EXHIBIT 10.17
MEMORANDUM OF AGREEMENT
THIS MEMORANDUM OF AGREEMENT (this "Agreement") is made as of July 6, 2001,
by and among Kahala Corp., a Florida corporation ("Kahala"), and Ranch * 1
Acquisition, L.L.C., an Arizona limited liability company ("Ranch") (jointly,
"Borrower"), on the one hand, and [...***...] ("Lender"), on the other hand,
with respect to the following facts:
A. Ranch and Lender have been in negotiation for Lender, or its designee,
to make a loan to Ranch in the principal amount of up to $2,500,000 (the "Loan")
for the purpose of permitting Ranch to provide debtor-in possession financing to
Ranch *1, Inc., a Delaware corporation, and certain of its affiliates
(collectively, "Debtor"), pursuant to the terms and conditions of that certain
Debtor-In-Possession Loan and Security Agreement entered into between Ranch and
Debtor (the "Debtor Loan Agreement"), a copy of which is attached hereto as
Exhibit A and incorporated herein by this reference.
B. Debtor are the debtors and the debtors-in-possession under that certain
Chapter 11 bankruptcy proceeding filed in the United States Bankruptcy Court for
the Southern District of New York, Bankruptcy Case Nos.: 01-41853 (AJG) through
01-41881 (AJG) (the "Bankruptcy Case.")
C. Kahala is the sole Member of Ranch.
D. Lender is willing to make the Loan to Ranch and Ranch is willing to
accept the Loan from Lender, all on the following terms and conditions:
NOW, THEREFORE, for and in consideration of the foregoing premises, and the
mutual undertakings set forth below, the parties hereto hereby agree as follows:
1. AGREEMENT TO MAKE LOAN. Lender hereby agrees that Lender, or its
designee, will make a loan to Ranch of the principal amount of up to $2,500,000
(the "Maximum Loan Amount"), on the terms and conditions contained in this
Agreement and in accordance with the terms and conditions for advances, interest
payments, late charges, standby and early termination fees and principal
payments as set forth in the Debtor Loan Agreement. The parties specifically
acknowledge and agree that the Loan shall not be a revolving loan.
2. LOAN DISBURSEMENT. The proceeds of the Loan will be disbursed to Ranch
according the following schedule.
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2.1 Lender shall disburse to Ranch during the first 30 days following
the filing of the Bankruptcy Case, an aggregate amount not to exceed $500,000
(collectively, the "Initial Disbursement"). The amount of each disbursement
comprising the Initial Disbursement shall be the same as the amount ordered by
the Court in the Bankruptcy Case. The date of the first such disbursement is
hereinafter referred to as the "Initial Disbursement Date."
2.2 Commencing no sooner than 30 days following the Initial
Disbursement Date and no more frequently than every 30 days thereafter (the
"Requested Disbursement Date"), Lender shall make disbursements to Ranch in such
amounts as Ranch, in accordance with the terms and provisions of the Debtor Loan
Agreement, may request, by a written notice from Ranch delivered to Lender not
later than 3 business days prior to the Requested Disbursement Date of the
requested amount, not to exceed $250,000 per month, until the full amount of the
Loan has been disbursed by Lender to Ranch.
3. INTEREST AND OTHER COMPENSATION TO LENDER.
3.1 INTEREST AND LATE CHARGES. Interest on the unpaid principal
balance of the Loan from time to time shall accrue at the rate per year set
forth in the Debtor Loan Agreement (and, if applicable, at the rate set forth in
any approved plan of reorganization in the Bankruptcy Case) (including any
default rate in either such case), commencing upon the Initial Disbursement Date
and continuing until the entire principal of the Loan has been repaid. Interest
shall be payable monthly, in arrears, commencing one month from the Initial
Disbursement Date and on the same day of each succeeding month until the full
amount of the principal balance of the Loan and all accrued but unpaid interest
thereon is paid. Any late charges paid by Debtor to Ranch shall be paid entirely
to Lender within 10 days of the receipt thereof by Ranch.
3.2 LOAN ORIGINATION FEE. Ranch shall pay to Lender a Loan Origination
Fee in the amount of $12,500. The Loan Origination Fee shall be due and payable
to Lender at the time of disbursement of the Initial Disbursement. Lender, at
its option, may add the amount of this $12,500 Loan Origination Fee to the
Initial Disbursement in which case, such amount shall be considered as part of
the Loan balance.
3.3 STANDBY FEE. For so long as the Debtor Loan Agreement is in
effect, Ranch shall pay to Lender a monthly Standby Fee equal to 0.25% of the
average daily undisbursed portion of the Maximum Loan Amount. The monthly
Standby Fee shall be due and payable within 3 business days of its receipt by
Ranch from Debtor.
