Document:

Exhibit
10.78

 

COVENANTS AGREEMENT AND

AMENDMENT TO TERM LOAN AGREEMENTS

 

THIS COVENANTS AGREEMENT AND
AMENDMENT TO TERM LOAN AGREEMENTS, made as of the 30th day of
January, 2004, among S&W OF LAS VEGAS, L.L.C., a Delaware limited liability
company, having an address at c/o The Smith & Wollensky Restaurant Group,
Inc., 1114 First Avenue, New York, New York 10021 (the “Borrower”), THE SMITH &
WOLLENSKY RESTAURANT GROUP, INC., having an address at 1114 First Avenue, New
York, New York 10021 (“S&W Restaurant Group”), DALLAS S&W,
L.P. (“S&W
Dallas” and, together with S&W Restaurant Group, the “Guarantors”),
having an address at c/o The Smith & Wollensky Restaurant Group, Inc., 1114
First Avenue, New York, New York 10021 and MORGAN STANLEY DEAN WITTER
COMMERCIAL FINANCIAL SERVICES, INC., a Delaware corporation, having an office
at 825 Third Avenue, New York, New York 10022 (the “Lender”).

 

W  I  T
N  E  S  S  E  T  H:

 

WHEREAS, the
Lender, the Borrower and S&W Restaurant Group entered into a Term Loan
Agreement dated August 23, 2002 (the “Original Term Loan Agreement”) in
connection with a $4,000,000.00 loan made by the Lender to the Borrower (the “First
Advance Loan”), and a contemplated loan to the Borrower in the
amount of $10,000,000.00, which Original Term Loan Agreement was amended by an
Amendment to Term Loan Agreement dated October 25, 2002, by a Second
Amendment to Term Loan Agreement dated December 24, 2002, by an Amendment
to Term Loan Agreements (being the third amendment to the Original Term Loan Agreement)
dated August 20, 2003 (the “August 2003 Amendment”) and by an
Amendment to the Term Loan Agreements (being the fourth amendment to the
Original Term Loan Agreement) dated September 28, 2003  (the “September 2003 Amendment”; the
Original Term Loan Agreement, as amended through to the September 2003
Amendment, the “First Loan Agreement”);

 

WHEREAS, the
Lender, the Borrower and the Guarantors entered into an additional Term Loan
Agreement dated December 24, 2002, which was also amended by the
August 2003 Amendment (being the first amendment to such latter Term Loan
Agreement) and by the September 2003 Amendment (being the second amendment
to such latter Term Loan Agreement; such latter Term Loan Agreement as amended
through to the September 2003 Amendment, the “Second Loan Agreement”) in
connection with a $1,900,000.00 loan (the “Second Term Loan”) made by the Lender to
the Borrower;

 

WHEREAS,  the Lender, the Borrower and S&W
Restaurant Group, simultaneously herewith, entered into a Line of Credit
Agreement dated as of the date hereof (the “Third Loan Agreement” and,
together with the First Loan Agreement and the Second Loan Agreement, the “Loan
Agreements”) in connection with a $2,000,000 commercial line of
credit (the “Third Loan” and, together with the First Advance Loan and the
Second Term Loan, the “Loans”) being extended by the Lender to the
Borrower;

 

WHEREAS, in
connection with the making of the Third Loan and the Third Loan Agreement, the
Borrower, the Guarantors and the Lender wish (for clarity and convenience) to
transpose into this (one) Agreement the financial covenants set forth in the
first two Loan Agreements, and to make certain amendments to the First Loan
Agreement and the Second Loan Agreement in connection therewith;

 

1

 

NOW, THEREFORE, in
consideration of Ten ($10.00) Dollars and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
each of the parties hereto, and in order to modify the First Loan Agreement and
the Second Loan Agreement, and to supplement the Third Loan Agreement, the
parties hereto agree for themselves, their successors and assigns as follows:

 

1.                                       Amendments.

 

(a)  Section 5.03 of each of the First Loan
Agreement and the Second Loan Agreement is deemed deleted, subject to
Section 3 of this Agreement.

 

(b)  Section 6.01(c)(i) of each of the First
Loan Agreement and the Second Loan Agreement is amended by adding the words “or
in the Covenants Agreement” to the end of said clause (i).

 

(c)  The following term is added to
Schedule I in the First Loan Agreement, in alphabetical order:

 

 “Covenants Agreement” means the
Covenants Agreement and Amendment to Term Loan Agreements dated as of
January 30, 2004 among the Lender, the Borrower, Dallas S & W, L.P.
and the Guarantor which, among other things, details certain financial
covenants made by the Borrower and the Guarantor to the Lender.

 

(d)  The following term is added to
Schedule I in the Second Loan Agreement, in alphabetical order:

 

“Covenants Agreement”
means the Covenants Agreement and Amendment to Term Loan Agreements dated as of
January 30, 2004 among the Lender, the Borrower and the Guarantors which,
among other things, details certain financial covenants made by the Borrower
and S&W Restaurant Group to the Lender.

 

(e)  The term “Loan Documents” as it appears in
Schedule I of each of the First Loan Agreement and the Second Loan
Agreement is amended by adding, “the Covenants Agreement” after the words “this
Agreement” in the first line thereof.

