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EXHIBIT 10.36
[FINOVA FINANCIAL INNOVATORS LOGO]
LOAN AND SECURITY AGREEMENT
FRESH CHOICE, INC.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇-▇▇▇▇▇▇▇
FED ID TAX NO.
$4,000,000
CREDIT LIMIT
DECEMBER 29, 1998
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CORPORATE FINANCE
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TABLE OF CONTENTS
PAGE
1. DEFINITIONS.........................................................................1
1.1 Defined Terms................................................................1
1.2 Other Terms..................................................................6
2. LOANS; INTEREST RATE AND OTHER CHARGES..............................................6
2.1 Total Facility...............................................................6
2.2 Loans........................................................................7
2.3 Overlines; Overadvances......................................................7
2.4 Intentionally Deleted........................................................7
2.5 Loan Account.................................................................7
2.6 Interest; Fees...............................................................7
2.7 Default Interest Rate........................................................7
2.8 Examination Fee..............................................................7
2.9 Excess Interest..............................................................7
2.10 Principal Payments; Proceeds of Collateral..................................8
2.11 Application of Collateral....................................................8
2.12 Application of Payments......................................................9
2.13 Notification of Closing......................................................9
3. SECURITY............................................................................9
3.1 Security Interest in the Collateral..........................................9
3.2 Perfection and Protection of Security Interest...............................9
3.3 Preservation of Collateral..................................................10
3.4 Insurance...................................................................10
3.5 Collateral Reporting; Inventory.............................................10
3.6 Receivables.................................................................10
3.7 Equipment...................................................................11
3.8 Other Liens; No Disposition of Collateral..................................11
3.9 Collateral Security.........................................................11
4. CONDITIONS OF CLOSING..............................................................11
4.1 Initial Advance.............................................................11
4.2 Subsequent Advances.........................................................14
5. REPRESENTATIONS AND WARRANTIES.....................................................14
5.1 Due Organization............................................................14
5.2 Other Names.................................................................14
5.3 Due Authorization...........................................................14
5.4 Binding Obligation..........................................................14
5.5 Intangible Property.........................................................15
5.6 Capital.....................................................................15
5.7 Material Litigation.........................................................15
5.8 Title; Security Interests of FINOVA.........................................15
5.9 Restrictive Agreements; Labor Contracts.....................................15
5.10 Laws........................................................................15
5.11 Consents....................................................................15
5.12 Defaults....................................................................15
5.13 Financial Condition.........................................................15
5.14 ERISA.......................................................................15
5.15 Taxes.......................................................................15
5.16 Locations; Federal Tax ID No................................................16
5.17 Business Relationships......................................................16
5.18 Reaffirmations..............................................................16
5.19 Year 2000 Representations & Warranties......................................16
6. COVENANTS..........................................................................16
6.1 Affirmative Covenants.......................................................16
6.1.1 Taxes................................................................16
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6.1.2 Notice of Litigation.................................................16
6.1.3 ERISA................................................................16
6.1.4 Change in Location...................................................16
6.1.5 Corporate Existence..................................................16
6.1.6 Labor Disputes.......................................................16
6.1.7 Violations of Law....................................................16
6.1.8 Defaults.............................................................16
6.1.9 Capital Expenditures.................................................16
6.1.10 Books and Records....................................................17
6.1.11 Leases; Warehouse Agreements.........................................17
6.1.12 Additional Documents.................................................17
6.1.13 Financial Covenants..................................................17
6.1.14 Year 2000 Covenants..................................................17
6.2 Negative Covenants..........................................................17
6.2.1 Mergers..............................................................17
6.2.2 Loans................................................................17
6.2.3 Dividends............................................................17
6.2.4 Adverse Transactions.................................................17
6.2.5 Indebtedness of Others...............................................17
6.2.6 Repurchase...........................................................17
6.2.7 Name.................................................................17
6.2.8 Prepayment...........................................................17
6.2.9 Capital Expenditure..................................................17
6.2.10 Compensation.........................................................18
6.2.11 Indebtedness.........................................................18
6.2.12 Affiliate Transactions...............................................18
6.2.13 Nature of Business...................................................18
6.2.14 FINOVA's Name........................................................18
6.2.15 Margin Security......................................................18
6.2.16 Real Property........................................................18
7. DEFAULT AND REMEDIES...............................................................18
7.1 Events of Default...........................................................18
7.2 Remedies....................................................................19
7.3 Standards for Determining Commercial Reasonableness.........................20
8. EXPENSES AND INDEMNITIES...........................................................20
8.1 Expenses....................................................................20
8.2 Environmental Matters......................................................20
9. MISCELLANEOUS......................................................................20
9.1 Examination of Records; Financial Reporting.................................20
9.2 Term; Termination...........................................................21
9.3 Recourse to Security; Certain Waivers.......................................21
9.4 No Waiver by FINOVA.........................................................21
9.5 Binding on Successor and Assigns............................................22
9.6 Severability................................................................22
9.7 Amendments; Assignments.....................................................22
9.8 Integration.................................................................22
9.9 Survival....................................................................22
9.10 Evidence of Obligations.....................................................22
9.11 Loan Requests...............................................................22
9.12 Notices.....................................................................22
9.13 Brokerage Fees..............................................................22
9.14 Disclosure..................................................................22
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9.15 Publicity...................................................................22
9.16 Captions....................................................................23
9.17 Injunctive Relief...........................................................23
9.18 Counterparts; Facsimile Execution...........................................23
9.19 Construction................................................................23
9.20 Time of Essence.............................................................23
9.21 Limitation of Actions.......................................................23
9.22 Liability...................................................................23
9.23 Notice of Breach by FINOVA..................................................23
9.24 Application of Insurance Proceeds...........................................23
9.25 Power of Attorney...........................................................24
9.26 Governing Law; Waivers......................................................24
9.27 Mutual Waiver of Right to Jury Trial........................................24
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THIS LOAN AND SECURITY AGREEMENT (collectively with the Schedule to Loan
Agreement (the "SCHEDULE") attached hereto, the "AGREEMENT") dated the date set
forth on the cover page, is entered into by and between the borrower named on
the cover page (the "Borrower"), whose address is set forth on the cover page
and FINOVA CAPITAL CORPORATION ("FINOVA"), whose address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
1. DEFINITIONS.
1.1 Defined Terms. As used in this Agreement, the following terms have the
definitions set forth below:
"ADA" has the meaning set forth in Section 4.1(aa) hereof.
"Additional Sums" has the meaning set forth in Section 2.9(a) hereof.
"Adjusted Interest" means the sum of (a) the product of the blended
interest rate applicable hereunder to the Loans (which blended interest rate
shall be calculated based on the ratio of the Term Loans to the Capital
Expenditure Loans then outstanding) multiplied by one-half of the difference
between (i) twice the value of the Obligations less (2) Adjusted Principal
Payments, plus (b) interest payments that are required to be made by Borrower
during the subsequent twelve months on Permitted Indebtedness other than the
Obligations.
"Adjusted Operating Cash Flow" means the difference between (i)
Operating Cash Flow/Actual measured on a twelve month rolling basis less (ii)
the sum of (x) Pro Forma Taxes payable over the subsequent twelve months plus
(y) aggregate Capital Expenditures not financed by Permitted Indebtedness
measured on a twelve month rolling basis.
"Adjusted Principal Payments" means the sum of (i) one-fifth of the
principal balance of the Loans as of the last day of the immediately preceding
month plus (ii) the contractual principal amortization for Permitted
Indebtedness (other than the Obligations) payable during the subsequent twelve
months.
"Adjusted Senior Contractual Debt Service" means the sum of (i)
Adjusted Principal Payments as of the last day of the immediately preceding
month plus (ii) Adjusted Interest.
"Affiliate" means any Person controlling, controlled by or under
common control with Borrower. For purposes of this definition, "control" means
the possession, directly or indirectly, of the power to direct or cause
direction of the management and policies of any Person, whether through
ownership of common or preferred stock or other equity interests, by contract or
otherwise. Without limiting the generality of the foregoing, each of the
following shall be an Affiliate: any officer, director, employee or other agent
of Borrower, any shareholder, member or subsidiary of Borrower, and any other
Person with whom or which Borrower has common shareholders, officers or
directors.
"Agreement" has the meaning set forth in the preamble.
"Applicable Usury Law" has the meaning set forth in Section 2.9(b)
hereof.
"Blocked Account" has the meaning set forth in Section 2.10(c) hereof.
"Borrower Properties" has the meaning set forth in the Schedule.
"Business Day" means any day on which commercial banks in both Los
Angeles, California and Phoenix, Arizona are open for business.
"Capital Expenditures" means all expenditures made and liabilities
incurred for the acquisition of any fixed asset or improvement, replacement,
substitution or addition thereto which has a useful life of more than one year
and including, without limitation, those arising in connection with Capital
Leases.
"Capital Lease" means any lease of property by Borrower that, in
accordance with GAAP, should be capitalized for financial reporting purposes and
reflected as a liability on the balance sheet of Borrower.
"Closing Fee" has the meaning set forth in the Schedule.
"Closing Date" means the date of the initial advance made by FINOVA
pursuant to this Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of Arizona from time to time.
"Collateral" has the meaning set forth in Section 3.1 hereof.
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"Collateral Monitoring Fee" has the meaning set forth in the Schedule.
"Deposit Accounts" has the meaning set forth in Section 9105 of the
Code.
"Dominion Account" has the meaning set forth in Section 2.10(c)
hereof.
"Earnings Before Interest, Taxes, Depreciation and Amortization" for
any fiscal period of Borrower means the net income of Borrower for such fiscal
period, plus interest expense, depreciation and amortization and provision for
income taxes for such fiscal period, and minus non-recurring miscellaneous
income and expenses, all calculated in accordance with GAAP.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which Borrower is a member and which is treated as a single
employer under ERISA Section 4001(b)(1), or IRC Section 414.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"Examination Fee" has the meaning set forth in the Schedule.
"Excess Availability" means, as of the date of determination thereof,
the amount by which the average daily total principal balance of the Capital
Expenditure Loans facility which Borrower would be permitted to have outstanding
over the prior 30 days, based on the formulas and reserves set forth in the
Schedule, exceeds the sum of the Capital Expenditure Loans then actually
outstanding, such excess then being reduced by an amount necessary to provide
for the payment of all accounts payable of Borrower which are more than 30 days
past due date and all book overdrafts.
"Excess Cash Flow" means Operating Cash Flow/Permitted less Total
Contractual Debt Service.
"FINOVA Affiliate" has the meaning set forth in Section 9.22 hereof.
"▇▇▇▇▇▇ City Store" has the meaning set forth in Section 3.8 hereof.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Boards which are applicable to the circumstances
as of the date of determination consistently applied, except that, for the
financial covenants set forth in this Agreement, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings, blueprints,
Trademarks, Licenses and Patents, names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against FINOVA, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation
credit, liability, property and other insurance) tax refunds and claims,
computer programs, discs, tapes and tape files, claims under guaranties,
security interests or other security held by or granted to Borrower to secure
payment of any of the Receivables by an account debtor, all rights to
indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Indebtedness" means all of Borrower's present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however
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evidenced, created, incurred, acquired, owing or arising, whether under written
or oral agreement, operation of law or otherwise, and includes, without limiting
the foregoing (i) the Obligations, (ii) obligations and liabilities of any
Person secured by a lien, claim, encumbrance or security interest upon property
owned by Borrower, even though Borrower has not assumed or become liable
therefor, (iii) obligations and liabilities created or arising under any lease
(including Capital Leases) or conditional sales contract or other title
retention agreement with respect to property used or acquired by Borrower, even
though the rights and remedies of the lessor, seller or lender are limited to
repossession, (iv) all unfunded pension fund obligations and liabilities and (v)
deferred taxes.
"Initial Term" has the meaning set forth on the Schedule.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease, all raw materials, work
in process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in Borrower's business or
used in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, merchandise or other personal property, and all
documents of title or other documents representing them.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Loans" has the meaning set forth in Section 2.2 hereof.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower and payable to FINOVA, and any other present or
future agreement entered into in connection with this Agreement, together with
all alterations, amendments, changes, extensions, modifications, refinancings,
refundings, renewals, replacements, restatements, or supplements, of or to any
of the foregoing.
"Loan Party" means Borrower and each other party (other than FINOVA)
to any Loan Document.
"Loan Reserves" means, as of any date of determination, such amounts
as FINOVA may from time to time establish and revise in good faith reducing the
amount of Capital Expenditure Loans which would otherwise be available to
Borrower under the lending formula(s) provided in the Schedule: (a) to reflect
events, conditions, contingencies or risks which, as determined by FINOVA in
good faith, do or may affect either (i) the Collateral or any other property
which is security for the Obligations or its value, (ii) the assets, business or
prospects of Borrower or any guarantor of the Obligations or (iii) the security
interests and other rights of FINOVA in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect FINOVA's good
faith belief that any collateral report or financial information furnished by or
on behalf of Borrower or any guarantor to FINOVA is or may have been incomplete,
inaccurate or misleading in any material respect or (c) in respect of any state
of facts which FINOVA determines in good faith constitutes an Event of Default
or may, with notice or passage of time or both, constitute an Event of Default."
"Loan Year" means each twelve month period commencing on the Closing
Date.
"Maximum Interest Rate" has the meaning set forth in Section 2.9(c)
hereof.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA
Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of
Borrower or any ERISA Affiliate.
"Net Worth" at any date means the Borrower's net worth as determined
in accordance with GAAP.
"Obligations" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time owing
by Borrower to FINOVA, whether evidenced by this Agreement, any note or other
instrument or document, whether arising from an extension of credit, opening of
a letter of credit, banker's acceptance, loan, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by FINOVA in Borrower's debts owing
to others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney's fees, expert
witness fees, Examination Fee, Collateral Monitoring Fee, Closing Fee, Facility
Fee, Termination Fee, and any other sums chargeable to Borrower hereunder or
under any other agreement with FINOVA.
