including any member who is acting in such capacity." 10. MODIFICATIONS; CUMULATIVE REMEDIES; LOSS OF NOTE; TIME OF ESSENCE. No modification or waiver by the Holder of any of the terms of this Note shall be valid or binding on the Holder unless such modification or waiver is in writing and signed by the Holder. Without limiting the generality of the preceding sentence, no delay, omission or forbearance by the Holder in exercising or enforcing any of its rights and remedies under this Note shall constitute a waiver of such rights or remedies. The Holder's rights and remedies under this Note are cumulative with and in addition to all other legal and equitable 4 rights and remedies which the Holder may have in connection with the Loan. The headings to sections of this Note are for convenient reference only and shall not be used in interpreting this Note. If this Note is lost, stolen, or destroyed, upon Maker's receipt of a reasonably satisfactory indemnification agreement executed by the Holder, or if this Note is mutilated, upon the Holder's surrender of the mutilated Note to Maker, Maker shall execute and deliver the Holder a new promissory note which is identical in form and content to this Note to replace the lost, stolen, destroyed or mutilated Note. All terms with an initial capital letter which are used but not specifically defined in this Note shall have the respective meanings given to such terms in the Deed of Trust. Time is of the essence in the performance of each provision of this Note by Maker. 11. ATTORNEYS' FEES. If Maker defaults under any of the terms of this Note, Maker shall pay all costs and expenses, including without limitation attorneys' fees and costs, incurred by the Holder in enforcing this Note immediately upon the Holder's demand, whether or not any action or proceeding is commenced by the Holder. Without limiting the generality of the preceding sentence, such costs and expenses shall include all attorneys' fees and costs incurred by the Holder in connection with any federal or state bankruptcy, insolvency, reorganization, or other similar proceeding by or against Maker or any surety, guarantor or endorser of this Note which in any way affects the Holder's exercise of its rights and remedies under this Note or under the Deed of Trust or any other agreement securing payment of this Note. 12. NO OFFSETS. No indebtedness evidenced by this Note shall be offset by all or part of any claim, cause of action, or cross-claim of any kind, whether liquidated or unliquidated, which Maker now has or may hereafter acquire or allege to have acquired against the Holder. To the fullest extent permitted by law, Maker waives the benefits of any applicable law, regulation, or procedure which provides, in substance, that where cross demands for money exist between parties at any point in time when neither demand is barred by the applicable statute of limitations, and an action is thereafter commenced by one such party, the other party may assert the defense of payment in that the two demands are compensated so far as they equal each other, notwithstanding that an independent action asserting the claim would at the time of filing the response be barred by the applicable statute of limitations. 13. INDEX. If the Index ceases to be made available, the Holder shall select an alternate Index which is based upon comparable information to the extent available and which is not subject to control or influence by the Holder and that, in the Holder's sole judgment, is not likely to result in the Note Rate being substantially different than if such prior Index had continued to be made available. In such event, the Holder shall adjust the percentage point spread set forth in Section 2.2 above (the "Spread") based on the value of the substitute Index as of the last preceding date on which the interest rate was adjusted or, if no such adjustment has yet occurred, as of the date of this Note, such that the sum of the substituted Index and the adjusted Spread equals the sum of the prior Index plus the prior Spread. 