 

(f)  In each place in Schedule II of the
First Loan Agreement and the Second Loan Agreement where there is required a
certificate of an officer or a managing member or another person, setting forth
calculations of compliance with financial covenants which are set forth in such
Schedule, the same is deemed amended to include a requirement for such a
certificate and such calculation with respect to this Agreement (as it may be
hereafter amended, modified, supplemented and/or restated) for any reporting
period ending after the date hereof.

 

(g) Paragraph (f) of
Schedule II to each of the First Loan Agreement and the Second Loan
Agreement is deemed deleted, subject to Section 3 below.

 

2.  Financial Covenants. So long as any
portion of the any of the Loans shall remain unpaid or any portion of the
Commitment under the Third Loan Agreement remains unterminated, the Borrower
and S&W Restaurant Group shall comply with the following:

 

2

 

(a) Debt
Service Coverage Ratio.  The
Borrower shall not permit the ratio of EBITDA excluding rent received from
tenants, minus maintenance capital expenditures, minus real estate taxes, to
interest expense plus current portion of long-term debt of the Borrower, to be
less than 1.50 to 1.00 (measured on a rolling four quarter basis) as of the
close of any fiscal quarter; provided, however (x) that the amount of any
“balloon” payments due at the maturity of the First Note, due at the maturity
of Second Note and outstanding at the termination of the Third Note, shall not
be included for the purposes of the calculation of the foregoing ratio, and (y)
that in determining the foregoing ratio, Subject Lease Capital Lease Debt shall
be excluded from the calculations of interest expense, current portion of
long-term debt (as applicable) and EBITDA.

 

(b) Senior
Leverage Ratio.  Subject to (e)
below, S&W Restaurant Group shall not permit the ratio of total
Unsubordinated Funded Debt to EBITDA to exceed 3.00 to 1.00 (measured on a
rolling four quarter basis) as of the close of any fiscal quarter.  For purposes of determining the foregoing
ratio, Subject Lease Capital Lease Debt shall be excluded from the calculations
of Unsubordinated Funded Debt and EBITDA. Any purchase money mortgage debt
incurred by a Subsidiary (other than the Borrower and S&W Dallas) of
S&W Restaurant Group which is not guaranteed by S&W Restaurant Group,
the Borrower or S&W Dallas shall not be deemed to be a part of
Unsubordinated Funded Debt of S&W Restaurant Group for the purposes of the
calculation of this Senior Leverage Ratio to the extent that such purchase
money debt is less than $5,000,000.00 in the aggregate.

 

(c) Interest
Coverage Ratio.  Subject to (e)
below, S&W Restaurant Group shall not permit the ratio of EBIT to interest
expense to be less than 2.0 to 1.0 as of the close of any fiscal quarter (in
each case, measured on a rolling four quarter basis).  Subject Lease Capital Lease Debt shall be excluded from the calculations
of interest expense and EBIT in determining the foregoing ratio.

 

(d) Loan
Repayment.  Prior to the end of each
calendar month, S&W Restaurant Group shall repay any loans owing to the
Borrower to the extent required for the Borrower to make all payments then due
and payable under the Notes and the other Loan Documents (as such term is
defined in each of the Loan Agreements, respectively).

 

(e) General.  All calculations of EBITDA and EBIT will
exclude from the determination of earnings, (a) amounts attributable to
pre-opening expenses associated with new restaurants, which expenses are
approved by the Lender in its reasonable discretion, and (b) operating losses
(up to $150,000.00 per new restaurant) incurred by a new restaurant during the
first full month after the opening of such new restaurant.  All calculations of EBITDA and EBIT will
include rent payments under the Subject Lease as an operating expense, provided
that until the first fiscal quarter ending after December 15, 2004, such
rent payments may be excluded from the calculation of earnings for purposes of
determining the Interest Coverage Ratio. 
In settlement of a suit filed in the State of Arizona on or about
September 5, 2001 by Mondo’s of Scottsdale, L.C., S&W Restaurant Group
may exclude an amount up to $300,000.00 from the determination of any of the
covenants set forth in this Section 2 for the fiscal quarter in which such
settlement is required to be reported as an accrued expense under GAAP (as
defined in the Third Loan Agreement). 
The covenants in this Section 2 of S&W Restaurant Group will be
determined on the basis of the consolidated results reflected on S&W
Restaurant Group’s financial statements.

 

3

 

For purposes of the
foregoing, (x) accounting terms which are not otherwise defined shall have the
meanings ascribed to them under GAAP; and (y) the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):

 

“EBIT” means net
income (net loss), plus (a) interest expense and (b) income tax expense.

 

“EBITDA” means net
income (net loss), plus (a) interest expense, (b) income tax expense, (c)
depreciation expense and (d) amortization expense.

 

“Funded Debt”
means all Debt, excluding (a) commitments and contingent obligations in respect
of undrawn letters of credit and guaranties (except, to the extent constituting
guaranties in respect of Funded Debt of a Person other than the Borrower,
either Guarantor or any Subsidiary), (b) hedging obligations and (c) accrued
liabilities incurred in the ordinary course of business.

 

“Subject Lease Capital
Lease Debt” means rental payments under the Subject Lease (as defined in
the Third Loan Agreement) which the Borrower is required to treat as payments
of principal or  interest under GAAP.

 

“Subordinated Debt”
of any Person means all Debt completely subordinated to such Person’s
obligations to the Lender pursuant to a subordination agreement in form and
substance satisfactory to the Lender.