"Operating Cash Flow/Actual" means, for any period, Borrower's net
income or loss (excluding the effect of any extraordinary gains or losses),
determined in accordance with GAAP, plus or minus each of the following items,
to the extent deducted from or added to the revenues of Borrower in the
calculation of net income or loss: (i) depreciation; (ii) amortization and other
non-
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cash charges; (iii) interest expense paid or accrued; and (iv) total federal
and state income tax expense determined as the accrued liability of Borrower in
respect of such period, regardless of what portion of such expense has actually
been paid by Borrower during such period.
"Operating Cash Flow/Permitted" means, for any period, Borrower's net
income or loss (excluding the effect of any extraordinary gains or losses),
determined in accordance with GAAP, plus or minus each of the following items,
to the extent deducted from or added to the revenues of Borrower in the
calculation of net income or loss: (i) depreciation; (ii) amortization and other
non- cash charges; (iii) interest expense paid or accrued; (iv) total federal
and state income tax expense determined as the accrued liability of Borrower in
respect of such period, regardless of what portion of such expense has actually
been paid by Borrower during such period; and (v) fees paid to subordinating
creditors, if any, to the extent permitted hereunder, and after deduction for
each of (a) federal and state income taxes, to the extent actually paid during
such period; (b) any non-cash income; and (c) all permitted Capital Expenditures
(without regard to any waiver given by FINOVA with respect to any limitation on
such Capital Expenditures) actually made during such period and not financed.
"Overadvance" has the meaning set forth in Section 2.3.
"Overline" has the meaning set forth in Section 2.3.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Permitted Discretion" means FINOVA's judgment exercised in good faith
based upon its consideration of any factor which FINOVA believes in good faith:
(i) will or could materially adversely affect the value of any Collateral, the
enforceability or priority of FINOVA's liens thereon or the amount which FINOVA
would be likely to receive (after giving consideration to delays in payment and
costs of enforcement) in the liquidation of such Collateral; (ii) suggests that
any collateral report or financial information delivered to FINOVA by any Person
on behalf of the Borrower is incomplete, inaccurate or misleading in any
material respect; (iii) materially increases the likelihood of a bankruptcy,
reorganization or other insolvency proceeding involving the Borrower, any Loan
Party or any of the Collateral, or (iv) creates or reasonably could be expected
to create an Event of Default. In exercising such judgment, FINOVA may consider
any of the following factors: (i) the financial and business climate of the
Borrower's industry, (ii) general macroeconomic conditions, and (iii) any other
factors that materially and adversely change the credit risk of lending to the
Borrower on the security of the Collateral. The burden of establishing lack of
good faith hereunder shall be on the Borrower.
"Permitted Encumbrance" means each of the liens, mortgages and other
security interests set forth on the Schedule.
"Permitted Indebtedness" has the meaning set forth in the Schedule.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, government, or any agency or political division thereof, or
any other entity.
"Plan" means any plan described in ERISA Section 3(2) maintained for
employees of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
"Prepared Financials" means the balance sheets of Borrower as of the
date set forth in the Schedule in the section entitled 'Reporting Requirements'
, and as of each subsequent date on which audited balance sheets are delivered
to FINOVA from time to time hereunder, and the related statements of operations,
changes in stockholder's equity and changes in cash flow for the periods ended
on such dates.
"Prime Rate" has the meaning set forth in the Schedule.
"Pro Forma Taxes" means Borrower's anticipated income tax payments
that will be due and payable during the subsequent twelve months calculated in
accordance with IRC.
"Prohibited Transaction" means any transaction described in Section
406 of ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction described in Section 4975(c) of the IRC which is not exempt by
reason of Section 4975(c)(2) of the IRC.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), proceeds of any letters of
credit naming Borrower as beneficiary, contract rights, chattel paper,
instruments, documents and all other forms of obligations at any time owing to
Borrower, all guaranties and other security therefor, whether secured or
unsecured, all merchandise returned to or repossessed by Borrower,
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and all rights of stoppage in transit and all other rights or remedies of an
unpaid vendor, lienor or secured party.
"Renewal Term" has the meaning set forth on the Schedule.
"Reportable Event" means a reportable event described in Section 4043
of ERISA or the regulations thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA, or a cessation of operations described in Section 4068(f)
of ERISA.
"Schedule" has the meaning set forth in the preamble.
"Senior Contractual Debt Service" means, for any period, the sum of
payments made or required to be made by Borrower during such period for (i)
interest and scheduled principal payments due on the Term Loans (excluding
voluntary prepayment), and (ii) interest only payments due on the Capital
Expenditure Loans facility plus the Collateral Monitoring Fee, the Facility Fee
and the Unused Line Fee.
"Start Date" has the meaning set forth in the Schedule.
"Subordinated Debt" means liabilities of Borrower the repayment of
which is subordinated, to the payment and performance of the Obligations,
pursuant to a subordination agreement acceptable to FINOVA in its sole
discretion.
"Targeted Stores" has the meaning set forth in Section 3.8 hereof.
"Term Loans" has the meaning set forth in the Schedule.
"Termination Fee" has the meaning set forth in Section 9.2(d) hereof.
"Total Contractual Debt Service" means, for any period, the sum of
payments made (or, as to clause (i) of this sentence, required to be made) by
Borrower during such period for (i) Senior Contractual Debt Service and (ii)
interest and scheduled principal payments due on any and all other Indebtedness
of Borrower.
"Total Debt Service Coverage Ratio" means as of the last day of each
fiscal quarter ended March, June, September or December, the ratio of Borrower's
Operating Cash Flow/Actual for the consecutive 12-month period ending as of such
last day to the amount necessary to meet Borrower's Total Contractual Debt
Service for such 12-month period, provided that such calculations shall be made
on a consolidated basis.
"Total Facility" has the meaning set forth in Section 2.1 hereof.
"Trademarks, Copyrights, Licenses and Patents" means all of Borrower's
right, title and interest in and to, whether now owned or hereafter acquired:
(i) trademarks, trademark registrations, trade names, trade name registrations,
and trademark or trade name applications, including without limitation such as
are listed on the Schedule attached hereto and made a part hereof, as the same
may be amended from time to time, and (a) renewals thereof, (b) all income,
royalties, damages and payments now and hereafter due and/or payable with
respect thereto, including without limitation, damages and payments for past or
future infringements thereof, (c) the right to ▇▇▇ for past, present and future
infringements thereof, (d) all rights corresponding thereto throughout the
world, and (e) the goodwill of the business operated by Borrower connected with
and symbolized by any trademarks or trade names; (ii) copyrights, copyright
registrations and copyright applications, including without limitation such as
are listed on the Schedule attached hereto and made a part hereof, as the same
may be amended from time to time, and (a) renewals thereof, (b) all income,
royalties, damages and payments now and hereafter due and/or payable with
respect thereto, including without limitation, damages and payments for past or
future infringements thereof, (c) the right to ▇▇▇ for past, present and future
infringements thereof, and (d) all rights corresponding thereto throughout the
world; (iii) license agreements, including without limitation such as are listed
on the Schedule attached hereto and made a part hereof, and the right to prepare
for sale, sell and advertise for sale any Inventory now or hereafter owned by
Borrower and now or hereafter covered by such licenses; and (iv) patents and
patent applications, registered or pending, including without limitation such as
are listed on the Schedule attached hereto, together with all income, royalties,
shop rights, damages and payments thereto, the right to ▇▇▇ for infringements
thereof, and all rights thereto throughout the world and all reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof.
"Unused Line Fee" has the meaning set forth in the Schedule.
1.2 Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings
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provided by the Code, to the extent such terms are defined therein.
2. LOANS; INTEREST RATE AND OTHER CHARGES.
2.1 Total Facility. Upon the terms and conditions set forth herein and
provided that no Event of Default or event which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default, shall have
occurred and be continuing, FINOVA shall, upon Borrower's request, make advances
to Borrower from time to time in an aggregate outstanding principal amount not
to exceed the Total Facility amount (the "TOTAL FACILITY") set forth on the
Schedule hereto, subject to deduction of reserves for accrued interest and such
other reserves as FINOVA deems proper from time to time in its Permitted
Discretion, and less amounts FINOVA may be obligated to pay in the future on
behalf of Borrower. The Schedule is an integral part of this Agreement and all
references to "herein", "herewith" and words of similar import shall for all
purposes be deemed to include the Schedule.
2.2 Loans. Advances under the Total Facility ("LOANS" and individually, a
"LOAN") shall be comprised of the amounts shown on the Schedule.
2.3 Overlines; Overadvances. If at any time or for any reason the
outstanding amount of advances extended or issued pursuant hereto exceeds any of
the dollar limitations ("OVERLINE") or percentage limitations ("OVERADVANCE") in
the Schedule, then Borrower shall, upon FINOVA's demand, immediately pay to
FINOVA, in cash, the full amount of such Overline or Overadvance which, at
FINOVA's option, may be applied to reduce the outstanding principal balance of
the Loans. Without limiting Borrower's obligation to repay to FINOVA on demand
the amount of any Overline or Overadvance, Borrower agrees to pay FINOVA
interest on the outstanding principal amount of any Overline or Overadvance, on
demand, at the rate set forth on the Schedule and applicable to the Capital
Expenditure Loans.
2.4 Intentionally Deleted.
2.5 Loan Account. All advances made hereunder shall be added to and deemed
part of the Obligations when made. FINOVA may from time to time charge all
Obligations of Borrower to Borrower's loan account with FINOVA.
2.6 Interest; Fees. Borrower shall pay FINOVA interest on the daily
outstanding balance of the Obligations at the per annum rate set forth on the
Schedule. Borrower shall also pay FINOVA the fees set forth on the Schedule.
2.7 Default Interest Rate. Upon the occurrence and during the continuation
of an Event of Default, Borrower shall pay FINOVA interest on the daily
outstanding balance of the Obligations at a rate per annum which is two percent
(2%) in excess of the rate which would otherwise be applicable thereto pursuant
to the Schedule.
2.8 Examination Fee. Borrower agrees to pay to FINOVA the Examination Fee
in the amount set forth on the Schedule in connection with each audit or
examination of Borrower performed by FINOVA prior to or after the date hereof.
Without limiting the generality of the foregoing, Borrower shall pay to FINOVA
an initial Examination Fee in an amount equal to the amount set forth on the
Schedule. Such initial Examination Fee shall be deemed fully earned at the time
of payment and due and payable upon the closing of this transaction, and shall
be deducted from any good faith deposit paid by Borrower to FINOVA prior to the
date of this Agreement.
2.9 Excess Interest.
(a) The contracted for rate of interest of the loan contemplated hereby,
without limitation, shall consist of the following: (i) the interest rate set
forth on the Schedule, calculated and applied to the principal balance of the
Obligations in accordance with the provisions of this Agreement; (ii) interest
after an Event of Default, calculated and applied to the amount of the
Obligations in accordance with the provisions hereof; and (iii) all Additional
Sums (as herein defined), if any. Borrower agrees to pay an effective contracted
for rate of interest which is the sum of the above-referenced elements. The
Examination Fee, attorneys fees, expert witness fees, collateral monitoring
fees, closing fees, facility fees, Termination Fees, other charges, goods,
things in action or any other sums or things of value paid or payable by
Borrower (collectively, the "ADDITIONAL SUMS"), whether pursuant to this
Agreement or any other documents or instruments in any way pertaining to this
lending transaction, or otherwise with respect to this lending transaction, that
under any applicable law may be deemed to be interest with respect to this
lending transaction, for the purpose of any applicable law that may limit the
maximum amount of interest to be charged with respect to this lending
transaction, shall be payable by Borrower as, and shall be deemed to be,
additional interest and for such purposes only, the agreed upon and "contracted
for rate of interest" of this lending transaction
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shall be deemed to be increased by the rate of interest resulting from the
inclusion of the Additional Sums.
(b) It is the intent of the parties to comply with the usury laws of the
State of Arizona (the "APPLICABLE USURY LAW"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Agreement, or in any of
the documents securing payment hereof or otherwise relating hereto, in no event
shall this Agreement or such documents require the payment or permit the
collection of interest in excess of the maximum contract rate permitted by the
Applicable Usury Law (the "MAXIMUM INTEREST RATE"). In the event (a) any such
excess of interest otherwise would be contracted for, charged or received from
Borrower or otherwise in connection with the loan evidenced hereby, or (b) the
maturity of the Obligations is accelerated in whole or in part, or (c) all or
part of the Obligations shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, shared or received in
connection with the loan evidenced hereby, would exceed the Maximum Interest
Rate, then in any such event (1) the provisions of this paragraph shall govern
and control, (2) neither Borrower nor any other Person now or hereafter liable
for the payment of the Obligations shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Maximum Interest Rate, (3)
any such excess which may have been collected shall be either applied as a
credit against the then unpaid principal amount of the Obligations or refunded
to Borrower, at FINOVA's option, and (4) the effective rate of interest shall be
automatically reduced to the Maximum Interest Rate. It is further agreed,
without limiting the generality of the foregoing, that to the extent permitted
by the Applicable Usury Law; (x) all calculations of interest which are made for
the purpose of determining whether such rate would exceed the Maximum Interest
Rate shall be made by amortizing, prorating, allocating and spreading during the
period of the full stated term of the loan evidenced hereby, all interest at any
time contracted for, charged or received from Borrower or otherwise in
connection with such loan; and (y) in the event that the effective rate of
interest on the loan should at any time exceed the Maximum Interest Rate, such
excess interest that would otherwise have been collected had there been no
ceiling imposed by the Applicable Usury Law shall be paid to FINOVA from time to
time, if and when the effective interest rate on the loan otherwise falls below
the Maximum Interest Rate, to the extent that interest paid to the date of
calculation does not exceed the Maximum Interest Rate, until the entire amount
of interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrower further
agrees that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the Maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
2.10 Principal Payments; Proceeds of Collateral. Notwithstanding anything
to the contrary contained in this Agreement, those provisions of subsections
2.10(b) and (c) requiring Borrower to cause the establishment of and make
payments to a Blocked Account shall be applicable only at FINOVA's election upon
the occurrence of an Event of Default. Prior to an Event of Default, Borrower
may collect and retain the collections of Receivables.
