COMMERCIAL SECURITY AGREEMENT
Exhibit 10.2
| Principal | Loan Date | Maturity | Loan No | Call / Coll | Account | Officer | Initials | |||||||
| $5,000,000.00 | 07-31-2010 | 07-28-2011 | 7657418442-26 | 10070010842 | K0096 | |||||||||
| References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations. |
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Grantor:
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Rocky Mountain Chocolate Factory, Inc. 000 Xxxxxx Xxxxx Xxxxxxx, XX 00000 |
Lender: | Xxxxx Fargo Bank, National Association Durango Main 000 Xxxx Xxxxxxx Xxxxx Xxxxxxx, XX 00000 |
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THIS COMMERCIAL SECURITY AGREEMENT dated July 31, 2010, is made and executed between Rocky
Mountain Chocolate Factory, Inc. (“Grantor”) and Xxxxx Fargo Bank, National Association
(“Lender”).
GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender a security
interest in the Collateral to secure the Indebtedness and agrees that Lender shall have the rights
stated in this Agreement with respect to the Collateral, in addition to all other rights which
Lender may have by law.
COLLATERAL DESCRIPTION. The word “Collateral” as used in this Agreement means the following
described property, whether now owned or hereafter acquired, whether now existing or hereafter
arising, and wherever located, in which Grantor is giving to Lender a security interest for the
payment of the Indebtedness and performance of all other obligations under the Note and this
Agreement:
All Inventory, Chattel Paper, Accounts and General Intangibles
In addition, the word “Collateral” also includes all the following, whether now owned or hereafter
acquired, whether now existing or hereafter arising, and wherever located:
(A) All accessions, attachments, accessories, tools, parts, supplies, replacements of and
additions to any of the collateral described herein, whether added now or later.
(B) All products and produce of any of the property described in this Collateral section.
(C) All accounts, general intangibles, instruments, rents, monies, payments, and all other
rights, arising out of a sale, lease, consignment or other disposition of any of the property
described in this Collateral section.
(D) All proceeds (including insurance proceeds) from the sale, destruction, loss, or other
disposition of any of the property described in this Collateral section, and sums due from a
third party who has damaged or destroyed the Collateral or from that party’s insurer, whether
due to judgment, settlement or other process.
(E) All records and data relating to any of the property described in this Collateral
section, whether in the form of a writing, photograph, microfilm, microfiche, or electronic
media, together with all of Grantor’s right, title, and interest in and to all computer
software required to utilize, create, maintain, and process any such records or data on
electronic media.
CROSS-COLLATERALIZATION. In addition to the Note, this Agreement secures all obligations, debts
and liabilities, plus interest thereon, of Grantor to Lender, or any one or more of them, as well
as all claims by Lender against Grantor or any one or more of them, whether now existing or
hereafter arising, whether related or unrelated to the purpose of the Note, whether voluntary or
otherwise, whether due or not due, direct or indirect, determined or undetermined, absolute or
contingent, liquidated or unliquidated, whether Grantor may be liable individually or jointly with
others, whether obligated as guarantor, surety, accommodation party or otherwise, and whether
recovery upon such amounts may be or hereafter may become barred by any statute of limitations,
and whether the obligation to repay such amounts may be or hereafter may become otherwise
unenforceable.
FUTURE ADVANCES. In addition to the Note, this Agreement secures all future advances made by
Lender to Grantor regardless of whether the advances are made a) pursuant to a commitment or b)
for the same purposes.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in
all Grantor’s accounts with Lender (whether checking, savings, or some other account). This
includes all accounts Grantor holds jointly with someone else and all accounts Grantor may open in
the future. However, this does not include any XXX or Xxxxx accounts, or any trust accounts for
which setoff would be prohibited by law. Grantor authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such
accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to
protect Lender’s charge and setoff rights provided in this paragraph.
GRANTOR’S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With respect to the
Collateral, Grantor represents and promises to Lender that:
Perfection of Security Interest. Grantor agrees to take whatever actions are requested by
Lender to perfect and continue Lender’s security interest in the Collateral. Upon request of
Lender, Grantor will deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Grantor will note Lender’s interest upon any and all chattel
paper and instruments if not delivered to Lender for possession by Lender. This is a
continuing Security Agreement and will continue in effect even though all or any part of the
Indebtedness is paid in full and even though for a period of time Grantor may not be indebted
to Lender.
Notices to Lender. Grantor will promptly notify Lender in writing at Lender’s address shown
above (or such other addresses as Lender may designate from time to time) prior to any (1)
change in Grantor’s name; (2) change in Grantor’s assumed business name(s); (3) change in the
management of the Corporation Grantor; (4) change in the authorized signer(s); (5) change in
Grantor’s principal office address; (6) change in Grantor’s state of organization; (7)
conversion of Grantor to a new or different type of business entity; or (8) change in any
other aspect of Grantor that directly or indirectly relates to any agreements between Grantor
and Lender. No change in Grantor’s name or state of organization will take effect until after
Lender has received notice.