3.4 EARLY TERMINATION FEE. Ranch shall pay to Lender 60% of any "Early
Termination Fee" (as such term is defined in the Debtor Loan Agreement) paid to
Ranch by Debtor pursuant to the Debtor Loan Agreement, which amount shall be due
and payable to Lender within 10 days following receipt of the Early Termination
Fee by Ranch.
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3.5 ADDITIONAL PAYMENT. As additional consideration for the Loan,
Ranch shall pay to Lender the sum of [...***...] (the "Additional Payment"). The
Additional Payment shall be paid to Lender in accordance with the provisions of
Paragraph 5 hereof.
Payments received by Lender from Ranch shall be applied first to unpaid loan
fees, then to interest then due and unpaid, and then to principal.
4. PRINCIPAL REPAYMENT. [...***...] Ranch acknowledges and agrees that no
part of the principal of the Loan repaid to Lender will be re-loaned by Lender
to Ranch.
5. PAYMENT OF ADDITIONAL PAYMENT. Following Ranch's repayment to Lender of
the full amount of the principal of the Loan together with all interest accrued
thereon, Ranch shall [...***...] . No interest shall accrue or be payable with
respect to the Additional Payment.
6. RIGHTS OF INSPECTION. Ranch agrees to furnish to Lender copies of
Ranch's monthly bank statements within 30 days following Ranch's receipt of such
statements, and quarterly financial statements for Ranch within 30 days
following the end of each quarterly financial period of Ranch. Lender and its
representatives shall have the right to audit and copy Ranch's books and
records, from time to time, to verify receipts of [...***...] generated by
Debtor and received by Company.
7. MANAGEMENT OF RANCH. For so long as there remains any sum owing to
Lender hereunder, including, without limitation, the Additional Payment, Ranch
and Kahala covenant and agree that Ranch shall be managed by 2 Managers. Lender
shall be entitled to designate one of the 2 Managers and Kahala shall be
entitled to designate the other of the 2 Managers. [...***...].
8. DEFAULT BY BORROWER. In the event of any default under this Agreement by
either Ranch or Kahala (and provided that Lender has given notice of such
alleged default to Ranch and Kahala, setting forth the details thereof, and such
default is not cured within 10 days of such notice), or in the event of Debtor's
default under the Debtor Loan Agreement, Lender shall have no obligation to make
any further disbursements under the Loan and Kahala agrees that Lender shall
have the option, exercisable in Lender's sole and absolute discretion, to
acquire the entire membership interest in Ranch, for no consideration, and to
remove any manager of Ranch appointed by Kahala.
9. REPRESENTATIONS AND WARRANTIES. Ranch and Kahala each hereby represents
and warrants to Lender as follows:
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*** CONFIDENTIAL TREATMENT REQUESTED
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9.1 Ranch is a limited liability company organized and in good
standing under the laws of the State of Arizona.
9.2 Kahala is a corporation formed and in good standing under the laws
of the State of Florida.
9.3 Kahala is the sole member of Ranch.
9.4 Kahala has delivered to Lender, Resolutions of the Board of
Directors of Kahala, acting in its capacity as sole Member of Ranch and on
behalf of Ranch, authorizing and approving the execution and delivery of this
Agreement.
9.5 Attached hereto as Exhibit B and incorporated herein by this
reference is a true and complete copy of that certain Debtor's Emergency Motion
for Order Authorizing The Debtor To Obtain Post-Petition Secured Financing And
Approving Joint Franchise Marketing Arrangement, filed in the Bankruptcy Case on
July 5, 2001 (the "Motion.")
9.6 Attached hereto as Exhibit C and incorporated herein by this
reference is a true and complete copy of that certain Order Authorizing The
Debtor To Obtain Post-Petition Secured Financing And Approving Joint Franchise
Marketing Arrangement, filed in the Bankruptcy Case on July 5, 2001, approving
the Motion.
9.7 Ranch and Kahala acknowledge and agree that the representations,
warranties and covenants of Ranch and Kahala contained in this Agreement are a
material inducement to Lender in entering into this Agreement and Lender is
relying on such representations, warranties and covenants notwithstanding its
own investigations.
9.8 Ranch and Kahala acknowledge and agree that the transaction
described in this Agreement is not usurious.
10. MISCELLANEOUS. The following miscellaneous provisions are also included
in this Agreement:
10.1 NOTICES. Any notice, request, demand, instruction or other
communication given hereunder by any party must be in writing and will be
validly and timely given or made to another party if (i) served personally, (ii)
deposited in the United States mail, certified or registered, postage prepaid,
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return receipt requested, (iii) delivered by overnight courier, or (iv) sent by
telecopier, to each of the parties as set forth below:
If to Ranch: Kahala Corp.