(a) Principal Payments. Except where evidenced by notes or other
instruments issued or made by Borrower to FINOVA specifically containing payment
provisions which are in conflict with this Section 2.10 (in which event the
conflicting provisions of said notes or other instruments shall govern and
control), that portion of the Obligations consisting of principal payable on
account of Loans shall be payable by Borrower to FINOVA immediately upon the
earliest of (i) except with respect to proceeds of the sale of the ▇▇▇▇▇▇ City
Store and the Targeted Stores as set forth in Section 3.8 hereof, the receipt by
FINOVA or Borrower of any proceeds of any of the Collateral, to the extent of
said proceeds, (ii) the occurrence of an Event of Default in consequence of
which FINOVA elects to accelerate the maturity and payment of such loans, or
(iii) any termination of this Agreement pursuant to Section 9.2 hereof;
provided, however, that any Overadvance or Overline shall be payable on demand
pursuant to the provisions of Section 2.3 hereof.
(b) Collections. Except with respect to proceeds of the sale of the ▇▇▇▇▇▇
City Store and the Targeted Stores as set forth in Section 3.8 hereof, until
FINOVA notifies Borrower to the contrary, consistent with the first paragraph of
this Section 2.10, Borrower may make collection of all Receivables for FINOVA
and shall receive all such payments or sums as trustee of FINOVA and immediately
deliver all such payments or sums to FINOVA in their original form, duly
endorsed in blank or cause the same to be deposited into a Blocked Account or
Dominion Account. Borrower agrees that, in computing the charges under this
Agreement, all items of payment shall be deemed applied by FINOVA on account of
the Obligations two (2) Business Days after receipt by
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FINOVA of good funds which have been finally credited to FINOVA's account,
whether such funds are received directly from Borrower or from the Blocked
Account bank or the Dominion Account bank, pursuant to Section 2.10(c) hereof,
and this provision shall apply regardless of the amount of the Obligations
outstanding or whether any Obligations are outstanding; provided, that if any
such good funds are received after 12:00 p.m. noon (Los Angeles time) on any
Business Day or at any time on any day not constituting a Business Day, such
funds shall be deemed received on the immediately following Business Day. FINOVA
is not, however, required to credit Borrower's account for the amount of any
item of payment which is unsatisfactory to FINOVA in its Permitted Discretion
and FINOVA may charge Borrower's loan account for the amount of any item of
payment which is returned to FINOVA unpaid.
(c) Establishment of a Lockbox Account or Dominion Account. Unless
otherwise provided herein or Borrower shall be otherwise directed by FINOVA in
writing, Borrower shall cause all proceeds of Collateral to be deposited into a
lockbox account, or such other "blocked account" as FINOVA may require (each, a
"BLOCKED ACCOUNT") pursuant to an arrangement with such bank as may be selected
by Borrower and be acceptable to FINOVA which proceeds, unless otherwise
provided herein, shall be applied in payment of the Obligations in such order as
FINOVA determines in its sole discretion. Borrower shall issue to any such bank
an irrevocable letter of instruction directing said bank to transfer such funds
so deposited to FINOVA, either to any account maintained by FINOVA at said bank
or by wire transfer to appropriate account(s) of FINOVA. All funds deposited in
a Blocked Account shall immediately become the sole property of FINOVA and
Borrower shall obtain the agreement by such bank to waive any offset rights
against the funds so deposited. FINOVA assumes no responsibility for any Blocked
Account arrangement, including without limitation, any claim of accord and
satisfaction or release with respect to deposits accepted by any bank
thereunder. Alternatively, FINOVA may establish depository accounts in the name
of FINOVA at a bank or banks for the deposit of such funds (each, a "DOMINION
ACCOUNT") and Borrower shall deposit all proceeds of Receivables and all cash
proceeds of any sale of Inventory or, to the extent permitted herein, Equipment
or cause same to be deposited, in kind, in such Dominion Accounts of FINOVA in
lieu of depositing same to Blocked Accounts, and, unless otherwise provided
herein, all such funds shall be applied by FINOVA to the Obligations in such
order as FINOVA determines in its sole discretion.
(d) Payments Without Deductions. Borrower shall pay principal, interest,
and all other amounts payable hereunder, or under any other Loan Document,
without any deduction whatsoever, including, but not limited to, any deduction
for any setoff or counterclaim.
(e) Collection Days Upon Repayment. In the event Borrower repays the
Obligations in full at any time hereafter, such payment in full shall be
credited (conditioned upon final collection) to Borrower's loan account three
(3) Business Days after FINOVA's receipt thereof.
(f) Monthly Accountings. FINOVA shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by FINOVA), unless Borrower
notifies FINOVA in writing to the contrary within thirty (30) days after each
account is rendered, describing the nature of any alleged errors or admissions.
2.11 Application of Collateral. Except as otherwise provided herein, FINOVA
shall have the continuing and exclusive right to apply or reverse and re-apply
any and all payments to any portion of the Obligations in such order and manner
as FINOVA shall determine in its sole discretion. To the extent that Borrower
makes a payment or FINOVA receives any payment or proceeds of the Collateral for
Borrower's benefit which is subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or any other party under any bankruptcy law, common law or
equitable cause, or otherwise, then, to such extent, the Obligations or part
thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by FINOVA.
2.12 Application of Payments. The amount of all payments or amounts
received by FINOVA with respect to the Loan shall be applied to the extent
applicable under this Agreement: (i) first, to accrued interest through the date
of such payment, including any Default Interest; (ii) then, to any late fees,
overdue risk assessments, Examination Fee and expenses, collection fees and
expenses and any other fees and expenses due to FINOVA hereunder; and (iii)
last, the remaining balance, if any, to the unpaid principal balance of the
Loan; provided however, while an Event of Default exists under this Agreement,
or under any other Loan Document, each payment hereunder shall be (x) held as
cash collateral to
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secure Obligations relating to any Letters of Credit or other contingent
obligations arising under the Loan Documents and/or (y) applied to amounts owed
to FINOVA by Borrower as FINOVA in its sole discretion may determine. In
calculating interest and applying payments as set forth above: (a) interest
shall be calculated and collected through the date a payment is actually applied
by FINOVA under the terms of this Agreement; (b) interest on the outstanding
balance shall be charged during any grace period permitted hereunder; (c) at the
end of each month, all accrued and unpaid interest and other charges provided
for hereunder shall be added to the principal balance of the Loan; and (d) to
the extent that Borrower makes a payment or FINOVA receives any payment or
proceeds of the Collateral for Borrower's benefit that is subsequently
invalidated, set aside or required to be repaid to any other Person, then, to
such extent, the Obligations intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by FINOVA and
FINOVA may adjust the Loan balances as FINOVA, in its sole discretion, deems
appropriate under the circumstances.
2.13 Notification of Closing. Borrower shall provide FINOVA with at least
forty-eight (48) hours prior written notice of the Closing Date, to enable
FINOVA to arrange for the availability of funds. In the event the closing does
not take place on the date specified in Borrower's notice to FINOVA, other than
through the fault of FINOVA, Borrower agrees to reimburse FINOVA for FINOVA's
costs to maintain the necessary funds available for the closing at the Capital
Expenditure Interest Rate with respect to an amount equal to the initial advance
under the Capital Expenditure Loans facility which is to be made on the Closing
Date, for the number of days which elapse between the date specified in
Borrower's notice and the date upon which the closing actually occurs (which
number of days shall not include the date specified in Borrower's notice, but
shall include the Closing Date).
3. SECURITY.
3.1 Security Interest in the Collateral. To secure the payment and
performance of the Obligations when due, Borrower hereby grants to FINOVA a
first priority security interest (subject only to Permitted Encumbrances) in all
of Borrower's now owned or hereafter acquired or arising Inventory, Equipment,
Receivables, life insurance policies and the proceeds thereof, Trademarks,
Copyrights, Licenses and Patents, Investment Property (as defined in Section
9-115 of the Code) and General Intangibles, including, without limitation, all
of Borrower's Deposit Accounts, money, any and all property now or at any time
hereafter in FINOVA's possession (including claims and credit balances), and all
proceeds (including proceeds of any insurance policies, proceeds of proceeds and
claims against third parties), all products and all books and records and
computer data related to any of the foregoing (all of the foregoing, together
with all other property in which FINOVA may be granted a lien or security
interest, is referred to herein, collectively, as the "COLLATERAL").
Notwithstanding anything contained in this Agreement, the Collateral shall not
include any dishwashers, Alliant Food Service, Inc. computer equipment, or Pepsi
Co. equipment not owned by Borrower or any Equipment leased from any third
Person if the lease agreement specifically prohibits Borrower from granting a
lien in the leased Equipment, provided that (x) if Borrower obtains title to the
Equipment or the lease agreement is amended, replaced or terminated such that
the prohibition against granting a lien is no longer in effect, then the
Collateral shall automatically thereafter include such Equipment and (y) nothing
herein shall be deemed to exclude the proceeds of any Equipment from the
Collateral to the extent permitted by law.
3.2 Perfection and Protection of Security Interest. Borrower shall, at its
expense, take all actions requested by FINOVA at any time to perfect, maintain,
protect and enforce FINOVA's first priority security interest and other rights
in the Collateral and the priority thereof from time to time, including, without
limitation, (i) executing and filing financing or continuation statements and
amendments thereof and executing and delivering such documents and titles in
connection with motor vehicles as FINOVA shall require, all in form and
substance satisfactory to FINOVA, (ii) maintaining a perpetual inventory and
complete and accurate stock records, (iii) delivering to FINOVA warehouse
receipts covering any portion of the Collateral located in warehouses and for
which warehouse receipts are issued, and transferring Inventory to warehouses
designated by FINOVA, (iv) placing notations on Borrower's books of account to
disclose FINOVA's security interest therein and (v) delivering to FINOVA all
letters of credit on which Borrower is named beneficiary. FINOVA may file,
without Borrower's signature, one or more financing statements disclosing
FINOVA's security interest under this Agreement. Borrower agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. If any Collateral is
at any time in the possession or control of any warehouseman, bailee or any of
Borrower's agents or processors, Borrower shall notify such Person of FINOVA's
security interest in such Collateral and, upon FINOVA's request, instruct them
to hold all such Collateral for FINOVA's account subject to FINOVA's
instructions. From time to time, Borrower
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shall, upon FINOVA's request, execute and deliver confirmatory written
instruments pledging the Collateral to FINOVA, but Borrower's failure to do so
shall not affect or limit FINOVA's security interest or other rights in and to
the Collateral. Until the Obligations have been fully satisfied and FINOVA's
obligation to make further advances hereunder has terminated, FINOVA's security
interest in the Collateral shall continue in full force and effect.
3.3 Preservation of Collateral. FINOVA may, in its Permitted Discretion
and upon notice to Borrower, at any time discharge any lien or encumbrance on
the Collateral or bond the same, pay any insurance, maintain guards, pay any
service bureau, obtain any record or take any other action to preserve the
Collateral and charge the cost thereof to Borrower's loan account as an
Obligation.
3.4 Insurance. Borrower will maintain and deliver evidence to FINOVA of
such insurance as is required by FINOVA, written by insurers, in amounts, and
with lender's loss payee, additional insured, and other endorsements,
satisfactory to FINOVA. All premiums with respect to such insurance shall be
paid by Borrower as and when due. Accurate and certified copies of the policies
shall be delivered by Borrower to FINOVA. If Borrower fails to comply with this
Section, FINOVA may (but shall not be required to) procure, upon notice to
Borrower, such insurance and endorsements at Borrower's expense and charge the
cost thereof to Borrower's loan account as an Obligation.
3.5 Intentionally Deleted.
3.6 Intentionally Deleted.
3.7 Equipment. Borrower shall keep and maintain the Equipment in good
operating condition and repair and make all necessary replacements thereto to
maintain and preserve the value and operating efficiency thereof at all times
consistent with Borrower's past practice, ordinary wear and tear excepted.
Borrower shall not permit any item of Equipment to become a fixture (other than
a trade fixture) to real estate or an accession to other property.
3.8 Other Liens; No Disposition of Collateral. Borrower represents,
warrants and covenants that except for FINOVA's security interest, Permitted
Encumbrances, and such other liens, claims and encumbrances as may be permitted
by FINOVA in its sole discretion from time to time in writing, (a) all
Collateral is and shall continue to be owned by it free and clear of all liens,
claims and encumbrances whatsoever and (b) Borrower shall not, without FINOVA's
prior written approval, sell, encumber or dispose of or permit the sale,
encumbrance or disposal of any Collateral or all or any substantial part of any
of its other assets (or any interest of Borrower therein), except for (x) the
sale of Inventory and the replacement of used Equipment with Equipment of equal
or greater value in the ordinary course of Borrower's business and (y) provided
that no Event of Default shall result therefrom, the sale of or closure of
Borrower's restaurants located in Bellevue, Washington, Los Gatos, California,
Clovis, California, San Leandro, California, Milpitas, California, ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (collectively, the "Targeted Stores") and Foster
City, California (the "▇▇▇▇▇▇ City Store"). In the event FINOVA gives any such
prior written approval with respect to any such sale of Collateral, the same may
be conditioned on the sale price being equal to, or greater than, an amount
acceptable to FINOVA. The proceeds of any such sales of Collateral other than
the sale of the ▇▇▇▇▇▇ City Store and the Targeted Stores shall be remitted to
FINOVA pursuant to this Agreement for application to the Obligations, provided
that the proceeds of the sale of any of the Targeted Stores shall be remitted to
FINOVA to the extent of any Overadvance that would result from such sale. Upon
the written request of Borrower to FINOVA, FINOVA agrees to release its security
interest in the Targeted Stores and the ▇▇▇▇▇▇ City Store upon the sale or any
disposition of the Collateral at such stores.
3.9 Collateral Security. The Obligations shall constitute one loan secured
by the Collateral. FINOVA may, in its sole discretion, (i) exchange, enforce,
waive or release any of the Collateral, (ii) apply Collateral and direct the
order or manner of sale thereof as it may determine, and (iii) settle,
compromise, collect or otherwise liquidate any Collateral in any manner without
affecting its right to take any other action with respect to any other
Collateral.