 

“Unsubordinated Funded
Debt” means Funded Debt that is not Subordinated Debt.

 

3.                                       Survival
of Certain Provisions. 
Notwithstanding anything in this Agreement to the contrary, any
financial covenant in the First Loan Agreement or the Second Loan Agreement
which relates to a period prior to the date of this Agreement for which
financial reporting has not been completed and accepted by the Lender shall
survive as an obligation of the party or parties making such covenant.  In addition, notwithstanding the relocation
of the financial covenants effected pursuant to this Agreement, the Borrower
expressly reaffirms paragraph (g) of each of the First Loan Agreement and the
Second Loan Agreement (added pursuant to Section 3 of the August 2003
Amendment) and the Security Agreement (Financial Assets) and the Account
Control Agreement made in connection said paragraph (g).

 

4.                                       Entire
Agreement.  This Agreement sets
forth the entire understanding of the parties with respect to the modification
to the First Loan Agreement and the Second Loan Agreement, and the other
subject matter hereof.  The Borrower and
the Guarantor acknowledge that no oral or other agreements, conditions,
promises, understandings, representations or warranties exist in regard to its
obligations under, or the subject matter of, this Agreement, except those
specifically set forth herein and therein.

 

5.                                       Ratification.  As specifically modified and supplemented
herein (as applicable), all of the terms, covenants, conditions and
stipulations contained in each of the Loan Agreements are hereby ratified and
confirmed in all respects, shall continue to apply with full force and effect.

 

6.                                       No
Oral Change.  Neither this Agreement
nor any provision hereof may be modified, amended, changed, waived, discharged
or terminated orally, but only by an instrument 

 

4

 

in writing signed by the
party against whom enforcement of the change, waiver, discharge or termination
is sought.

 

7.                                       Counterparts.  This Amendment may be executed in one or
more counterparts each of which shall be an original but all of which when
taken together shall constitute one and the same instrument.

 

8.                                       New  York Law.  This Agreement is and shall be deemed to be a contract entered
into pursuant to the laws of the State of New York and shall in all respects be
governed, construed, applied and enforced in accordance with the laws of the
State of New York, without regard to the conflicts of laws principles of the
State of New York other than Section 5-1401 of the New York General
Obligations Law.

 

9.                                       Submission
to Jurisdiction.  The Borrower and
each of the Guarantors agree to submit to personal jurisdiction in the State of
New York in any action or proceeding arising out of this Agreement or any of
the Loan Agreements or any of the other Loan Documents (as defined in each of
the Loan Agreements and amended hereby). 
In furtherance of such agreement, the Borrower and each of the
Guarantors hereby agree and consent that without limiting other methods of
obtaining jurisdiction, personal jurisdiction over any of them in any such
action or proceeding may be obtained within or without the jurisdiction of any
court located in New York and that any process or notice of motion or other
application to any such court in connection with any such action or proceeding
may be served upon any of them by registered or certified mail to, or by
personal service at, the last known address of the applicable entity whether
such address be within or without the jurisdiction of any such court.  The Borrower and each of the Guarantors
further agree that the venue of any litigation arising in connection with any
of the Loans, or in respect of any of the obligations of the Borrower or either
of the Guarantors under this Agreement, shall, to the extent permitted by law,
be in New York County.

 

10.                                 Binding
Effect.  This Agreement is binding
upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns.

 

11.                                 Severability.  If any term, covenant, provision or
condition of this Agreement shall be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be construed without such
term, covenant, provision or condition.

 

12.                               Waiver
of Jury Trial.  The parties hereto
hereby irrevocably and unconditionally waive any and all rights to trial by
jury in any action, suit or counterclaim arising in connection with, out of or
otherwise related to this Agreement.

 

 

[Signatures appear
on the following page.]

 

5

 

IN WITNESS WHEREOF,
the parties have executed this Amendment as of the day and year first above
written.

 

	
   

  	
  S&W OF LAS VEGAS,
  L.L.C.,

  
	
   

  	
  a Delaware limited
  liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  The Smith &
  Wollensky Restaurant Group, Inc.,

  
	
   

  	
   

  	
  a Delaware corporation,
  its Sole Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /S/ JAMES DUNN

  	
   

  
	
   

  	
   

  	
   

  	
  Name: JAMES DUNN

  
	
   

  	
   

  	
   

  	
  Title: PRESIDENT

  

 

	
  STATE OF NEW YORK

  	
  )

  
	
   

  	
  )  ss.:

  
	
  COUNTY OF NEW YORK

  	
  )

  

 

On the 30th day of
January in the year 2004, before me, the undersigned, a Notary Public in
and for said State, personally appeared James Dunn, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in his capacity, and that by his signature on the instrument,
the individual, or the person upon behalf of which the individual acted,
executed the instrument.