Attn: Xxxxx Xxxxxxx
0000 X. Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000, Ext. 17
Fax: (000) 000-0000
If to Kahala: Kahala Corp.
Attn: Xxxxx Xxxxxxxxx
0000 X. Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000, Ext. 15
Fax: (000) 000-0000
With a copy to: Xxxxxxx Xxxxxx, Esq.
Kahala Corp.
0000 X. Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000, Ext. 18
Fax: (000) 000-0000
If to Lender: [...***...]
With a copy to: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxxx & Xxxxxxx,
A Law Corporation
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
If such notice is served personally, such notice will be deemed to be given at
the time of such personal service. If notice is served by mail, such notice will
be deemed to be given two days after the deposit of same in any United States
mail post office box. If such notice is served by overnight courier, such notice
will be deemed to be given on the next business day following the acceptance of
such notice for delivery by such other overnight courier. If such notice is
served by telecopier, such notice will be deemed to be given at the time such
notice is sent, provided that an additional copy of such notice is sent the same
day by another acceptable means of giving notice under this Paragraph 10.1. Any
person entitled to receive notice under this agreement may change the address or
telecopier number to which such notice may be sent, by giving notice thereof
pursuant to this Paragraph 10.1.
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10.2 ATTORNEYS' FEES. Should any legal action be brought for the
enforcement of this Agreement or any term hereof, or due to any alleged dispute,
breach, default or misrepresentation in connection with any provisions herein
contained, the prevailing party shall be entitled to its reasonable attorneys'
fees and costs and other costs incurred in any such action or proceeding and
including any such action to collect any award or judgment, including
representation in bankruptcy court, which results in an arbitration of the
matters herein, in addition to such other relief as may be granted by the courts
or arbitration proceedings.
10.3 APPLICABLE LAW. The existence, validity, construction and
operational effect of this Agreement and all matters pertaining hereto shall be
determined in accordance with the laws of the State of Arizona.
10.4 FURTHER ASSURANCES. Each of the parties agrees that it will,
without further consideration, execute, acknowledge and deliver such other
documents and take such other actions as may be reasonably requested by the
other party in order to consummate the purposes and subject matter hereof,
including Ranch providing security to Lender for the Loan.
10.5 ASSIGNMENT. Neither party may assign its rights or delegate its
obligations under this Agreement without the prior written consent of the other
party, which consent shall not be unreasonably withheld.
10.6 VALIDITY. Any provision of this Agreement which may be prohibited
by law or otherwise held invalid shall be ineffective only to the extent of such
prohibition or invalidity and shall not invalidate or otherwise render
ineffective the remaining provisions of this Agreement.
10.7 ENTIRE AGREEMENT. All understandings and agreements heretofore
made by and between the parties hereto, whether in writing or oral, with regard
to the subject matter hereof are merged into this Agreement which alone fully
and completely expresses the parties' agreement. This Agreement may be amended
only by a writing dated subsequent to the date hereof, signed by all of the
parties hereto.
10.8 NO WAIVER. The waiver by one party of the performance of any
covenant, condition or promise shall not invalidate this Agreement nor shall it
be considered a waiver by such party of any other covenant, condition or promise
hereunder. The waiver by any party of the time for performing any act shall not
constitute a waiver of the time for performing any other act or an identical act
required to be performed at a later time. The exercise of any remedy shall not
exclude the exercise of other consistent remedies.
10.9 HEADINGS. The paragraph headings of the various provisions hereof
are intended solely for convenience of reference and shall not in any manner
amplify, limit or modify, or otherwise be used in the interpretation of, any of
said provisions.
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10.10 NEUTRAL INTERPRETATION. In any action to construe the terms of
this Agreement, this Agreement shall be considered the product of negotiation by
and among the parties hereto. No clause or provision shall be interpreted more
strongly in favor of one party or the other, based upon the source of the
draftsmanship, but shall be interpreted in a neutral manner.
10.11 COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. Delivery of a signed counterpart
by telephone facsimile transmission shall be effective as delivery of a manually
signed counterpart of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"LENDER":
[...***...]
"RANCH":
RANCH *1 ACQUISITION, L.L.C.,
an Arizona limited liability company
By: Kahala Corp.,
a Florida corporation
Its: Member
By: /s/ Xxxxx Xxxxxxx
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Its: VP-CFO
"KAHALA":
KAHALA CORP.,
a Florida corporation
By: /s/ Xxxxx Xxxxxxx
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Its: VP-CFO
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*** CONFIDENTIAL TREATMENT REQUESTED
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