4. CONDITIONS OF CLOSING.
4.1 Initial Advance. The obligation of FINOVA to make the initial advance
hereunder is subject to the fulfillment, to the satisfaction of FINOVA and its
counsel, of each of the following conditions on or prior to the date set forth
on the Schedule:
(a) Loan Documents. FINOVA shall have received each of the following Loan
Documents: (i) the Agreement fully and properly executed by Borrower; (ii)
promissory notes in such amounts and on such terms and conditions as FINOVA
shall specify, executed by Borrower; (iii) such security agreements,
intellectual property assignments, pledge agreements, mortgages and
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deeds of trust as FINOVA may require with respect to this Agreement, executed by
each of the parties thereto and, if applicable, duly acknowledged for recording
or filing in the appropriate governmental offices; (iv) Subordination Agreements
in form and substance acceptable to FINOVA, together with copies of all
instruments subject thereto showing a legend indicating such subordination; and
(vi) such other documents, instruments and agreements in connection herewith as
FINOVA shall require, executed, certified and/or acknowledged by such parties as
FINOVA shall designate;
(b) Minimum Excess Availability. Borrower shall have Excess Availability
under the Capital Expenditure Loans facility of not less than the amount
specified in the Schedule, after giving effect to the initial advance hereunder.
(c) Terminations by Existing Lender. Borrower's existing lender(s) shall
have executed and delivered UCC termination statements and other documentation
evidencing the termination of its liens and security interests in the assets of
Borrower or a subordination agreement in form and substance satisfactory to
FINOVA in its sole discretion;
(d) Charter Documents. FINOVA shall have received copies of Borrower's
By-laws and Articles or Certificate of Incorporation, as amended, modified, or
supplemented to the Closing Date, certified by the Secretary of Borrower;
(e) Good Standing. FINOVA shall have received a certificate of corporate
status with respect to Borrower, dated within ten (10) days of the Closing Date,
by the Secretary of State of the state of incorporation of Borrower, which
certificate shall indicate that Borrower is in good standing in such state;
(f) Foreign Qualification. FINOVA shall have received certificates of
corporate status with respect to Borrower and each other Loan Party, each dated
within ten (10) days of the Closing Date, issued by the Secretary of State of
each state in which such party's failure to be duly qualified or licensed would
have a material adverse effect on its financial condition or assets, indicating
that such party is in good standing;
(g) Authorizing Resolutions and Incumbency. FINOVA shall have received a
certificate from the Secretary of Borrower attesting to (i) the adoption of
resolutions of Borrower's Board of Directors, and shareholders or members if
necessary, authorizing the borrowing of money from FINOVA and execution and
delivery of this Agreement and the other Loan Documents to which Borrower is a
party, and authorizing specific officers of Borrower to execute same, and (ii)
the authenticity of original specimen signatures of such officers;
(h) Insurance. FINOVA shall have received the insurance certificates and
certified copies of policies required by Section 3.4 hereof, in form and
substance satisfactory to FINOVA and its counsel, together with an additional
insured endorsement in favor of FINOVA with respect to all liability policies
and a lender's loss payable endorsement in favor of FINOVA with respect to all
casualty and business interruption policies, each in form and substance
acceptable to FINOVA and its counsel;
(i) Title Insurance. FINOVA shall have received binding commitments to
issue such title insurance with respect to Collateral which is comprised of real
property as it shall determine;
(j) Searches; Certificates of Title. FINOVA shall have received searches
reflecting the filing of its financing statements and fixture filings in such
jurisdictions as it shall determine, and shall have received certificates of
title with respect to the Collateral which shall have been duly executed in a
manner sufficient to perfect all of the security interests granted to FINOVA;
(k) Intentionally Deleted.
(l) Fees. Borrower shall have paid all fees payable by it on the Closing
Date pursuant to this Agreement;
(m) Opinion of Counsel. FINOVA shall have received an opinion of
Borrower's counsel covering such matters as FINOVA shall determine in its sole
discretion;
(n) Officer Certificate. FINOVA shall have received a certificate of the
President and the Chief Financial Officer or similar official of Borrower,
attesting to the accuracy of each of the representations and warranties of
Borrower set forth in this Agreement and the fulfillment of all conditions
precedent to the initial advance hereunder;
(o) Solvency Certificate. If requested, FINOVA shall have received a
signed certificate of the Borrower's duly elected Chief Financial Officer
concerning the solvency and financial condition of Borrower, on FINOVA's
standard form;
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(p) Intentionally Deleted.
(q) Intentionally Deleted.
(r) Environmental Certificate. FINOVA shall have received Environmental
Certificates from Borrower, in form and substance satisfactory to FINOVA in its
discretion, with respect to all locations of Collateral;
(s) Search and References. FINOVA shall have received and approved the
results of UCC, tax lien, litigation, judgment, and bankruptcy searches
regarding Borrower and shall have received satisfactory customer, vendor and
credit reference checks on Borrower.
(t) Intentionally Deleted.
(u) Intentionally Deleted.
(v) No Material Adverse Changes. Prior to the Closing Date, there shall
have occurred no material adverse change in the financial condition of Borrower,
or in the condition of the assets of Borrower, from that shown on the draft
financial statements for Borrower dated on the date set forth in the Schedule.
At the closing, Borrower shall deliver to FINOVA an officer's certification
confirming that Borrower is unaware of the existence of any such material
adverse change in Borrower's financial condition.
(w) Material Agreements. FINOVA shall have received, reviewed and approved
all material agreements to which Borrower is a party.
(x) Projections. Borrower shall submit cash flow projections and pro forma
balance sheet with adjusting entries (i) showing that the proposed financing
will provide sufficient funds for the Borrower's projected working capital
needs, and (ii) showing: (1) that the Borrower will have reasonably sufficient
capital for the conduct of its business following the initial funding, and (2)
that the Borrower will not incur debts beyond its ability to pay such debts as
they mature.
(y) Opinions. To the extent any Person other than Borrower shall be
parties to the Loan Documents, FINOVA reserves the right to require satisfactory
opinions of counsel for each such Person concerning the proper organization of
such Person and the due authorization, execution, delivery, enforceability,
validity and binding effect of the Loan Documents to which such Person is a
party. Each such opinion of counsel shall confirm, to the satisfaction of
FINOVA, that the opinion is being delivered to FINOVA at the instruction of the
party represented by such counsel, that FINOVA is entitled to rely on such
opinion and that for purposes of such reliance, FINOVA is deemed to be in
privity with the opining counsel.
(z) ADA Compliance. If necessary, as of the Closing Date, Borrower shall
be in compliance with the Americans with Disabilities Act of 1990 ("ADA"), or,
if any renovations of Borrower's facilities or modifications of Borrower's
employment practices shall be required to bring them into compliance with the
ADA, review and approval by FINOVA of Borrower's proposed plan to come into such
compliance. Borrower shall deliver representations and warranties to FINOVA
concerning Borrower's compliance with the ADA, and no evidence shall have come
to the attention of FINOVA indicating that Borrower is not in compliance with
the ADA (except to the extent that FINOVA has reviewed and approved Borrower's
plan to come into compliance).
(aa) Subordination and Intercreditor Agreements. FINOVA and each creditor
of Borrower designated by FINOVA shall have entered into a subordination
agreement in form and substance satisfactory to FINOVA.
(bb) Intentionally Deleted.
(cc) Intentionally Deleted.
(dd) Intentionally Deleted.
(ee) Intentionally Deleted.
(ff) Intentionally Deleted.
(gg) Schedule Conditions. Borrower shall have complied with all additional
conditions precedent as set forth in the Schedule attached hereto.
(hh) Other Matters. All other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered,
executed and recorded and shall be in form and substance satisfactory to FINOVA
and its counsel.
4.2 Subsequent Advances. The obligation of FINOVA to make any advance
hereunder shall be subject to the further conditions precedent that, on and as
of the date of such advance: (a) the representations and warranties of Borrower
set forth in this Agreement shall be accurate, before and after giving effect to
such advance or issuance and to the application of any proceeds thereof; (b) no
Event of Default and no event which, with notice or passage of time or both,
would constitute an Event of Default has occurred and is
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continuing, or would result from such advance or issuance or from the
application of any proceeds thereof; (c) no material adverse change has occurred
in the Borrower's business, operations, financial condition, in the condition of
the Collateral or other assets of Borrower or in the prospect of repayment of
the Obligations; and (d) FINOVA shall have received such other approvals,
opinions or documents as FINOVA shall reasonably request.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
5.1 Due Organization. It is a corporation duly organized, validly existing
and in good standing under the laws of the State set forth on the Schedule, is
qualified and authorized to do business and is in good standing in all states in
which such qualification and good standing are necessary in order for it to
conduct its business and own its property, and has all requisite power and
authority to conduct its business as presently conducted, to own its property
and to execute and deliver each of the Loan Documents to which it is a party and
perform all of its Obligations thereunder, and has not taken any steps to
wind-up, dissolve or otherwise liquidate its assets;
5.2 Other Names. Borrower has not, during the preceding five (5) years,
been known by or used any other corporate or fictitious name except as set forth
on the Schedule, nor has Borrower been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any Person
during such time;
5.3 Due Authorization. The execution, delivery and performance by Borrower
of the Loan Documents to which it is a party have been authorized by all
necessary corporate action and do not and shall not constitute a violation of
any applicable law or of Borrower's Articles or Certificate of Incorporation or
By-Laws or any other document, agreement or instrument to which Borrower is a
party or by which Borrower or its assets are bound;
5.4 Binding Obligation. Each of the Loan Documents to which Borrower is a
party is the legal, valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms;
5.5 Intangible Property. Borrower possesses adequate assets, licenses,
patents, patent applications, copyrights, trademarks, trademark applications and
trade names for the present and planned future conduct of its business without
any known conflict with the rights of others, and each is valid and has been
duly registered or filed with the appropriate governmental authorities; each of
Borrower's patents, patent applications, copyrights, trademarks and trademark
applications which have been registered or filed with any governmental authority
(including the U.S. Patent and Trademark Office and the Library of Congress) are
identified on the Schedule;
5.6 Capital. Borrower has capital sufficient to conduct its business, is
able to pay its debts as they mature, and owns property having a fair salable
value greater than the amount required to pay all of its debts (including
contingent debts);
5.7 Material Litigation. Borrower has no pending or overtly threatened
litigation, actions or proceedings which would materially and adversely affect
its business, assets, operations, prospects or condition, financial or
otherwise, or the Collateral or any of FINOVA's interests therein;
5.8 Title; Security Interests of FINOVA. Borrower has good, indefeasible
and merchantable title to the Collateral and, upon the execution and delivery of
the Loan Documents, the filing of UCC-1 Financing Statements, delivery of the
certificate(s) evidencing any pledged securities, the filing of any collateral
assignments or security agreements regarding Borrower, Trademarks, Copyrights,
Licenses and/or Patents, if any, with the appropriate governmental offices and
the recording of any mortgages or deeds of trust with respect to real property,
in each case in the appropriate offices, this Agreement and such documents shall
create valid and perfected first priority liens in the Collateral, subject only
to Permitted Encumbrances;
5.9 Restrictive Agreements; Labor Contracts. Borrower is not a party or
subject to any contract or subject to any charge, corporate restriction,
judgment, decree or order materially and adversely affecting its business,
assets, operations, prospects or condition, financial or otherwise, or which
restricts its right or ability to incur Indebtedness, and it is not party to any
labor dispute. In addition, no labor contract is scheduled to expire during the
Initial Term of this Agreement, except as disclosed to FINOVA in writing prior
to the date hereof;
5.10 Laws. Borrower is not in violation of any applicable statute,
regulation, ordinance or any order of any court, tribunal or governmental
agency, in any respect materially and adversely affecting the Collateral
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or its business, assets, operations, prospects or condition, financial or
otherwise;
5.11 Consents. Borrower has obtained or caused to be obtained or issued any
required consent of a governmental agency or other Person in connection with the
financing contemplated hereby;
5.12 Defaults. Except as set forth on the Exhibit A attached hereto,
Borrower is not in default with respect to any note, indenture, loan agreement,
mortgage, lease, deed or other agreement to which it is a party or by which it
or its assets are bound, nor has any event occurred which, with the giving of
notice or the lapse of time, or both, would cause such a default;
5.13 Financial Condition. The Prepared Financials fairly present Borrower's
financial condition and results of operations and those of such other Persons
described therein as of the date thereof in accordance with GAAP; there are no
material omissions from the Prepared Financials or other facts or circumstances
not reflected in the Prepared Financials; and there has been no material and
adverse change in such financial condition or operations since the date of the
initial Prepared Financials delivered to FINOVA hereunder;
5.14 ERISA. None of Borrower, any ERISA Affiliate, or any Plan is or has
been in violation of any of the provisions of ERISA, any of the qualification
requirements of IRC Section 401(a) or any of the published interpretations
thereunder, nor has Borrower or any ERISA Affiliate received any notice to such
effect. No notice of intent to terminate a Plan has been filed under Section
4041 of ERISA, nor has any Plan been terminated under ERISA. The PBGC has not
instituted proceedings to terminate, or appointed a trustee to administer, a
Plan. No lien upon the assets of Borrower has arisen with respect to a Plan. No
prohibited transaction or Reportable Event has occurred with respect to a Plan.
Neither Borrower nor any ERISA Affiliate has incurred any withdrawal liability
with respect to any Multiemployer Plan. Borrower and each ERISA Affiliate have
made all contributions required to be made by them to any Plan or Multiemployer
Plan when due. There is no accumulated funding deficiency in any Plan, whether
or not waived;
5.15 Taxes. Borrower has filed all tax returns and such other reports as it
is required by law to file and has paid or made adequate provision for the
payment on or prior to the date when due of all taxes, assessments and similar
charges that are due and payable;
5.16 Locations; Federal Tax ID No. Borrower's chief executive office and
the offices and locations where it keeps the Collateral (except for Inventory in
transit) are at the locations set forth on the Schedule, except to the extent
that such locations may have been changed after notice to FINOVA in accordance
with Section 6.4 hereof; Borrower's federal tax identification number is as
shown on the Schedule;
5.17 Business Relationships. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower and any customer or any group of
customers whose purchases individually or in the aggregate are material to the
business of Borrower, or with any material supplier, and there exists no present
condition or state of facts or circumstances which would materially and
adversely affect Borrower or prevent Borrower from conducting such business
after the consummation of the transactions contemplated by this Agreement in
substantially the same manner in which it has heretofore been conducted; and
5.18 Reaffirmations. Each request for a loan made by Borrower pursuant to
this Agreement shall constitute (i) an automatic representation and warranty by
Borrower to FINOVA that there does not then exist any Event of Default and (ii)
a reaffirmation as of the date of said request of all of the representations and
warranties of Borrower contained in this Agreement and the other Loan Documents.