No
Violation. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a
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party, and its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of accounts, chattel
paper, or general intangibles, as defined by the Uniform Commercial Code, the Collateral is
enforceable in accordance with its terms, is genuine, and fully complies with all applicable
laws and regulations concerning form, content and manner of preparation and execution, and
all persons appearing to be obligated on the Collateral have authority and capacity to
contract and are in fact obligated as they appear to be on the Collateral. At the time any
account becomes subject to a security interest in favor of Lender, the account shall be a
good and valid account representing an undisputed, bona fide indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or previously shipped
or delivered pursuant to a contract of sale, or for services previously performed by Grantor
with or for the account debtor. So long as this Agreement remains in effect, Grantor shall
not, without Lender’s prior written consent, compromise, settle, adjust, or extend payment
under or with regard to any such Accounts. There shall be no setoffs or counterclaims against
any of the Collateral, and no agreement shall have been made under which any deductions or
discounts may be claimed concerning the Collateral except those disclosed to Lender in
writing.
Location of the Collateral. Except in the ordinary course of Grantor’s business, Grantor
agrees to keep the Collateral (or to the extent the Collateral consists of intangible
property such as accounts or general intangibles, the records concerning the Collateral) at
Grantor’s address shown above or at such other locations as are acceptable to Lender. Upon
Lender’s request, Grantor will deliver to Lender in form satisfactory to Lender a schedule of
real properties and Collateral locations relating to Grantor’s operations, including without
limitation the following: (1) all real property Grantor owns or is purchasing; (2) all real
property Grantor is renting or leasing; (3) all storage facilities Grantor owns, rents,
leases, or uses; and (4) all other properties where Collateral is or may be located.
Removal of the Collateral. Except in the ordinary course of Grantor’s business, including the
sales of inventory, Grantor shall not remove the Collateral from its existing location
without Lender’s prior written consent. To the extent that the Collateral consists of
vehicles, or other titled property, Grantor shall not take or permit any action which would
require application for certificates of title for the vehicles outside the State of Colorado,
without Lender’s prior written consent. Grantor shall, whenever requested, advise Lender of
the exact location of the Collateral.
Transactions Involving Collateral. Except for inventory sold or accounts collected in the
ordinary course of Grantor’s business, or as otherwise provided for in this Agreement,
Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell inventory, but only in
the ordinary course of its business and only to buyers who qualify as a buyer in the ordinary
course of business. A sale in the ordinary course of Grantor’s business does not include a
transfer in partial or total satisfaction of a debt or any bulk sale. Grantor shall not
pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any lien,
security interest, encumbrance, or charge, other than the security interest provided for in
this Agreement, without the prior written consent of Lender. This includes security interests
even if junior in right to the security interests granted under this Agreement. Unless waived
by Lender, all proceeds from any disposition of the Collateral (for whatever reason) shall be
held in trust for Lender and shall not be commingled with any other funds; provided however,
this requirement shall not constitute consent by Lender to any sale or other disposition.
Upon receipt, Grantor shall immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that Grantor holds good and marketable title
to the Collateral, free and clear of all liens and encumbrances except for the lien of this
Agreement. No financing statement covering any of the Collateral is on file in any public
office other than those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend Lender’s rights in the
Collateral against the claims and demands of all other persons.
Repairs and Maintenance. Grantor agrees to keep and maintain, and to cause others to keep and
maintain, the Collateral in good order, repair and condition at all times while this
Agreement remains in effect. Grantor further agrees to pay when due all claims for work done
on, or services rendered or material furnished in connection with the Collateral so that no
lien or encumbrance may ever attach to or be filed against the Collateral.
Inspection of Collateral. Lender and Lender’s designated representatives and agents shall
have the right at all reasonable times to examine and inspect the Collateral wherever
located.
Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments and liens upon
the Collateral, its use or operation, upon this Agreement, upon any promissory note or notes
evidencing the Indebtedness, or upon any of the other Related Documents. Grantor may withhold
any such payment or may elect to contest any lien if Grantor is in good faith conducting an
appropriate proceeding to contest the obligation to pay and so long as Lender’s interest in
the Collateral is not jeopardized in Lender’s sole opinion. If the Collateral is subjected to
a lien which is not discharged within fifteen (15) days, Grantor shall deposit with Lender
cash, a sufficient corporate surety bond or other security satisfactory to Lender in an
amount adequate to provide for the discharge of the lien plus any interest, costs, attorneys’
fees or other charges that could accrue as a result of foreclosure or sale of the Collateral.
In any contest Grantor shall defend itself and Lender and shall satisfy any final adverse
judgment before enforcement against the Collateral. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the contest proceedings. Grantor
further agrees to furnish Lender with evidence that such taxes, assessments, and governmental
and other charges have been paid in full and in a timely manner. Grantor may withhold any
such payment or may elect to contest any lien if Grantor is in good faith conducting an
appropriate proceeding to contest the obligation to pay and so long as Lender’s interest in
the Collateral is not jeopardized.