 

 

	
   

  	
   

  	
   

  	
   

  	
  /S/ MARIA A. CHANG

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  MARIA A. CHANG

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Notary Public NOTARIZED

  	
   

  

 

	
   

  	
  THE SMITH &
  WOLLENSKY RESTAURANT

  GROUP, INC.,

  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ JAMES DUNN

  	
   

  
	
   

  	
   

  	
  Name: JAMES DUNN

  
	
   

  	
   

  	
  Title: PRESIDENT

  

 

	
  STATE OF NEW YORK

  	
  )

  
	
   

  	
  )  ss.:

  
	
  COUNTY OF NEW YORK

  	
  )

  

 

On the 30th day of
January in the year 2004, before me, the undersigned, a Notary Public in
and for said State, personally appeared James Dunn, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in his capacity, and that by his signature on the instrument,
the individual, or the person upon behalf of which the individual acted,
executed the instrument.

 

 

	
   

  	
   

  	
   

  	
   

  	
  /S/ MARIA A. CHANG

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  MARIA A. CHANG

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Notary Public NOTARIZED

  	
   

  

 

 

	
   

  	
  DALLAS S&W, L.P.

  By:  S&W of Dallas LLC, general
  partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ ALAN M. MANDEZ

  	
   

  
	
   

  	
   

  	
  Name: ALAN M. MANDEZ

  
	
   

  	
   

  	
  Title: SECRETARY

  

 

	
  STATE OF NEW YORK

  	
  )

  
	
   

  	
  )  ss.:

  
	
  COUNTY OF NEW YORK

  	
  )

  

 

On the 30th day of
January in the year 2004, before me, the undersigned, a Notary Public in
and for said State, personally appeared ALAN M. MANDEZ, personally known to me
or proved to me on the basis of satisfactory evidence to be the individual
whose name is subscribed to the within instrument and acknowledged to me that
he executed the same in his capacity, and that by his signature on the
instrument, the individual, or the person upon behalf of which the individual
acted, executed the instrument.

 

 

	
   

  	
   

  	
   

  	
  /S/ MARIA A. CHANG

  	
   

  
	
   

  	
   

  	
   

  	
  Notary Public NOTARIZED

  	
   

  

 

 

	
   

  	
  MORGAN STANLEY DEAN
  WITTER

  COMMERCIAL FINANCIAL SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ CHRISTOPHER MAYROSE

  	
   

  
	
   

  	
   

  	
  Name: CHRISTOPHER
  MAYROSE

  
	
   

  	
   

  	
  Title: EXECUTIVE
  DIRECTOR

  

 

 

	
  STATE OF NEW YORK

  	
  )

  
	
   

  	
  )  ss.:

  
	
  COUNTY OF NEW YORK

  	
  )

  

 

On the 30th day of
January in the year 2004, before me, the undersigned, a Notary Public in
and for said State, personally appeared CHRISTOPHER MAYROSE, personally known
to me or proved to me on the basis of satisfactory evidence to be the
individual whose name is subscribed to the within instrument and acknowledged
to me that he executed the same in his capacity, and that by his signature on
the instrument, the individual, or the person upon behalf of which the
individual acted, executed the instrument.

 

 

	
   

  	
   

  	
   

  	
  /S/ EVA MARIE AROMI

  	
   

  
	
   

  	
   

  	
   

  	
  Notary Public NOTARIZEDExhibit
10.79

 

GUARANTY OF PAYMENT

 

	
  New York, New
  York

  
	
  As of
  January 30, 2004

  

 

WHEREAS, S&W OF LAS
VEGAS, L.L.C., a Delaware limited liability company, having an office at c/o
The Smith & Wollensky Restaurant Group, Inc., 1114 First Avenue, New York,
New York 10021 (the “Borrower”), has applied to MORGAN STANLEY
DEAN WITTER COMMERCIAL FINANCIAL SERVICES, INC., a Delaware corporation, having
an office at 825 Third Avenue, New York, New York 10022 (the “Lender”)
for a line of credit, which line of credit will be (a) evidenced by the Note,
(b) secured by, among other things, the Deed of Trust and (c) advanced pursuant
to the Loan Agreement, all as defined in Exhibit A attached hereto (the “Line of
Credit”);

 

WHEREAS, the Lender is
willing to enter into the Loan Agreement and to make the Advances (as defined
in Exhibit
A hereto) to the Borrower only if the undersigned executes and
delivers this Guaranty and guarantees payment to the Lender of the Debt (as
herein defined) in the manner hereinafter provided.

 

NOW, THEREFORE, in
consideration of the premises and other good and valuable consideration, the
receipt and legal sufficiency of which are hereby acknowledged, and in order to
induce the Lender to enter into the Loan Agreement and to make the Advances to
the Borrower, the undersigned hereby acknowledges, agrees and confirms that all
of the above recitals are true, correct and complete and hereby covenants and
agrees with the Lender as follows:

 

1.                                       The
undersigned guarantees, absolutely, irrevocably and unconditionally, to the
Lender the payment of the Debt.  The
term “Debt”
as used in this Guaranty shall mean all liabilities of the Borrower to the
Lender of whatever nature, whether now existing or hereafter incurred, whether
created directly or acquired by the Lender, by assignment or otherwise, whether
matured or unmatured and whether absolute or contingent, arising in connection
with the Note, the Deed of Trust, the Loan Agreement, or any other document or
instrument now or hereafter executed and/or delivered in connection therewith
or otherwise with respect to the Line of Credit (said Note, Deed of Trust, Loan
Agreement and other documents and instruments being collectively, the “Loan
Documents”), including, without limitation,  all principal, interest,
additional interest (including specifically all interest accruing from and
after the commencement of any case, proceeding or action under any existing or
future laws relating to bankruptcy, insolvency or similar matters with respect
to the Borrower) and other sums of any nature whatsoever which may or shall
become due and payable pursuant to the provisions of the Loan Documents (all of
the above unaffected by modification thereof in any bankruptcy or insolvency
proceeding), and even though the Lender may not have an allowed claim for the
same against the Borrower as a result of any bankruptcy or insolvency
proceeding.