5.19 Year 2000 Representations & Warranties. Borrower has taken all action
necessary to assure that there will be no material adverse change to Borrower's
business by reason of the advent of the year 2000, including without limitation
that all computer-based systems, embedded microchips and other processing
capabilities effectively recognize and process dates after April 1, 1999.
6. COVENANTS.
6.1 AFFIRMATIVE COVENANTS. Borrower covenants that, so long as any
Obligation remains outstanding and this Agreement is in effect, it shall:
6.1.1 Taxes. File all tax returns and pay or make adequate provision
for the payment of all taxes, assessments and other charges on or prior to the
date when due;
6.1.2 Notice of Litigation. Promptly notify FINOVA in writing of any
litigation, suit or administrative proceeding which may materially and
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adversely affect the Collateral or Borrower's business, assets, operations,
prospects or condition, financial or otherwise, whether or not the claim is
covered by insurance;
6.1.3 ERISA. Notify FINOVA in writing (i) promptly upon the occurrence
of any event described in Paragraph 4043 of ERISA, other than a termination,
partial termination or merger of a Plan or a transfer of a Plan's assets and
(ii) prior to any termination, partial termination or merger of a Plan or a
transfer of a Plan's assets;
6.1.4 Change in Location. Notify FINOVA in writing forty-five (45)
days prior to any change in the location of Borrower's chief executive office or
the location of any Collateral, or Borrower's opening or closing of any other
place of business;
6.1.5 Corporate Existence. Maintain its corporate existence and its
qualification to do business and good standing in all states necessary for the
conduct of its business and the ownership of its property and maintain adequate
assets, licenses, patents, copyrights, trademarks and trade names for the
conduct of its business;
6.1.6 Labor Disputes. Promptly notify FINOVA in writing of any labor
dispute to which Borrower is or may become subject and the expiration of any
labor contract to which Borrower is a party or bound;
6.1.7 Violations of Law. Promptly notify FINOVA in writing of any
violation of any law, statute, regulation or ordinance of any governmental
entity, or of any agency thereof, applicable to Borrower which may materially
and adversely affect the Collateral or Borrower's business, assets, prospects,
operations or condition, financial or otherwise;
6.1.8 Defaults. Notify FINOVA in writing within five (5) Business Days
of Borrower's default under any note, indenture, loan agreement, mortgage, lease
or other agreement to which Borrower is a party or by which Borrower is bound,
or of any other default under any Indebtedness of Borrower;
6.1.9 Capital Expenditures. Promptly notify FINOVA in writing of the
making of any Capital Expenditure materially affecting Borrower's business,
assets, prospects, operations or condition, financial or otherwise, except to
the extent permitted in the Schedule;
6.1.10 Books and Records. Keep adequate records and books of account
with respect to its business activities in which proper entries are made in
accordance with GAAP, reflecting all of its financial transactions;
6.1.11 Leases; Warehouse Agreements. Provide FINOVA with (i) copies of
all agreements between Borrower and any landlord, warehouseman or bailee which
owns any premises at which any Collateral may, from time to time, be located
(whether for processing, storage or otherwise), and (ii) without limiting the
landlord, bailee and/or mortgagee waivers to be provided pursuant to the
Schedule, use its best efforts to provide FINOVA with additional landlord,
bailee and/or mortgagee waivers in form acceptable to FINOVA with respect to all
locations where any Collateral is hereafter located;
6.1.12 Additional Documents. At FINOVA's request, promptly execute or
cause to be executed and delivered to FINOVA any and all documents, instruments
or agreements deemed necessary by FINOVA to facilitate the collection of the
Obligations or the Collateral or otherwise to give effect to or carry out the
terms or intent of this Agreement or any of the other Loan Documents; and
6.1.13 Financial Covenants. Comply with the financial covenants set
forth on the Schedule.
6.1.14 Year 2000 Covenants. Borrower shall take all action necessary
to assure that there will be no material adverse change to Borrower's business
by reason of the advent of the year 2000, including without limitation that all
computer-based systems, embedded microchips and other processing capabilities
effectively recognize and process dates after April 1, 1999. At FINOVA's
request, Borrower shall provide to FINOVA assurance reasonably acceptable to
FINOVA that Borrower's computer-based systems, embedded microchips and other
processing capabilities are year 2000 compatible.
6.2 Negative Covenants. Without FINOVA's prior written consent, which
consent FINOVA may withhold in its sole discretion, so long as any Obligation
remains outstanding and this Agreement is in effect, Borrower shall not:
6.2.1 Mergers. Merge or consolidate with or acquire any other Person,
or make any other material change in its capital structure or in its business or
operations which might adversely affect the repayment of the Obligations;
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6.2.2 Loans. Make advances, loans or extensions of credit to, or
invest in, any Person, except for loans or cash advances to employees which are
permitted in the Schedule;
6.2.3 Dividends. Declare or pay cash dividends upon any of its stock
or distribute any of its property or redeem, retire, purchase or acquire
directly or indirectly any of its stock;
6.2.4 Adverse Transactions. Enter into any transaction which
materially and adversely affects the Collateral or its ability to repay the
Obligations in full as and when due;
6.2.5 Indebtedness of Others. Guarantee or become directly or
contingently liable for the Indebtedness of any Person, except by endorsement of
instruments for deposit and except for the existing guarantees made by Borrower
prior to the date hereof, if any, which are set forth in the Schedule;
6.2.6 Repurchase. Make a sale to any customer on a ▇▇▇▇-and-hold,
guaranteed sale, sale and return, sale on approval, consignment, or any other
repurchase or return basis;
6.2.7 Name. Use any corporate or fictitious name other than its
corporate name as set forth in its Articles or Certificate of Incorporation on
the date hereof or as set forth on the Schedule;
6.2.8 Prepayment. Prepay any Indebtedness other than trade payables
and other than the Obligations;
6.2.9 Capital Expenditure. Make or incur any Capital Expenditure if,
after giving effect thereto, the aggregate amount of all Capital Expenditures by
Borrower in any fiscal year would exceed the amount set forth on the Schedule;
6.2.10 Compensation. Pay total compensation, including salaries,
withdrawals, fees, bonuses, commissions, drawing accounts and other payments,
whether directly or indirectly, in money or otherwise, during any fiscal year to
all of Borrower's executives, officers and directors (or any relative thereof)
in an amount in excess of the amount set forth on the Schedule;
6.2.11 Indebtedness. Create, incur, assume or permit to exist any
Indebtedness (including Indebtedness in connection with Capital Leases) in
excess of the amount set forth on the Schedule, other than (i) the Obligations,
(ii) trade payables and other contractual obligations to suppliers and customers
incurred in the ordinary course of business, and (iii) other Indebtedness
existing on the date of this Agreement and reflected in the Prepared Financials
(except Indebtedness paid on the date of this Agreement from proceeds of the
initial advances hereunder), and (iv) Subordinated Debt;
6.2.12 Affiliate Transactions. Except as set forth below, sell,
transfer, distribute or pay any money or property to any Affiliate, or invest in
(by capital contribution or otherwise) or purchase or repurchase any stock or
Indebtedness, or any property, of any Affiliate, or become liable on any
guaranty of the indebtedness, dividends or other obligations of any Affiliate.
Notwithstanding the foregoing, Borrower may pay compensation permitted by
Section 6.23 to employees who are Affiliates and, if no Event of Default has
occurred, Borrower may (i) engage in transactions with Affiliates in the normal
course of business, in amounts and upon terms which are fully disclosed to
FINOVA and which are no less favorable to Borrower than would be obtainable in a
comparable arm's length transaction with a Person who is not an Affiliate, and
(ii) make payments to a subordinating creditor that is an Affiliate, subject to
and only to the extent expressly permitted in the Subordination Agreement
between such subordinating creditor and FINOVA;
6.2.13 Nature of Business. Enter into any new business or make any
material change in any of Borrower's business objectives, purposes or
operations;
6.2.14 FINOVA's Name. Use the name of FINOVA in connection with any of
Borrower's business or activities, except in connection with internal business
matters or as required in dealings with governmental agencies and financial
institutions or with trade creditors of Borrower, solely for credit reference
purposes; or
6.2.15 Margin Security. Borrower will not (and has not in the past)
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation G or Regulation U issued by the Board of Governors of
the Federal Reserve System), and no proceeds of any Loan or other advance will
be used to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock, or in any manner which
might cause such Loan or other advance or the application of such proceeds to
violate (or require any regulatory filing under) Regulation G, Regulation T,
Regulation U, Regulation X or any other regulation of the
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Board of Governors of the Federal Reserve System, in each case as in effect on
the date or dates of such Loan or other advance and such use of proceeds.
Further, no proceeds of any Loan or other advance will be used to acquire any
security of a class which is registered pursuant to Section 12 of the Securities
Exchange Act of 1934.
6.2.16 Real Property. Purchase or acquire any fee simple interest in
real property without FINOVA's prior written consent, a condition of which
consent shall include delivery of appropriate environmental reports and
analysis, in form and substance satisfactory to FINOVA and its counsel.
7. DEFAULT AND REMEDIES.
7.1 Events of Default. Any one or more of the following events shall
constitute an Event of Default under this Agreement:
(a) Borrower fails to pay when due and payable any portion of the
Obligations at stated maturity, upon acceleration or otherwise;
(b) Borrower or any other Loan Party fails or neglects to perform, keep,
or observe any Obligation including, but not limited to, any term, provision,
condition, covenant or agreement contained in any Loan Document to which
Borrower or such other Loan Party is a party;
(c) Any material adverse change occurs in Borrower's business, assets,
operations, prospects or condition, financial or otherwise;
(d) The prospect of repayment of any portion of the Obligations or the
value or priority of FINOVA's security interest in the Collateral is materially
impaired;
(e) Any portion of Borrower's assets is seized, attached, subjected to a
writ or distress warrant, is levied upon or comes into the possession of any
judicial officer;
(f) Borrower shall generally not pay its debts as they become due or shall
enter into any agreement (whether written or oral), or offer to enter into any
agreement, with all or a significant number of its creditors regarding any
moratorium or other indulgence with respect to its debts or the participation of
such creditors or their representatives in the supervision, management or
control of the business of Borrower;
(g) Any bankruptcy or other insolvency proceeding is commenced by
Borrower, or any such proceeding is commenced against Borrower and remains
undischarged or unstayed for forty-five (45) days;
(h) Other than the lien identified as item 4 on Exhibit A hereto, any
notice of lien, levy or assessment is filed of record and not discharged or
fully bonded within fifteen (15) days with respect to any of Borrower's assets
with a fair market value in excess of $50,000 as determined by FINOVA in its
sole discretion reasonably exercised;
(i) Any judgments are entered against Borrower in an aggregate amount
exceeding $100,000 in any fiscal year;
(j) Except for any default arising out of Borrower's failure to pay rent
under the lease agreement for Borrower's location in Bellevue, Washington or to
continue the operation of such restaurant, any default (after the applicable
cure period, if any, has expired) shall occur under (i) any material agreement
between Borrower and any third party including, without limitation, any default
which would result in a right by such third party to accelerate the maturity of
any Indebtedness of Borrower to such third party, or (ii) any Subordinated Debt;
(k) Any representation or warranty made or deemed to be made by Borrower,
any Affiliate or any other Loan Party in any Loan Document or any other
statement, document or report made or delivered to FINOVA in connection
therewith shall prove to have been misleading in any material respect;
(l) Intentionally Deleted.
(m) Any Prohibited Transaction or Reportable Event shall occur with
respect to a Plan which could have a material adverse effect on the financial
condition of Borrower; any lien upon the assets of Borrower in connection with
any Plan shall arise; Borrower or any of its ERISA Affiliates shall fail to make
full payment when due of all amounts which Borrower or any of its ERISA
Affiliates may be required to pay to any Plan or any Multiemployer Plan as one
or more contributions thereto; Borrower or any of its ERISA Affiliates creates
or permits the creation of any accumulated funding deficiency, whether or not
waived; or
(n) Intentionally Deleted.
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NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, FINOVA RESERVES THE RIGHT
TO CEASE MAKING ANY LOANS DURING ANY CURE PERIOD STATED ABOVE, AND THEREAFTER IF
AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING.
7.2 Remedies. Upon the occurrence of an Event of Default, FINOVA may, at
its option and in its sole discretion and in addition to all of its other rights
under the Loan Documents, cease making Loans, terminate this Agreement and/or
declare all of the Obligations to be immediately payable in full. Borrower
agrees that FINOVA shall also have all of its rights and remedies under
applicable law, including, without limitation, the default rights and remedies
of a secured party under the Code, and upon the occurrence of an Event of
Default Borrower hereby consents to the appointment of a receiver by FINOVA in
any action initiated by FINOVA pursuant to this Agreement and to the
jurisdiction and venue set forth in Section 9.25 hereof, and Borrower waives
notice and posting of a bond in connection therewith. Further, FINOVA may, at
any time, take possession of the Collateral and keep it on Borrower's premises,
at no cost to FINOVA, or remove any part of it to such other place(s) as FINOVA
may desire, or Borrower shall, upon FINOVA's demand, at Borrower's sole cost,
assemble the Collateral and make it available to FINOVA at a place reasonably
convenient to FINOVA. FINOVA may sell and deliver any Collateral at public or
private sales, for cash, upon credit or otherwise, at such prices and upon such
terms as FINOVA deems advisable, at FINOVA's discretion, and may, if FINOVA
deems it reasonable, postpone or adjourn any sale of the Collateral by an
announcement at the time and place of sale or of such postponed or adjourned
sale without giving a new notice of sale. Borrower agrees that FINOVA has no
obligation to preserve rights to the Collateral or ▇▇▇▇▇▇▇▇ any Collateral for
the benefit of any Person. Upon the occurrence and continuation of an Event of
Default, FINOVA is hereby granted a license or other right to use, without
charge, Borrower's labels, patents, copyrights, name, trade secrets, trade
names, trademarks and advertising matter, or any similar property, in completing
production, advertising or selling any Collateral and Borrower's rights under
all licenses and all franchise agreements shall inure to FINOVA's benefit. Any
requirement of reasonable notice shall be met if such notice is mailed postage
prepaid to Borrower at its address set forth in the heading to this Agreement at
least five (5) days before sale or other disposition. The proceeds of sale shall
be applied, first, to all attorneys fees and other expenses of sale, and second,
to the Obligations in such order as FINOVA shall elect, in its sole discretion.