14. APPLICABLE LAW; PREPAYMENT. This Note shall be governed by and interpreted in accordance with the laws of the State of California. Except as expressly provided in this Section, Maker shall not have the right to prepay all or part of the outstanding principal balance of this Note. Maker shall have the right to prepay all or part of the outstanding principal balance of this Note on any Installment Payment Date upon payment to the Holder of the prepayment charge described in this Section (the "Prepayment Charge"), provided that Maker has given the Holder not less than ten (10) days prior written notice of such prepayment. Maker acknowledges and agrees that (1) the Holder has made the Loan with the expectation that the Loan will be outstanding for the entire stated term of this Note; (2) the Holder would not have been willing to make the Loan on the terms and at the interest rate or interest rates contained in this Note for a shorter period of time; and (3) the Holder would not have been willing to make the Loan without Maker's agreement not to prepay all or part of the principal balance of this Note, except on the terms contained in this Section. Consequently, if for any reason all or part of the outstanding principal balance of this Note is prepaid, whether voluntarily or involuntarily, prior to the date on which such principal amount is due under the terms of this Note, including without limitation any payment resulting from the Holder's acceleration of the outstanding principal balance of this Note or any full or partial payment as a result of any judicial or non-judicial foreclosure under the Deed of Trust by the Holder 5 (any such voluntary or involuntary payment is referred to as a "Prepayment"), then the Maker shall pay to the Holder, in addition to the principal balance of this Note or portion thereof that is prepaid, accrued interest thereon, and all other sums due to the Holder at the time of such Prepayment, a Prepayment Charge calculated as follows: 14.1 A Prepayment Charge equal to THREE PERCENT (3%) of the portion of the outstanding principal balance of this Note that is prepaid during the FIRST (1ST) Loan Year; 14.2 A Prepayment Charge equal to TWO PERCENT (2%) of the portion of the outstanding principal balance of this Note that is prepaid during the SECOND (2ND) Loan Year; and 14.3 A Prepayment Charge equal to ONE PERCENT (1%) of the portion of the outstanding principal balance of this Note that is prepaid during the THIRD (3RD) Loan Year; Maker shall have the right to prepay all or part of the outstanding balance of this Note without payment of any Prepayment Charge from and after the end of the THIRD (3RD) Loan Year. Notwithstanding anything to the contrary in this Section, if the Holder elects to accelerate the unpaid principal balance of this Note as a result of any Event of Default under the Loan documents or other event that entitles the Holder to declare the unpaid principal balance of this Note due and payable, then the date on which the Prepayment is made shall conclusively be deemed to be the date of which the Holder declares the unpaid principal balance of this Note due and payable (the "Acceleration Date"), and the Prepayment Charge shall be immediately due and payable by Maker to the Holder as of the Acceleration Date. IN ACCORDANCE WITH AND PURSUANT TO CALIFORNIA CIVIL CODE SECTION 2954.10, MAKER ACKNOWLEDGES AND AGREES THAT MAKER WAIVES ANY RIGHT TO PREPAY THE PRINCIPAL BALANCE OF THIS NOTE, IN WHOLE OR IN PART, WITHOUT PENALTY OR PREPAYMENT CHARGE, AND MAKER EXPRESSLY AGREES TO THE PAYMENT OF THE PREPAYMENT CHARGE PROVIDED FOR IN THIS SECTION UPON ANY VOLUNTARY OR INVOLUNTARY PREPAYMENT OF THE OUTSTANDING PRINCIPAL BALANCE OF THIS NOTE, INCLUDING WITHOUT LIMITATION ANY ACCELERATION BY THE HOLDER PURSUANT TO SECTION 9 OF THIS NOTE. MAKER ACKNOWLEDGES AND AGREES THAT THE HOLDER'S AGREEMENT TO MAKE THE LOAN ON THE TERMS AND AT THE INTEREST RATE PROVIDED FOR IN THIS NOTE CONSTITUTE ADEQUATE CONSIDERATION, OF INDIVIDUAL WEIGHT, FOR MAKER'S WAIVER AND AGREEMENT UNDER THIS SECTION. MAKER HAS SEPARATELY INITIALED THIS SECTION 14 TO EVIDENCE MAKER'S AGREEMENT WITH THE PROVISION CONTAINED IN THIS SECTION. 15. SUCCESSORS. This Note shall be the joint and several obligation of all Persons executing this Note as Maker and all sureties, guarantors, and endorsers of this Note, and this Note shall be binding upon each of such Persons and their respective successors and assigns, subject to Section 9 above. This Note shall inure to the benefit of the Holder and its successors and assigns. 