 

2.                                       The
undersigned agrees that the undersigned shall indemnify and hold the Lender
harmless and defend the Lender at the undersigned’s sole cost and expense
against any loss or liability, cost or expense (including, but not limited to,
reasonable attorneys’ fees and 

 

 

disbursements of the
Lender’s counsel, whether in-house staff, retained firms or otherwise), and all
claims, actions, procedures and suits arising out of or in connection with:

 

(a)                                  any
ongoing matters arising out of the transaction contemplated hereby, this
Guaranty, the Debt, the Deed of Trust, the Note, the Loan Agreement or any
other Loan Document, including, but not limited to, all costs of appraisals and
reappraisals of the property encumbered by the Deed of Trust or any part
thereof;

 

(b)                                 any
amendment to, or restructuring of, this Guaranty, the Debt and the Deed of
Trust, the Note, the Loan Agreement or any of the other Loan Documents; and

 

(c)                                  any
and all lawful action that may be taken by the Lender in connection with the
enforcement of the provisions of this Guaranty, the Note, the Deed of Trust,
the Loan Agreement or any of the other Loan Documents, whether or not suit is
filed in connection with the same, or in connection with the undersigned, the
Borrower and/or any partner, joint venturer or shareholder thereof becoming a
party to a voluntary or involuntary federal or state bankruptcy, insolvency or
similar proceeding.

 

All sums expended by the
Lender shall be payable on demand and, until reimbursed by the Borrower or by
the undersigned pursuant hereto, shall bear interest at the default interest
rate as set forth in the Note.

 

3.                                       The
undersigned hereby represents and warrants that all financial statements of the
undersigned heretofore delivered to the Lender by or on behalf of the
undersigned are true and correct in all material respects and fairly present
the financial condition of the undersigned as of the respective dates thereof,
and no material adverse change has occurred in the financial conditions
reflected therein since the respective dates thereof.

 

4.                                       In
addition to any right available to the Lender under applicable law or any other
agreement, the undersigned hereby gives to the Lender a continuing lien on,
security interest in and right of set-off against all moneys, securities and
other property of the undersigned and the proceeds thereof, now on deposit or
now or hereafter delivered, remaining with or in transit in any manner to the
Lender, its affiliates, correspondents, participants or its agents from or for
the undersigned (other than separate accounts maintained exclusively for
payroll or taxes), whether for safekeeping, custody, pledge, transmission,
collection or otherwise or coming into possession of the Lender in any way, and
also, any balance of any deposit or brokerage account and credits of the
undersigned with, and any and all claims of the undersigned against, the Lender
or any such affiliate, correspondent, participant or agent, at any time
existing, as collateral security for the payment of the Debt and all of the
other obligations of the undersigned under this Guaranty, including fees,
contracted with or acquired by the Lender, whether joint, several, absolute,
contingent, secured, matured or unmatured (for the purposes of this paragraph 4
and paragraphs 6, 8 and 16 below, collectively, the “Liabilities”), hereby
authorizing the Lender at any time or times, without prior notice, to apply
such balances, credits or claims, or any part thereof, to such Liabilities in
such amounts as it may select, whether contingent, unmatured or otherwise and
whether any collateral security therefor is deemed adequate or not.  The collateral security described herein shall
be in addition to any collateral security described in any separate

 

2

 

agreement executed by the
undersigned.  The Lender, in addition to
any right available to it under applicable law or any other agreement, shall
have the right, at its option, to immediately set off against any Liabilities
all monies owed by the Lender in any capacity to the undersigned, whether or
not due, and the Lender shall, at its option, be deemed to have exercised such
right to set off and to have made a charge against any such money immediately
upon the occurrence of any events of default set forth below, even though such
charge is made or entered on the books of the Lender subsequent to those
events.

 

5.                                       All
moneys available to the Lender for application in payment or reduction of the
Debt may be applied by the Lender in such manner and in such amounts and at
such time or times and in such order, priority and proportions as the Lender
may see fit to the payment or reduction of such portion of the Debt as the
Lender may elect.

 

6.                                       The
undersigned hereby expressly agrees that this Guaranty is independent of, and
in addition to, all collateral granted, pledged or assigned under the Loan
Documents, and the undersigned hereby consents that from time to time, before
or after any default by the Borrower, with or without further notice to or
assent from the undersigned:

 

(a)                                  any
security at any time held by or available to the Lender for any obligation of
the Borrower, or any security at any time held by or available to the Lender
for any obligation of any other person or party primarily, secondarily or
otherwise liable for all or any portion of the Debt, any other Liabilities
and/or any other obligations of the Borrower or any other person or party,
other than the Lender, under any of the Loan Documents (“Other Obligations”),
including any guarantor of the Debt and/or any of such Other Obligations, may
be accelerated, settled, exchanged, surrendered or released and the Lender may
fail to set off and may release, in whole or in part, any balance of any
deposit account or credit on its books in favor of the Borrower, or of any such
other person or party;