FINOVA shall return any excess to Borrower and Borrower shall remain liable for
any deficiency to the fullest extent permitted by law.
7.3 Standards for Determining Commercial Reasonableness. Borrower and
FINOVA agree that the following conduct by FINOVA with respect to any
disposition of Collateral shall conclusively be deemed commercially reasonable
(but other conduct by FINOVA, including, but not limited to, FINOVA's use in its
sole discretion of other or different times, places and manners of noticing and
conducting any disposition of Collateral shall not be deemed unreasonable): Any
public or private disposition: (i) as to which on no later than the fifth
calendar day prior thereto written notice thereof is mailed or personally
delivered to Borrower and, with respect to any public disposition, on no later
than the fifth calendar day prior thereto notice thereof describing in general
non-specific terms, the Collateral to be disposed of is published once in a
newspaper of general circulation in the county where the sale is to be conducted
(provided that no notice of any public or private disposition need be given to
the Borrower or published if the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market); (ii) which is conducted at any place designated by FINOVA, with or
without the Collateral being present; and (iii) which commences at any time
between 8:00 a.m. and 5:00 p.m. Without limiting the generality of the
foregoing, Borrower expressly agrees that, with respect to any disposition of
accounts, instruments and general intangibles, it shall be commercially
reasonable for FINOVA to direct any prospective purchaser thereof to ascertain
directly from Borrower any and all information concerning the same, including,
but not limited to, the terms of payment, aging and delinquency, if any, the
financial condition of any obligor or account debtor thereon or guarantor
thereof, and any collateral therefor.
8. EXPENSES AND INDEMNITIES
8.1 Expenses. Borrower covenants that, so long as any Obligation remains
outstanding and this Agreement remains in effect, it shall promptly reimburse
FINOVA for all costs, fees and expenses incurred by FINOVA in connection with
the negotiation, preparation, execution, delivery, administration and
enforcement of each of the Loan Documents, including, but not limited to, the
attorneys' and paralegals' fees of in-house and outside counsel, expert witness
fees, lien, title search and insurance fees, appraisal fees, all charges and
expenses incurred in connection with any and all environmental reports and
environmental remediation activities, and all other costs, expenses, taxes and
filing or recording fees payable in connection with the transactions
contemplated by this Agreement, including without limitation all such
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costs, fees and expenses as FINOVA shall incur or for which FINOVA shall become
obligated in connection with (i) any inspection or verification of the
Collateral, (ii) any proceeding relating to the Loan Documents or the
Collateral, (iii) actions taken with respect to the Collateral and FINOVA's
security interest therein, including, without limitation, the defense or
prosecution of any action involving FINOVA and Borrower or any third party, (iv)
enforcement of any of FINOVA's rights and remedies with respect to the
Obligations or Collateral and (v) consultation with FINOVA's attorneys and
participation in any workout, bankruptcy or other insolvency or other proceeding
involving any Loan Party or any Affiliate, whether or not suit is filed or the
issues are peculiar to federal bankruptcy or state insolvency laws. Borrower
shall also pay all FINOVA charges in connection with bank wire transfers,
forwarding of loan proceeds, deposits of checks and other items of payment,
returned checks, and all other bank and administrative matters, in accordance
with FINOVA's schedule of bank and administrative fees and charges in effect
from time to time.
8.2 Environmental Matters.
The Environmental Certificates dated on or about the date of this Agreement
are incorporated herein for all purposes as if fully stated in this Agreement.
9. MISCELLANEOUS.
9.1 Examination of Records; Financial Reporting.
(a) Examinations. FINOVA shall at all reasonable times have full access to
and the right to examine, audit, make abstracts and copies from and inspect
Borrower's records, files, books of account and all other documents, instruments
and agreements relating to the Collateral and the right to check, test and
appraise the Collateral. Borrower shall deliver to FINOVA any instrument
necessary for FINOVA to obtain records from any service bureau maintaining
records for Borrower. All instruments and certificates prepared by Borrower
showing the value of any of the Collateral shall be accompanied, upon FINOVA's
request, by copies of related purchase orders and invoices. FINOVA may, at any
time after the occurrence of an Event of Default, remove from Borrower's
premises Borrower's books and records (or copies thereof) or require Borrower to
deliver such books and records or copies to FINOVA. FINOVA may, without expense
to FINOVA, use such of Borrower's personnel, supplies and premises as may be
reasonably necessary for maintaining or enforcing FINOVA's security interest.
(b) Reporting Requirements. Borrower shall furnish FINOVA, upon request,
such information and statements as FINOVA shall reasonably request from time to
time regarding Borrower's business affairs, financial condition and the results
of its operations. Without limiting the generality of the foregoing, Borrower
shall provide FINOVA with: (i) compliance certificates and unaudited financial
statements with respect to the prior month prepared on a basis consistent with
such statements prepared in prior months and otherwise in accordance with GAAP;
(ii) audited annual consolidated and consolidating financial statements,
prepared in accordance with GAAP applied on a basis consistent with the most
recent Prepared Financials provided to FINOVA by Borrower, including balance
sheets, income and cash flow statements, accompanied by the unqualified report
thereon of independent certified public accountants acceptable to FINOVA, as
soon as available, and in any event, within one hundred twenty (120) days after
the end of each of Borrower's fiscal years; and (iii) such certificates relating
to the foregoing as FINOVA may request, including, without limitation, a monthly
certificate from the president or the chief financial officer of Borrower
showing Borrower's compliance with each of the financial covenants set forth in
this Agreement, and stating whether any Event of Default has occurred or event
which, with giving of notice or the passage of time, or both, would constitute
an Event of Default, and if so, the steps being taken to prevent or cure such
Event of Default. All reports or financial statements submitted by Borrower
shall be in reasonable detail and shall be certified by the principal financial
officer of Borrower as being complete and correct.
(c) Intentionally Deleted.
9.2 Term; Termination.
(a) Term. The Initial Term of the Capital Expenditure Loans facility and
the obligation of FINOVA to make advances with respect thereto in accordance
with this Agreement shall be as set forth on the Schedule, and the Capital
Expenditure Loans facility and this Agreement shall be automatically renewed for
one or more Renewal Term(s) as set forth in the Schedule, unless earlier
terminated as provided herein.
(b) Prior Notice. Each party shall have the right to terminate this
Agreement effective at the end of the Initial Term or at the end of any Renewal
Term, without any termination fee being applicable thereto, by giving the other
party written notice not less than sixty (60) days prior to the effective date
of such termination, by registered or certified mail.
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FINOVA LOAN AND SECURITY AGREEMENT
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(c) Payment in Full. Upon the effective date of termination, the
Obligations shall become immediately due and payable in full in cash.
(d) Early Termination; Termination Fee. In addition to the procedure set
forth in Section 9.2(b), Borrower may terminate this Agreement at any time but
only upon sixty (60) days' prior written notice and prepayment of the
Obligations. Upon any such early termination by Borrower or any termination of
this Agreement by FINOVA upon the occurrence of an Event of Default, then, and
in any such event, Borrower shall pay to FINOVA upon the effective date of such
termination a fee (the "TERMINATION FEE") in an amount equal to the amount shown
on the Schedule.
9.3 Recourse to Security; Certain Waivers. All Obligations shall be
payable by Borrower as provided for herein and, in full, at the termination of
this Agreement; recourse to security shall not be required at any time. Borrower
waives presentment and protest of any instrument and notice thereof, notice of
default and, to the extent permitted by applicable law, all other notices to
which Borrower might otherwise be entitled.
9.4 No Waiver by FINOVA. Neither FINOVA's failure to exercise any right,
remedy or option under this Agreement, any supplement, the Loan Documents or
other agreement between FINOVA and Borrower nor any delay by FINOVA in
exercising the same shall operate as a waiver. No waiver by FINOVA shall be
effective unless in writing and then only to the extent stated. No waiver by
FINOVA shall affect its right to require strict performance of this Agreement.
FINOVA's rights and remedies shall be cumulative and not exclusive.
9.5 Binding on Successor and Assigns. All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind
FINOVA's and Borrower's respective representatives, successors and assigns.
9.6 Severability. If any provision of this Agreement shall be prohibited
or invalid under applicable law, it shall be ineffective only to such extent,
without invalidating the remainder of this Agreement.
9.7 Amendments; Assignments. This Agreement may not be modified, altered
or amended, except by an agreement in writing signed by Borrower and FINOVA.
Borrower may not sell, assign or transfer any interest in this Agreement or any
other Loan Document, or any portion thereof, including, without limitation, any
of Borrower's rights, title, interests, remedies, powers and duties hereunder or
thereunder. Only if incidental to a sale, assignment, transfer or other
disposition of all or substantially all of FINOVA's Los Angeles loan portfolio,
Borrower hereby consents to FINOVA's sale, assignment, transfer or other
disposition of this Agreement and any of the other Loan Documents, or of any
portion hereof or thereof, including, without limitation, FINOVA's rights,
title, interests, remedies, powers and duties hereunder or thereunder. In
connection therewith, FINOVA may disclose all documents and information which
FINOVA now or hereafter may have relating to Borrower or Borrower's business. To
the extent that FINOVA assigns its rights and obligations hereunder to a third
party in accordance with this Section 9.7, FINOVA shall thereafter be released
from such assigned obligations to Borrower and such assignment shall effect a
novation between Borrower and such third party, provided that the assignee fully
assumes all of FINOVA's obligations hereunder.
9.8 Integration. This Agreement, together with the Schedule (which is a
part hereof) and the other Loan Documents, reflect the entire understanding of
the parties with respect to the transactions contemplated hereby.
9.9 Survival. All of the representations and warranties of Borrower
contained in this Agreement shall survive the execution, delivery and acceptance
of this Agreement by the parties. No termination of this Agreement shall affect
or impair the powers, obligations, duties, rights, representations, warranties
or liabilities of the parties hereto and all shall survive such termination.
9.10 Evidence of Obligations. Each Obligation may, in FINOVA's discretion,
be evidenced by notes or other instruments issued or made by Borrower to FINOVA.
If not so evidenced, such Obligation shall be evidenced solely by entries upon
FINOVA's books and records.
9.11 Loan Requests. Each oral or written request for a loan by any Person
who purports to be any employee, officer or authorized agent of Borrower shall
be made to FINOVA on or prior to 11:00 a.m., Pacific time, on the Business Day
on which the proceeds thereof are requested to be paid to Borrower and shall be
conclusively presumed to be made by a Person authorized by Borrower to do so and
the crediting of a loan to Borrower's operating account shall conclusively
establish Borrower's obligation to repay such loan. Unless and until Borrower
otherwise directs FINOVA in writing, all loans shall be wired to Borrower's
operating account set forth on the Schedule.
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FINOVA LOAN AND SECURITY AGREEMENT
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9.12 Notices. Any notice required hereunder shall be in writing and
addressed to the Borrower and FINOVA at their addresses set forth at the
beginning of this Agreement. Notices hereunder shall be deemed received on the
earlier of receipt, whether by mail, personal delivery, facsimile, or otherwise,
or upon deposit in the United States mail, postage prepaid.
9.13 Brokerage Fees. Borrower represents and warrants to FINOVA that, with
respect to the financing transaction herein contemplated, no Person is entitled
to any brokerage fee or other commission and Borrower agrees to indemnify and
hold FINOVA harmless against any and all such claims.
9.14 Disclosure. No representation or warranty made by Borrower in this
Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to Borrower
or which reasonably should be known to Borrower which Borrower has not disclosed
to FINOVA in writing with respect to the transactions contemplated by this
Agreement which materially and adversely affects the business, assets,
operations, prospects or condition (financial or otherwise), of Borrower.
9.15 Publicity. FINOVA is hereby authorized to issue, after prior written
approval thereof by Borrower, which consent shall not be unreasonably withheld,
appropriate press releases and to cause a tombstone to be published announcing
the consummation of this transaction and the aggregate amount thereof.
9.16 Captions. The Section titles contained in this Agreement are without
substantive meaning and are not part of this Agreement.
9.17 Injunctive Relief. Borrower recognizes that, in the event Borrower
fails to perform, observe or discharge any of its Obligations under this
Agreement, any remedy at law may prove to be inadequate relief to FINOVA.
Therefore, FINOVA, if it so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
9.18 Counterparts; Facsimile Execution. This Agreement may be executed in
one or more counterparts, each of which taken together shall constitute one and
the same instrument, admissible into evidence. Delivery of an executed
counterpart of this Agreement by telefacsimile shall be equally as effective as
delivery of a manually executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by telefacsimile shall also
deliver a manually executed counterpart of this Agreement, but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
9.19 Construction. The parties acknowledge that each party and its counsel
have reviewed this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any amendments or
exhibits hereto.
9.20 Time of Essence. Time is of the essence for the performance by
Borrower of the Obligations set forth in this Agreement.