16. WAIVER OF RIGHT TO JURY TRIAL. MAKER IRREVOCABLY WAIVES ALL RIGHTS TO A JURY TRIAL IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND DIRECTLY OR INDIRECTLY ARISING OUT OF OR IN ANY WAY RELATING TO THE LOAN, THIS NOTE, THE DEED OF TRUST SECURING THIS NOTE, OR ANY OF THE OTHER DOCUMENTS EXECUTED BY MAKER IN CONNECTION WITH THE LOAN (COLLECTIVELY, THE "LOAN DOCUMENTS"), ANY OR ALL OF THE REAL AND PERSONAL PROPERTY COLLATERAL SECURING THE LOAN, OR ANY OF THE TRANSACTIONS WHICH ARE CONTEMPLATED BY THE LOAN DOCUMENTS. THE JURY TRIAL WAIVER CONTAINED IN THIS SECTION IS INTENDED TO APPLY, TO THE FULLEST EXTENT PERMITTED BY LAW, TO ANY AND ALL DISPUTES AND CONTROVERSIES THAT ARISE OUT OF OR IN ANY WAY RELATED TO ANY OR ALL OF THE MATTERS DESCRIBED IN THE PRECEDING SENTENCE, INCLUDING WITHOUT LIMITATION 6 CONTRACT CLAIMS, TORT CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS OF ANY KIND. MAKER ACKNOWLEDGES AND AGREES THAT (1) MAKER HAS CAREFULLY READ AND UNDERSTANDS ALL OF THE TERMS OF THE LOAN DOCUMENTS; (2) MAKER HAS EXECUTED THE LOAN DOCUMENTS FREELY AND VOLUNTARILY, AFTER HAVING CONSULTED WITH MAKER'S INDEPENDENT LEGAL COUNSEL AND AFTER HAVING HAD ALL OF THE TERMS OF THE LOAN DOCUMENTS EXPLAINED TO IT BY ITS INDEPENDENT LEGAL COUNSEL OR AFTER HAVING HAD A FULL AND ADEQUATE OPPORTUNITY TO CONSULT WITH MAKER'S INDEPENDENT LEGAL COUNSEL; (3) THE WAIVERS CONTAINED IN THE LOAN DOCUMENTS ARE REASONABLE, NOT CONTRARY TO PUBLIC POLICY OR LAW, AND HAVE BEEN INTENTIONALLY, INTELLIGENTLY, KNOWINGLY, AND VOLUNTARY AGREED TO BY MAKER; (4) THE WAIVERS CONTAINED IN THE LOAN DOCUMENTS HAVE BEEN AGREED TO BY MAKER WITH FULL KNOWLEDGE OF THEIR SIGNIFICANCE AND CONSEQUENCES, INCLUDING FULL KNOWLEDGE OF THE SPECIFIC NATURE OF ANY RIGHTS OR DEFENSES WHICH MAKER HAS AGREED TO WAIVE PURSUANT TO THE LOAN DOCUMENTS; (5) MAKER HAS HAD A FULL AND ADEQUATE OPPORTUNITY TO NEGOTIATE THE TERMS CONTAINED IN THE LOAN DOCUMENTS; (6) MAKER IS EXPERIENCED IN AND FAMILIAR WITH LOAN TRANSACTIONS OF THE TYPE EVIDENCED BY THE LOAN DOCUMENTS; AND (7) THE WAIVERS CONTAINED IN THE LOAN DOCUMENTS ARE MATERIAL INDUCEMENTS TO THE HOLDER'S EXTENSION OF CREDIT TO MAKER, AND THE HOLDER HAS RELIED ON SUCH WAIVERS IN MAKING THE LOAN TO MAKER AND WILL CONTINUE TO RELAY ON SUCH WAIVERS IN ANY RELATED FUTURE DEALINGS WITH MAKER. THE WAIVERS CONTAINED IN THE LOAN DOCUMENTS SHALL APPLY TO ALL SUBSEQUENT EXTENSIONS, RENEWALS, MODIFICATIONS, AND REPLACEMENTS OF THE LOAN DOCUMENTS. THIS NOTE MAY BE FILED WITH ANY COURT OF COMPETENT JURISDICTION AS MAKER'S WRITTEN CONSENT TO MAKER'S WAIVER OF A JURY TRIAL. MAKER HAS INITIALED THIS SECTION BELOW TO INDICATE ITS AGREEMENT WITH THE JURY TRIAL WAIVER AND OTHER TERMS CONTAINED IN THIS SECTION. / / / / - ----- ----- ----- ----- MAKER'S INITIALS 17. SECURITY. This Note is secured by a Deed of Trust dated the same date as this Note in favor of the Holder, as beneficiary. MAKER: - ------ CALIFORNIA CULINARY ACADEMY, INC., A CALIFORNIA CORPORATION BY: ------------------------------ KEITH KEOGH, PRESIDENT 7 EX-10.37 4 EXHIBIT 10.37 PROMISSORY NOTE DATED 12/15/97 PROMISSORY NOTE $465,198.20 December 15, 1997 The undersigned hereby promises to pay to the order of the California Culinary Academy, Inc. (the "Holder") at its principal business office at 625 Polk Street, San Francisco, CA 94102 the sum of $465,198.20 together with interest thereon at the rate of 9.5% per annum without compounding on the unpaid balance hereof in a single payment due on or before June 30, 1998. /s/ Theodore G. Crocker - ------------------------------ Theodore G. Crocker EX-10.38 5 EXHIBIT 10.38 PROMISSORY NOTE/G. WICKERSHAM PROMISSORY NOTE $62,073.00 December 15, 1997 The undersigned hereby promises to pay to the order of the California Culinary Academy, Inc. (the "Holder") at its principal business office at 625 Polk Street, San Francisco, CA 94102 the sum of $62,073.00 together with interest thereon at the rate of 9.5% per annum without compounding on the unpaid balance hereof in a single payment due on or before June 30, 1998. /s/ Grover T. Wickersham - ---------------------------- Grover T. Wickersham EX-27 6 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF DECEMBER 31, 1997 AND THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000858915 CALIFORNIA CULINARY ACADEMY 1,000 6-MOS JUN-30-1998 JUL-01-1997 DEC-31-1997 1,293 0 3,397 382 291 5,562 12,386 5,386 13,208 5,557 1,200 0 91 10,635 (4,399) 13,208 87 8,117 51 1,688 6,797 54 (5) (363) (70) (293) 0 0 0 (293) (0.09) (0.09)
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