 

(b)                                 any
obligation of the Borrower, or of any such other person or party, may be changed,
altered, renewed, extended, continued, accelerated, surrendered, compromised,
settled, waived or released in whole or in part, or any default with respect
thereto waived; and

 

(c)                                  the
Lender may extend further credit in any manner whatsoever to the Borrower, and
generally deal with the Borrower or any of the above-mentioned security,
deposit account, credit on its books or other person or party as the Lender may
see fit;

 

and the undersigned shall
remain bound in all respects under this Guaranty, without any loss of any
rights by the Lender and without affecting the liability of the undersigned,
notwithstanding any such exchange, surrender, release, change, alteration,
renewal, extension, continuance, compromise, waiver, inaction, extension of
further credit or other dealing.  In
addition, all moneys available to the Lender for application in payment or
reduction of the Debt and/or any Other Obligations may be applied by the Lender
in such manner and in such amounts and at such time or times and in such order,
priority and proportions as the Lender may see fit.

 

3

 

7.                                       The
undersigned hereby waives:

 

(a)                                  notice
of acceptance of this Guaranty and of the making of any Advances by the Lender
to the Borrower;

 

(b)                                 presentment
and demand for payment of the Debt or any portion thereof;

 

(c)                                  protest
and notice of dishonor or default to the undersigned or to any other person or
party with respect to the Debt or any portion thereof;

 

(d)                                 all
other notices to which the undersigned might otherwise be entitled; and

 

(e)                                  any
demand under this Guaranty.

 

8.                                       If
any of the following events should occur:

 

(a)                                  default
under any of the Loan Documents and its continuance beyond any applicable
notice and/or grace periods therein contained; or

 

(b)                                 the
undersigned violates any provision of this Guaranty;

 

then, and in such event,
the Lender may declare the Liabilities to be, and the same shall become,
immediately due and payable.

 

9.                                       This
is a guaranty of payment and not of collection and the undersigned further
waives any right to require that any action be brought against the Borrower or
any other person or party or to require that resort be had to any security or
to any balance of any deposit account or credit on the books of the Lender in
favor of the Borrower or any other person or party.  Any payment on account of or reacknowledgment of the Debt by the
Borrower, or any other party liable therefor, shall be deemed to be made on
behalf of the undersigned and shall serve to start anew the statutory period of
limitations applicable to the Debt.

 

10.                                 Each
reference herein to the Lender shall be deemed to include its successors and
assigns, in whose favor the provisions of this Guaranty shall also inure.  Each reference herein to the undersigned
shall be deemed to include the successors and assigns of the undersigned, all
of whom shall be bound by the provisions of this Guaranty, provided, however,
that the undersigned shall in no event nor under any circumstance have the
right, without obtaining the prior written consent of the Lender, to assign or
transfer the undersigned’s obligations and liabilities under this Guaranty, in
whole or in part, to any other person, party or entity.

 

11.                                 The
term “undersigned”
as used herein shall, if this Guaranty is signed by more than one party, unless
otherwise stated herein, mean the “undersigned and each of them” and each
undertaking herein contained shall be their joint and several undertaking.  If this Guaranty is signed by more than one
party, all singular references to the undersigned shall be deemed to be
plural.  If any party hereto shall be a
partnership, the agreements and obligations on the part of the undersigned
herein contained shall remain in force and application notwithstanding any

 

4

 

changes in the
individuals composing the partnership and the term “undersigned” shall include
any altered or successive partnerships, but the predecessor partnerships and
their partners shall not thereby be released from any obligations or liability
hereunder.  If any party hereto shall be
a corporation, the agreements and obligations on the part of the undersigned
herein contained shall remain in force and application notwithstanding the
merger, consolidation, reorganization or absorption thereof, and the term
“undersigned” shall include such new entity, but the old entity shall not
thereby be released from any obligations or liabilities hereunder.

 

12.                                 No
delay on the part of the Lender in exercising any right or remedy under this
Guaranty or failure to exercise the same shall operate as a waiver in whole or
in part of any such right or remedy.  No
notice to or demand on the undersigned shall be deemed to be a waiver of the
obligations of the undersigned or of the right of the Lender to take further
action without notice or demand as provided in this Guaranty.  No course of dealing between the undersigned
and the Lender shall change, modify or discharge, in whole or in part, this
Guaranty or any obligations of the undersigned hereunder.

 

13.                                 This
Guaranty may only be modified, amended, changed or terminated by an agreement
in writing signed by the Lender and the undersigned.  No waiver of any term, covenant or provision of this Guaranty
shall be effective unless given in writing by the Lender and if so given by the
Lender shall only be effective in the specific instance in which given.  The execution and delivery hereafter to the
Lender by the undersigned of a new instrument of guaranty or any reaffirmation
of guaranty, of whatever nature, shall not terminate, supersede or cancel this
instrument, unless expressly so provided therein, and all rights and remedies
of the Lender hereunder or under any instrument of guaranty hereafter executed
and delivered to the Lender by the undersigned shall be cumulative and may be
exercised singly or concurrently.