9.21 Limitation of Actions. Borrower agrees that any claim or cause of
action by Borrower against FINOVA, or any of FINOVA's directors, officers,
employees, agents, accountants or attorneys, based upon, arising from, or
relating to this Agreement, or any other present or future agreement, or any
other transaction contemplated hereby or thereby or relating hereto or thereto,
or any other matter, cause or thing whatsoever, whether or not relating hereto
or thereto, occurred, done, omitted or suffered to be done by FINOVA, or by
FINOVA's directors, officers, employees, agents, accountants or attorneys,
whether sounding in contract or in tort or otherwise, shall be barred unless
asserted by Borrower by the commencement of an action or proceeding in a court
of competent jurisdiction by the filing of a complaint within one year after the
first act, occurrence or omission upon which such claim or cause of action, or
any part thereof, is based and service of a summons and complaint on an officer
of FINOVA or any other Person authorized to accept service of process on behalf
of FINOVA, within 30 days thereafter. Borrower agrees that such one-year period
of time is a reasonable and sufficient time for Borrower to investigate and act
upon any such claim or cause of action. The one-year period provided herein
shall not be waived, tolled, or extended except by a specific written agreement
of FINOVA. This provision shall survive any termination of this Loan Agreement
or any other agreement.
9.22 Liability. Neither FINOVA nor any FINOVA Affiliate shall be liable for
any indirect, special, incidental or consequential damages in connection with
any breach of contract, tort or other wrong relating to this Agreement or the
Obligations or the establishment, administration or collection thereof
(including without limitation damages for loss of profits, business
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FINOVA LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
interruption, or the like), whether such damages are foreseeable or
unforeseeable, even if FINOVA has been advised of the possibility of such
damages. Neither FINOVA, nor any FINOVA Affiliate shall be liable for any
claims, demands, losses or damages, of any kind whatsoever, made, claimed,
incurred or suffered by the Borrower through the ordinary negligence of FINOVA,
or any FINOVA Affiliate. "FINOVA Affiliate" shall mean FINOVA's directors,
officers, employees, agents, attorneys or any other Person or entity affiliated
with or representing FINOVA.
9.23 Notice of Breach by FINOVA. Borrower agrees to give FINOVA written
notice of (i) any action or inaction by FINOVA or any attorney of FINOVA in
connection with any Loan Documents that may be actionable against FINOVA or any
attorney of FINOVA or (ii) any defense to the payment of the Obligations for any
reason, including, but not limited to, commission of a tort or violation of any
contractual duty or duty implied by law. Borrower agrees that unless such notice
is fully given as promptly as possible (and in any event within thirty (30)
days) after Borrower has knowledge, or with the exercise of reasonable diligence
should have had knowledge, of any such action, inaction or defense, Borrower
shall not assert, and Borrower shall be deemed to have waived, any claim or
defense arising therefrom.
9.24 Application of Insurance Proceeds. The net proceeds of any casualty
insurance insuring the Collateral, after deducting all costs and expenses
(including attorneys' fees) of collection, shall be applied, at FINOVA's option,
either toward replacing or restoring the Collateral, in a manner and on terms
satisfactory to FINOVA, or toward payment of the Obligations. Any proceeds
applied to the payment of Obligations shall be applied in such manner as FINOVA
may elect. Notwithstanding the foregoing or anything contained in the deeds of
trust for the Borrower Properties, so long as no Event of Default has occurred
and is continuing, FINOVA will allow insurance proceeds to be applied to
replacing or restoring a loss to the extent that such losses do not exceed
$250,000 per year in the aggregate. Insurance proceeds for losses above $250,000
per year in the aggregate shall be applied as set forth in the first two
sentences of this Section 9.24. In no event shall such application relieve
Borrower from payment in full of all installments of principal and interest
which thereafter become due in the order of maturity thereof.
9.25 Power of Attorney. Borrower appoints FINOVA and its designees as
Borrower's attorney, with the power to endorse Borrower's name on any checks,
notes, acceptances, money orders or other forms of payment or security that come
into FINOVA's possession; to sign Borrower's name on any invoice or ▇▇▇▇ of
lading relating to any Receivable, on drafts against customers, on assignments
of Receivables, on notices of assignment, financing statements and other public
records, on verifications of accounts and on notices to customers or account
debtors; to send requests for verification of Receivables to customers or
account debtors; after the occurrence of any Event of Default, to notify the
post office authorities to change the address for delivery of Borrower's mail to
an address designated by FINOVA and to open and dispose of all mail addressed to
Borrower; and to do all other things FINOVA deems necessary or desirable to
carry out the terms of this Agreement. Borrower hereby ratifies and approves all
acts of such attorney. Neither FINOVA nor any of its designees shall be liable
for any acts or omissions nor for any error of judgment or mistake of fact or
law while acting as Borrower's attorney. This power, being coupled with an
interest, is irrevocable until the Obligations have been fully satisfied and
FINOVA's obligation to provide loans hereunder shall have terminated
9.26 GOVERNING LAW; WAIVERS. THIS AGREEMENT, INCLUDING WITHOUT LIMITATION
ENFORCEMENT OF THE OBLIGATIONS, SHALL BE INTERPRETED IN ACCORDANCE WITH THE
INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF THE STATE OF ARIZONA
GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. BORROWER HEREBY
CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN THE COUNTY OF MARICOPA IN THE STATE OF ARIZONA OR, AT THE SOLE OPTION OF
FINOVA, IN ANY OTHER COURT IN WHICH FINOVA SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. BORROWER WAIVES ANY OBJECTION OF FORUM NON CONVENIENS AND VENUE.
BORROWER FURTHER WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE IN THE MANNER SET FORTH IN
SECTION 9.12 HEREOF FOR THE GIVING OF NOTICE. BORROWER FURTHER WAIVES ANY RIGHT
IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT ENTERED AGAINST IT.
9.27 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND BORROWER EACH HEREBY
WAIVES THE
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FINOVA LOAN AND SECURITY AGREEMENT
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RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; (II) ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN FINOVA AND BORROWER; OR (III) ANY CONDUCT, ACTS
OR OMISSIONS OF FINOVA OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH FINOVA OR
BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
BORROWER:
FRESH CHOICE, INC.
FED. TAX ID #▇▇-▇▇▇▇▇▇▇
BY /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------
TITLE SENIOR VICE PRESIDENT AND CFO
-----------------------------
FINOVA:
FINOVA CAPITAL CORPORATION
BY /S/ ▇▇▇▇▇▇▇▇ ▇. BREED
---------------------
TITLE VICE PRESIDENT
--------------
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SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: FRESH CHOICE, INC.
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: DECEMBER 17, 1998
This Schedule forms an integral part of the Loan and Security Agreement between
the above Borrower and FINOVA Capital Corporation dated the above date, and all
references herein and therein to "this Agreement" shall be deemed to refer to
said Agreement and to this Schedule.
================================================================================
TOTAL FACILITY (SECTION 2.1):
$4,000,000
================================================================================
LOANS (SECTION 2.2):
CAPITAL EXPENDITURE LOANS: one or more loans against the
value of Borrower's machinery, equipment and/or real
estate ("CAPITAL EXPENDITURE LOANS") in an aggregate
outstanding principal amount not to exceed the lesser of
(a) or (b) below:
(a) Four Million Dollars ($4,000,000), less the aggregate
original principal amount of the Term Loans, or
(b) the total of
(i) up to 70.25% of the Orderly Liquidation Value of
Borrower's equipment, as determined by an appraisal
conducted at Borrower's expense by an appraiser and
otherwise in form and substance acceptable to FINOVA in
its discretion, provided, that equipment shall be eligible
for borrowing under this Agreement if and only if FINOVA
has received a landlord waiver in form and substance
satisfactory to it in its sole discretion and UCC-1
fixture filings and financing statements sufficient to
create a first priority perfected security interest in
such equipment, including, without limitation, a legal
description of the real property for each location at
which
29
such equipment is located, provided further, that, without
limiting the requirements set forth in the first proviso
to this subparagraph, if Borrower also delivers to FINOVA
such documents and agreements, including, without
limitation, a consent of landlord to leasehold mortgage
and leasehold mortgage, in form and substance satisfactory
to FINOVA in its sole discretion sufficient to create a
first priority, insured (but FINOVA shall not require a
survey to be conducted in connection with any such
insurance) leasehold mortgage in favor of FINOVA on
Borrower's interest in the real property at any three (3)
of the Borrower's restaurants located at ▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
or ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, then the
borrowing availability for equipment provided for in this
subparagraph shall be increased up to $71,250 for each
single line, one-buffet restaurant and $82,500 for each
double line, two-buffet restaurant, not to exceed 70.25%
of the Orderly Liquidation Value of all of Borrower's
equipment that is not leased or encumbered by any Person
other than FINOVA; plus
(ii) up to $2,330,000, being 75.4% of the Fair Market
Value of Borrower's interest in real property located at
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ (collectively, the "BORROWER
PROPERTIES"); less
(iii) the sum of
(x) $71,250 for each single line, one-buffet restaurant
and $82,500 for each double line, two-buffet restaurant
that is sold by Borrower in accordance with this
Agreement, provided that such amounts shall be $33,370 and
$38,640, respectively, if either the advance rate applied
to Borrower's equipment for which FINOVA is fully secured
has never exceeded 70.25% or, in the event that FINOVA has
obtained at least three first priority leasehold mortgages
as set forth above, the sum of (1) the product of the
number of single line, one-buffet restaurants for which
FINOVA is fully secured multiplied by $71,250 plus (2) the
product of the number of double line, two-buffet
restaurants for which FINOVA is fully secured multiplied
by $82,500 equals or exceeds $1,670,000 after giving
effect to such sale; plus
(y) the aggregate original principal amount of the Term
Loans; plus
2
30
(z) any Loan Reserves.
Notwithstanding the foregoing, FINOVA shall not advance
any Capital Expenditure Loans to Borrower unless Borrower
satisfactorily demonstrates to FINOVA in its discretion
that Borrower's Total Debt Service Coverage Ratio will
equal or exceed 1.0:1.0 after giving effect to such
Capital Expenditure Loan. Other than the initial Loan
against the value of Borrower's Properties, FINOVA will
have no obligation to advance any other Loans until that
certain Notice and Statement of Lien allegedly filed by
the State of Washington against Borrower in the face
amount of $351,432.96 has been released or subordinated in
form satisfactory to FINOVA.
Monthly payments on the Capital Expenditure Loans shall be
interest-only, provided that all outstanding principal and
interest on any Capital Expenditure Loans shall be fully
due and payable three (3) years from the date hereof; and
provided further, that the Capital Expenditure Loans shall
be in such amounts and on such terms as are set forth on
one or more separate promissory notes of Borrower from
time to time, each in form and substance satisfactory to
FINOVA in its sole discretion.
All Capital Expenditure Loans advanced to Borrower in the
period from and including the Closing Date through and
including the day immediately preceding the first
anniversary of the Closing Date that remain outstanding on
the first anniversary of the Closing Date shall be
automatically converted to a Term Loan on the first
anniversary of the Closing Date ("Term Loan A"), and all
Capital Expenditure Loans advanced to Borrower in the
period from and including the first anniversary of the
Closing Date through and including the day immediately
preceding the second anniversary of the Closing Date that
remain outstanding on the second anniversary of the
Closing Date shall be automatically converted to a Term
Loan on the second anniversary of the Closing Date ("Term
Loan B").
Any Capital Expenditure Loan, once repaid, can be
reborrowed.
TERM LOANS: repayment of Term Loan A and Term Loan B
(collectively, the "TERM LOANS") shall be based on a five
(5) year amortization schedule, provided that the entire
amount of the Term Loans, including interest thereon,
shall be fully due and payable three (3) years from the
date hereof, and provided further, that the Terms Loans
shall be, at FINOVA's option, on such terms as are
3
31
set forth on separate promissory notes of Borrower from
time to time, each in form and substance satisfactory to
FINOVA in its sole discretion.
Any Term Loan, once repaid, cannot be reborrowed.
================================================================================
INTEREST AND FEES (SECTION 2.6):
Capital Expenditure Interest Rate. Borrower shall pay
FINOVA interest on the daily outstanding balance of
Borrower's Capital Expenditure Loans at a per annum rate
of 1.25% in excess of the rate of interest announced
publicly by Citibank, N.A., (or any successor thereto),
from time to time as its "prime rate" (the " PRIME RATE")
which may not be such institution's lowest rate. The
interest rate chargeable hereunder in respect of the
Capital Expenditure Loans (herein, the "CAPITAL
EXPENDITURE INTEREST RATE") shall be increased or
decreased, as the case may be, without notice or demand of
any kind, upon the announcement of any change in the Prime
Rate. Each change in the Prime Rate shall be effective
hereunder on the first day following the announcement of
such change. Interest charges and all other fees and
charges herein shall be computed on the basis of a year of
360 days and actual days elapsed and shall be payable to
FINOVA in arrears on the first day of each month.
Term Interest Rate. Borrower shall pay FINOVA interest on
the daily outstanding balance of the Term Loans at a per
annum rate of 1.75% in excess of the Prime Rate. The
interest rate chargeable hereunder in respect of the Term
Loans (herein, the "TERM INTEREST RATE") shall be
increased or decreased, as the case may be, without notice
or demand of any kind, upon the announcement of any change
in the Prime Rate. Each change in the Prime Rate shall be
effective hereunder on the first day following the
announcement of such change. Interest charges and all
other fees and charges herein shall be computed on the
basis of a year of 360 days and actual days elapsed and
shall be payable to FINOVA in arrears on the first day of
each month.
In addition to all other fees and interest on the Loans,
Borrower shall pay an interest premium of one-half of one
percent (0.5%) on the daily outstanding balance of
Borrower's Capital Expenditure Loans and Term Loans to the
extent the aggregate of all such Loans exceeds $2,500,000.
4
32
Collateral Monitoring Fee. At the closing of this
transaction and on the first day of each calendar month
thereafter, Borrower shall pay FINOVA a collateral
monitoring fee of $1,500 ("COLLATERAL MONITORING Fee");
provided however, that Borrower agrees and acknowledges
that each Loan Year a full year's fee shall be deemed
earned at the beginning of the respective Loan Year.
Closing Fee. At the closing of this transaction, Borrower
shall pay to FINOVA a closing fee in an amount equal to
one percent (1%) of the Total Facility ("CLOSING FEE"),
which shall be deemed fully earned on the date such
payment is due.