 

14.                                 The
undersigned acknowledges that this Guaranty and the undersigned’s obligations
under this Guaranty are and shall at all times continue to be absolute,
irrevocable and unconditional in all respects, and shall at all times be valid
and enforceable irrespective of any other agreements or circumstances of any
nature whatsoever which might otherwise constitute a defense to this Guaranty
and the obligations of the undersigned under this Guaranty or the obligations
of any other person or party (including, without limitation, the Borrower)
relating to this Guaranty or the obligations of the undersigned hereunder or
otherwise with respect to the Debt, including, but not limited to, a
foreclosure of the Deed of Trust or the realization upon any other collateral
given, pledged or assigned as security for all or any portion of the Debt, or
the filing of a petition under Title 11 of the United States Code with regard
to the Borrower or the undersigned, or the commencement of an action or
proceeding for the benefit of the creditors of the Borrower or the undersigned,
or the obtaining by the Lender of title to, respectively, the premises
encumbered by the Deed of Trust or any other collateral given, pledged or
assigned as security for the Debt by reason of the foreclosure or enforcement
the Deed of Trust or any other pledge or security agreement, the acceptance of
a deed or assignment in lieu of foreclosure or sale, or otherwise.  This Guaranty sets forth the entire
agreement and understanding of the Lender and the undersigned with respect to
the matters covered by this Guaranty and the undersigned acknowledges that no
oral or other agreements, understandings, representations or warranties exist
with respect to this Guaranty or with respect to the obligations of the
undersigned under this Guaranty, except those specifically set forth in this
Guaranty.

 

5

 

15.                                 This
Guaranty has been validly authorized, executed and delivered by the
undersigned.  The undersigned represents
and warrants to the Lender that it has the corporate or other organizational
power to do so and to perform its obligations under this Guaranty and this
Guaranty constitutes the legally binding obligation of the undersigned fully
enforceable against the undersigned in accordance with the terms hereof.  The undersigned further represents and
warrants to the Lender that:

 

(a)                                  neither
the execution and delivery of this Guaranty nor the consummation of the
transactions contemplated hereby nor compliance with the terms and provisions
hereof will violate any applicable provision of law or any applicable
regulation or other manifestation of governmental action; and

 

(b)                                 all
necessary approvals, consents, licenses, registrations and validations of any
governmental regulatory body, including, without limitation, approvals required
to permit the undersigned to execute and carry out the provisions of this
Guaranty, for the validity of the obligations of the undersigned hereunder and
for the making of any payment or remittance of any funds required to be made by
the undersigned under this Guaranty, have been obtained and are in full force
and effect.

 

16.                                 Notwithstanding
any payments made by the undersigned pursuant to the provisions of this
Guaranty, the undersigned irrevocably waives all rights to enforce or collect
upon any rights which it now has or may acquire against the Borrower either by
way of subrogation, indemnity, reimbursement or contribution for any amount
paid under this Guaranty or by way of any other obligations whatsoever of the
Borrower to the undersigned, nor shall the undersigned file, assert or receive
payment on any claim, whether now existing or hereafter arising, against the
Borrower in the event of the commencement of a case by or against the Borrower
under Title 11 of the United States Code. 
In the event either a petition is filed under said Title 11 of the
United States Code with regard to the Borrower or the commencement of an action
or proceeding for the benefit of the creditors of the Borrower, this Guaranty
shall at all times thereafter remain effective in regard to any payments or
other transfers of assets to the Lender received from or on behalf of the Borrower
prior to notice of termination of this Guaranty and which are or may be held
voidable on the grounds of preference or fraud, whether or not the Debt has
been paid in full.  The provisions of
this paragraph 16 shall survive the term of this Guaranty and the payment in
full of the Debt and all other Liabilities.

 

17.                                 Any
notice, request or demand given or made under this Guaranty shall be in writing
and shall be given in the manner and to the notice parties set forth in the
Loan Agreement.

 

18.                                 This
Guaranty is, and shall be deemed to be, a contract entered into under and
pursuant to the laws of the State of New York and shall be in all respects
governed, construed, applied and enforced in accordance with the laws of the
State of New York without regard to principles of conflicts of laws.  The undersigned acknowledges and agrees that
this Guaranty is, and is intended to be, an instrument for the payment of money
only, as such phrase is used in

 

6

 

§3213 of the Civil
Practice Law and Rules of the State of New York, and the undersigned has been
fully advised by its counsel of the Lender’s rights and remedies pursuant to
said §3213.

 

19.                                 The
undersigned agrees to submit to personal jurisdiction in the State of New York
in any action or proceeding arising out of this Guaranty.  In furtherance of such agreement, the
undersigned hereby agrees and consents that without limiting other methods of
obtaining jurisdiction, personal jurisdiction over the undersigned in any such
action or proceeding may be obtained within or without the jurisdiction of any
court located in New York and that any process or notice of motion or other
application to any such court in connection with any such action or proceeding
may be served upon the undersigned by registered or certified mail to, or by
personal service at, the last known address of the undersigned, whether such
address be within or without the jurisdiction of any such court.  The undersigned hereby further agrees that
the venue of any litigation arising in connection with the Debt or in respect
of any of the obligations of the undersigned under this Guaranty, shall, to the
extent permitted by law, be in New York County.  Nothing in this paragraph shall limit the right of the Lender to
bring an action or proceeding arising out of the Guaranty in any other
jurisdiction.

 

20.                                 The
undersigned absolutely, unconditionally and irrevocably waives any and all
right to assert or interpose any defense (other than the final and indefeasible
payment in full of the Debt), setoff, counterclaim or crossclaim of any nature
whatsoever with respect to this Guaranty or the obligations of the undersigned
under this Guaranty, or the obligations of any other person or party (including
without limitation, the Borrower) relating to this Guaranty, or the obligations
of the undersigned hereunder or otherwise with respect to the Line of Credit in
any action or proceeding brought by the Lender to collect the Debt, or any
portion thereof, or to enforce the obligations of the undersigned under this
Guaranty (provided, however, that the foregoing shall not be deemed a waiver of
the right of the undersigned to assert any compulsory counterclaim maintained
in a court of the United States, or of the State of New York if such
counterclaim is compelled under local law or rule of procedure, nor shall the
foregoing be deemed a waiver of the right of the undersigned to assert any
claim which would constitute a defense, setoff, counterclaim or crossclaim of
any nature whatsoever against the Lender in any separate action or
proceeding).  The undersigned hereby
undertakes and agrees that this Guaranty shall remain in full force and effect
for all of the obligations and liabilities of the undersigned hereunder,
notwithstanding the maturity of the Advances or termination of the Commitment
(as defined in the Loan Agreement), whether by acceleration, scheduled maturity
or otherwise.

 

21.                                 No
exculpatory provisions which may be contained in the Note, the Deed of Trust or
in any other Loan Document shall in any event or under any circumstances be
deemed or construed to modify, qualify, or affect in any manner whatsoever the
obligations and liabilities of the undersigned under this Guaranty.

 

22.                                 The
obligations and liabilities of the undersigned under this Guaranty are in
addition to the obligations and liabilities of the undersigned under the Other
Guaranties (as hereinafter defined). 
The discharge of the undersigned’s obligations and liabilities under any
one or more of the Other Guaranties by the undersigned or by reason of
operation of law or otherwise shall in no event or under any circumstance
constitute or be deemed to constitute a discharge, in whole or in part, of the
undersigned’s obligations and liabilities under this Guaranty.  Conversely,

 

7

 

the discharge of any of
the undersigned’s obligations and liabilities under this Guaranty by the
undersigned or by reason of operation of law or otherwise shall in no event or
under any circumstance constitute or be deemed to constitute a discharge, in
whole or in part, of the undersigned’s obligations and liabilities under any of
the Other Guaranties.  The term “Other
Guaranties” as used herein shall mean any other guaranty of payment,
guaranty of performance, completion guaranty, indemnification agreement or
other guaranty or instrument creating any obligation or undertaking of any
nature whatsoever (other than this Guaranty) now or hereafter executed and
delivered by the undersigned to the Lender in connection with the Line of
Credit.

 

23.                                 This
Guaranty may be executed in one or more counterparts by some or all of the
parties hereto, each of which counterparts shall be an original and all of
which together shall constitute a single agreement of guaranty.

 

24.                               The
undersigned hereby irrevocably and unconditionally waives, and the Lender by
its acceptance of this Guaranty irrevocably and unconditionally waives, any and
all right to trial by jury in any action, suit or counterclaim arising in
connection with, out of or otherwise relating to this Guaranty.

 

 

[Remainder of page
left intentionally blank]

 

8

 

IN WITNESS WHEREOF, the
undersigned has duly executed this Guaranty the day and year first above set
forth.

 

 

	
   

  	
  THE SMITH &
  WOLLENSKY RESTAURANT

  GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ ALAN M. MANDEZ

  	
   

  
	
   

  	
   

  	
  Name: ALAN M. MANDEZ

  
	
   

  	
   

  	
  Title: SECRETARY

  

 

 

	
  STATE OF NEW YORK

  	
  )

  
	
   

  	
  ss.:

  
	
  COUNTY OF NEW YORK

  	
  )

  

 

On the 30th day of
January in the year 2004 before me, the undersigned, a Notary Public in
and for said State, personally appeared ALAN M. MANDEZ, personally known to me
or proved to me on the basis of satisfactory evidence to be the individual
whose name is subscribed to the within instrument and acknowledged to me that
he executed the same in his capacity, and that by his signature on the
instrument, the individual, or the person upon behalf of which the individual
acted, executed the instrument.

 

	
   

  	
  /S/ MARIA A. CHANG

  	
   

  
	
   

  	
  Notary Public NOTARIZED

  	
   

  

 

 

EXHIBIT A

 

Advances:  The term “Advances” as used in this
Guaranty shall have the meaning assigned to such term in the Loan Agreement.

 

Deed of Trust:
The term “Deed
of Trust” as used in this Guaranty shall have the meaning assigned
to such term in the Loan Agreement.

 

Loan Agreement:  The term “Loan Agreement” as used in
this Guaranty shall mean that  certain
Line of Credit Agreement, of even date herewith, entered into among the
Borrower, The Smith & Wollensky Restaurant Group, Inc. and the Lender,
together with any and all modifications, supplements, replacement or
substitutions therefor as may exist from time to time.

 

Loan Documents:  The term “Loan Documents” as used in
this Guaranty shall have the meaning assigned to such term in the Loan
Agreement.

 

Note:  The term “Note” as used in this
Guaranty shall mean the Promissory Note, of even date herewith, referred to in
the Loan Agreement, together with any and all modifications, supplements,
replacements or substitutions therefor as may exist from time to time.

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