Unused Line Fee. With respect to each fiscal quarter, or
portion thereof during the term of this Agreement,
Borrower shall unconditionally pay to FINOVA a fee equal
to one-half of one percent (0.50%) per annum of the
difference between the Total Facility and the average
daily outstanding balance of the Loans during such
quarter, or portion thereof ("UNUSED LINE FEE"), which fee
shall be calculated and payable quarterly, in arrears, and
shall be due and payable, commencing on the first Business
Day of the Borrower's first fiscal quarter following the
Closing Date and continuing on the first Business Day of
each fiscal quarter thereafter.
Examination Fee. Borrower agrees to pay to FINOVA an
examination fee in the amount of $600 per person per day
in connection with each audit or examination of Borrower
performed by FINOVA prior to or after the date hereof,
plus all costs and expenses incurred in connection
therewith (the "EXAMINATION FEE"). Without limiting the
generality of the foregoing, Borrower shall pay to FINOVA
an initial Examination Fee in an amount equal to $600 per
person per day, plus all costs and expenses incurred in
connection therewith. Such initial Examination Fee shall
be deemed fully earned at the time of payment and due and
payable upon the closing of this transaction, and shall be
deducted from any good faith deposit paid by Borrower to
FINOVA prior to the date of this Agreement. FINOVA will
perform audits and examinations of Borrower no more
frequently than on a quarterly basis, provided that if
FINOVA believes in its sole discretion that an Event of
Default has or may have occurred and be continuing, FINOVA
may perform audits and examinations of Borrower more
frequently than quarterly.
================================================================================
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CONDITIONS OF CLOSING (SECTION 4.1):
The obligation of FINOVA to make the initial advance
hereunder is subject to the fulfillment, to the
satisfaction of FINOVA and its counsel, of each of the
following conditions, in addition to the conditions set
forth in Sections 4.1 and 4.2 above:
(a) Minimum Excess Availability (Section 4.1(c)). Not less
than 15% of Borrower's total availability hereunder on the
Closing Date. Accounts payable outstanding: 30 days or
LESS from their invoice date.
(b) Deeds of Trust. Borrower shall have granted to FINOVA
first priority deeds of trust on its entire interest in
each of the Borrower Properties.
(c) No Material Adverse Change (Section 4.1(v)). Draft
financial statements for Borrower dated as of November 1,
1998. Further, no material adverse change has occurred in
the Borrower's business, operations, financial condition,
or assets or in the prospect of repayment of the
Obligations since November 1, 1998.
(d) Guaranty from ▇▇▇▇▇▇▇ Design Corporation. FINOVA shall
have received a continuing corporate guaranty of the
Obligations by ▇▇▇▇▇▇▇ Design Corporation in form and
substance satisfactory to FINOVA in its sole discretion.
Borrower shall cause the conditions precedent set forth in
Section 4.1 of this Agreement and set forth above in this
Schedule to be satisfied, and shall provide evidence to
FINOVA that all such conditions precedent have been
satisfied, on or before December 31, 1998.
================================================================================
BORROWER INFORMATION:
Borrower's State of Incorporation (Section 5.1): Delaware
Borrower's copyrights, patents trademarks, and licenses (Section 5.5): As
set forth in that certain Trademark Security Agreement between Borrower and
FINOVA dated on or about the date hereof.
Fictitious Names/Prior Corporate Names (Section 5.2):
Prior Corporate Names: (1) California Gourmet
(2) Gourmet California, Inc.
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(3) ▇▇▇▇▇▇▇ Partners, Inc.
Fictitious Names: (1) Fresh Choice
(2) The Ultimate Soup and Salad Bar
(3) Zoopa
Borrower Locations (Section 5.16) See Exhibit B attached hereto.
Borrower's Federal Tax Identification Number (Section 5.16): ▇▇-▇▇▇▇▇▇▇
Permitted Encumbrances (Section 1.1): See Exhibit C attached hereto.
================================================================================
FINANCIAL COVENANTS (SECTION 6.1.13):
Borrower shall comply with all of the following
covenants. Compliance shall be determined as of the
end of each month or quarter (as determined by
FINOVA in its sole discretion reasonably
exercised), except as otherwise specifically
provided below:
Total Interest to Cash Flow Ratio As of the last day of each
four week period of Borrower, Borrower's aggregate
interest paid or accrued for money borrowed for the
consecutive 12-month period ending as of such last
day must be no more than 1.3 times Borrower's
Operating Cash Flow/Permitted provided however,
that, with respect to the calculations set forth
herein for the period from the Closing Date through
December 31, 1999, Borrower's Total Interest to
Cash Flow Ratio shall be determined beginning as of
December 28, 1998 (the "START DATE") and be tested
(i) at the end of the fiscal quarter ending March,
1999 for such fiscal quarter and (ii) at the end of
each subsequent four week period of Borrower for
the period from the Start Date through the end of
such period; and, provided further, that all such
determinations shall be made on a consolidated
basis.
Total Debt to Cash Flow Ratio As of the last day of each four
week period of Borrower commencing with such period
ending March 1999, Borrower's aggregate outstanding
principal indebtedness for money borrowed
(including under any capital leases) for the
consecutive 12-month period ending as of such last
day must be no more than 5 times the Borrower's
Operating Cash Flow/Permitted provided, that
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all such determinations shall be made on a
consolidated basis.
Senior Debt Service Coverage Ratio As of the last day of each
four week period of Borrower, Borrower's Operating
Cash Flow/Actual for the consecutive 12-month
period ending as of such last day must be at least
1.3 times the amount necessary to meet Borrower's
Senior Contractual Debt Service for such 12-month
period; provided however, that, with respect to the
calculations set forth herein for the period from
the Closing Date through the fiscal year ending
December, 1999, Borrower's Senior Debt Service
Coverage Ratio shall be determined beginning as of
December 28, 1998 (the "START DATE") and be tested
(i) at the end of the fiscal quarter ending March,
1999 for such fiscal quarter and (ii) at the end of
each subsequent four week period of Borrower for
the period from the Start Date through the end of
such period; and, provided further, that all such
determinations shall be made on a consolidated
basis.
Total Debt Service Coverage Ratio As of the last day of each
four week period of Borrower, Borrower's Operating
Cash Flow/Actual for the consecutive 12-month
period ending as of such last day must be at least
1.2 times the amount necessary to meet Borrower's
Total Contractual Debt Service for such 12-month
period; provided however, that, with respect to the
calculations set forth herein for the period from
the Closing Date through the fiscal year ending
December, 1999, Borrower's Total Debt Service
Coverage Ratio shall be determined beginning as of
December 28, 1998 (the "START DATE") and (i) shall
be tested (x) at the end of the fiscal quarter
ending March, 1999 for such fiscal quarter and (y)
at the end of each subsequent four week period of
Borrower for the period from the Start Date through
the end of such period, and (ii) Borrower's Total
Debt Service Coverage Ratio for, respectively,
January through March of 1999 and April through
June of 1999 shall be at least 1.1 and 1.15, and,
provided further, that all such determinations
shall be made on a consolidated basis.
Net Worth. Borrower shall maintain Net Worth of not less than
Nineteen Million Dollars ($19,000,000).
================================================================================
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NEGATIVE COVENANTS (SECTION 6.2):
Employee Advances: Loans or advances in the ordinary course of
business and consistent with past practices of
Borrower, provided that FINOVA shall establish
reserves against Borrower's availability under
this Agreement to the extent that the aggregate
of any such loans or advances to employees
outstanding at any one time exceeds $50,000, and
provided further that Borrower shall provide
FINOVA with prior written notice of any such
loan or advance that would cause the aggregate
of such loans or advances to exceed $50,000.
Existing Guaranties: None.
Capital Expenditures: Borrower shall not make or incur any Capital
Expenditure that is not financed by the
Permitted Indebtedness if, after giving effect
thereto, the aggregate amount of all Capital
Expenditures by Borrower in any fiscal year
(beginning with the 1999 fiscal year) would
exceed $750,000, provided that (x) any proceeds
of the sale of the ▇▇▇▇▇▇ City Store that are
used to make a Capital Expenditure shall not be
included in determining compliance with such
limitation and (y) Borrower may make or incur a
Capital Expenditure resulting in a fiscal year
aggregate in excess of $750,000 if the ratio of
Borrower's Adjusted Operating Cash Flow to
Adjusted Senior Contractual Debt Service,
measured on a consolidated basis, equals or
exceeds 1.5:1 after giving effect (without
duplication) to such Capital Expenditure. In no
event shall any monies retained by FINOVA and
credited against Borrower's loan account or any
monies advanced by FINOVA to a third party to
pay an Indebtedness of Borrower be considered a
Capital Expenditure.
Compensation: So long as Borrower is a publicly traded
corporation listed on NASDAQ or a comparable
national stock exchange, Borrower may pay
compensation to its executives, officers, and
directors (or any relative thereof) in any
amount determined by Borrower's Board of
Directors or the compensation committee thereof
in accordance with Borrower's articles of
incorporation and by-laws. In all other cases,
Borrower shall not pay total compensation,
including salaries, withdrawals, fees,
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bonuses, commissions, drawing accounts and other
payments, whether directly or indirectly, in
money or otherwise, during any fiscal year to
all of Borrower's executives, officers and
directors (or any relative thereof) in an amount
in excess of 115% of such total compensation
paid in the immediately preceding fiscal year.
Indebtedness: Borrower shall not create, incur, assume or
permit to exist any Indebtedness (including
Indebtedness in connection with Capital Leases)
in excess of $100,000 other than the following
(collectively, the "Permitted Indebtedness"):
(i) the Obligations, (ii) current and future
capital lease obligations of Borrower in an
aggregate amount not to exceed $2,500,000,
provided that Borrower's Total Debt Service
Coverage Ratio will equal or exceed 1:1, as
determined by FINOVA in its sole discretion
reasonably exercised, after giving effect to
such capital lease obligations and other secured
debt, and provided further that FINOVA may
approve in its sole discretion any capital
leases or other secured debt proposed by
Borrower on or after the date hereof which,
after giving effect thereto, would cause the
aggregate of such obligations to exceed
$2,500,000, (iii) trade payables and other
contractual obligations to suppliers and
customers incurred in the ordinary course of
business, (iv) operating leases, and (v) other
Indebtedness existing on the date of this
Agreement and reflected in Exhibit D attached
hereto (other than Indebtedness paid on the date
of this Agreement from proceeds of the initial
advances hereunder).
================================================================================
REPORTING REQUIREMENTS (SECTION 9.1):
1. Borrower shall provide FINOVA with monthly outstanding
or held check registers within ten (10) days after the
end of each month.
2. Borrower shall provide FINOVA with monthly unaudited
financial statements, statements of cash flow, and a
trial balance within thirty (30) days after the end of
each month.
3. Borrower shall provide FINOVA with audited
consolidated and consolidating fiscal financial
statements within one hundred
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twenty (120) days after the end of each fiscal year,
as more specifically described in Section 9.1(b)
hereof, and with an opinion issued by a Certified
Public Accountant which is acceptable to FINOVA.
4. Borrower shall provide FINOVA with annual operating
budgets (including income statements, balance sheets
and cash flow statements, by month) for the upcoming
fiscal year of Borrower within fifteen (15) days after
approval thereof by Borrower's Board of Directors, but
in no event later than thirty (30) days after the
commencement of each fiscal year of Borrower.
5. Borrower shall provide FINOVA with monthly
same-store-sales and profitability analyses for each
restaurant operated by Borrower, in form and substance
satisfactory to FINOVA in the exercise of its
reasonable discretion within thirty (30) days after
the end of each month.
6. Borrower's balance sheets for purposes of the
definition of Prepared Financials shall be as of
November 1, 1998.
================================================================================
TERM (SECTION 9.2):
The initial term of this Agreement shall be three (3)
years from the date hereof (the "INITIAL TERM") and shall
be automatically renewed for successive periods of one (1)
year each (each, a "RENEWAL TERM"), unless earlier
terminated as provided in Section 7 or 9.2 above or
elsewhere in this Agreement.
================================================================================
TERMINATION FEE (SECTION 9.2):
Credit Facility. The Termination Fee applicable to the
Loans provided for in Section 9.2(d) shall be an amount
equal to the following percentage of the Total Facility:
(i) Three percent (3%) of the Total Facility, if such
early termination occurs on or prior to the first
anniversary of the date of this Agreement;
(ii) Two percent (2%) of the Total Facility, if such early
termination occurs after the first anniversary of the date
of this Agreement but on or prior to the second
anniversary of the date of this Agreement; and
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(iii) One percent (1%) of the Total Facility, if such
early termination occurs after the second anniversary of
the date of this Agreement.
Notwithstanding the foregoing, if Borrower refinances all
of the Obligations through ▇▇▇▇▇ Fargo Bank or any
successor thereof not sooner than eighteen months from the
date hereof, there shall be no Termination Fee.
================================================================================
DISBURSEMENT (SECTION 9.11):
Unless and until Borrower otherwise directs FINOVA in
writing, all loans shall be wired to Borrower's following
operating account: ▇▇▇▇▇ Fargo Bank, Account Number
4038-832325.
================================================================================
ADDITIONAL PROVISIONS:
1. Within 45 days after the Closing Date, Borrower shall
use its best efforts to provide FINOVA with waivers
executed by the applicable warehouseman for each warehouse
where Borrower stores Inventory in form and substance
acceptable to FINOVA in its sole discretion.
2. Borrower may request a Capital Expenditure Loan advance
no more often than once per week by providing FINOVA with
a disbursement letter in form and substance satisfactory
to FINOVA in its sole discretion no later than 11:00 am
Pacific Standard Time on the Business Day prior to the
requested advance, provided that FINOVA may permit in its
sole discretion more than one Capital Expenditure Loan
advance in a single week.
3. Prior to the establishment of a Blocked Account
pursuant to the provisions of this Agreement, any payments
that Borrower delivers to FINOVA shall be made by wire
transfer to a bank account designated by FINOVA and shall
be accompanied by contemporaneous written notice to FINOVA
from Borrower.
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BORROWER: FINOVA:
FRESH CHOICE, INC. FINOVA CAPITAL CORPORATION
BY /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ BY /S/ ▇▇▇▇▇▇▇▇ ▇. Breed
------------------- -----------------------
TITLE Sr Vice President - CFO TITLE Vice President
------------------------ ----------------
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