Compliance with Governmental Requirements. Grantor shall comply promptly with all laws,
ordinances, rules and regulations of all governmental authorities, now or hereafter in
effect, applicable to the ownership, production, disposition, or use of the Collateral,
including all laws or regulations relating to the undue erosion of highly-erodible land or
relating to the conversion of wetlands for the production of an agricultural product or
commodity. Grantor may contest in good faith any such law, ordinance or regulation and
withhold compliance during any proceeding, including appropriate appeals, so long as Lender’s
interest in the Collateral, in Lender’s opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral never has been, and
never will be so long as this Agreement remains a lien on the Collateral, used in violation
of any Environmental Laws or for the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any Hazardous Substance. The
representations and warranties contained herein are based on Grantor’s due diligence in
investigating the Collateral for Hazardous Substances. Grantor hereby (1) releases and waives
any future claims against Lender for indemnity or contribution in the event Grantor becomes
liable for cleanup or other costs under any Environmental Laws, and (2) agrees to indemnify,
defend, and hold harmless Lender against any and all claims and losses resulting from a
breach of this provision of this Agreement. This obligation to indemnify and defend shall
survive the payment of the Indebtedness and the satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain all risks insurance,
including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages and basis reasonably acceptable to Lender and issued
by a company or companies reasonably acceptable to Lender. Grantor, upon request of Lender,
will deliver to Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be cancelled or
diminished without at least thirty (30) days’ prior written notice to Lender and not
including any disclaimer of
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the insurer’s liability for failure to give such a notice. Each
insurance policy also shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Grantor or any other
person. In connection with all policies covering assets in which Lender holds or is offered a
security interest, Grantor will provide Lender with such loss payable or other endorsements
as Lender may require. If Grantor at any time fails to obtain or maintain any insurance as
required under this Agreement, Lender may (but shall not be obligated to) obtain such
insurance as Lender deems appropriate, including if Lender so choos “single interest
insurance,” which will cover only Lender’s interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of any loss or damage
to the Collateral exceeding $50,000, whether or not such casualty or loss is covered by
insurance. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days
of the casualty. All proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender consents to repair or
replacement of the damaged or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement of the Collateral, Lender
shall retain a sufficient amount of the proceeds to pay all of the Indebtedness, and shall
pay the balance to Grantor. Any proceeds which have not been disbursed within six (6) months
after their receipt and which Grantor has not committed to the repair or restoration of the
Collateral shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender reserves for payment
of insurance premiums, which reserves shall be created by monthly payments from Grantor of a
sum estimated by Lender to be sufficient to produce, at least fifteen (15) days before the
premium due date, amounts at least equal to the insurance premiums to be paid. If fifteen
(15) days before payment is due, the reserve funds are insufficient, Grantor shall upon
demand pay any deficiency to Lender. The reserve funds shall be held by Lender as a general
deposit and shall constitute a non-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by Grantor as they become due. Lender
does not hold the reserve funds in trust for Grantor, and Lender is not the agent of Grantor
for payment of the insurance premiums required to be paid by Grantor. The responsibility for
the payment of premiums shall remain Grantor’s sole responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender reports on each
existing policy of insurance showing such information as Lender may reasonably request
including the following: (1) the name of the insurer; (2) the risks insured; (3) the amount
of the policy; (4) the property insured; (5) the then current value on the basis of which
insurance has been obtained and the manner of determining that value; and (6) the expiration
date of the policy. In addition, Grantor shall upon request by Lender (however not more often
than annually) have an independent appraiser satisfactory to Lender determine, as applicable,
the cash value or replacement cost of the Collateral.
Financing Statements. Grantor authorizes Lender to file a UCC financing statement, or
alternatively, a copy of this Agreement to perfect Lender’s security interest. At Lender’s
request, Grantor additionally agrees to sign all other documents that are necessary to
perfect, protect, and continue Lender’s security interest in the Property. Grantor will pay
all filing fees, title transfer fees, and other fees and costs involved unless prohibited by
law or unless Lender is required by law to pay such fees and costs. Grantor irrevocably
appoints Lender to execute documents necessary to transfer title if there is a default.
Lender may file a copy of this Agreement as a financing statement. If Grantor changes
Grantor’s name or address, or the name or address of any person granting a security interest
under this Agreement changes, Grantor will promptly notify the Lender of such change.
GRANTOR’S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except as otherwise
provided below with respect to accounts, Grantor may have possession of the tangible personal
property and beneficial use of all the Collateral and may use it in any lawful manner not
inconsistent with this Agreement or the Related Documents, provided that Grantor’s right to
possession and beneficial use shall not apply to any Collateral where possession of the Collateral
by Lender is required by law to perfect Lender’s security interest in such Collateral. Until
otherwise notified by Lender, Grantor may collect any of the Collateral consisting of accounts. At
any time and even though no Event of Default exists, Lender may exercise its rights to collect the
accounts and to notify account debtors to make payments directly to Lender for application to the
Indebtedness. If Lender at any time has possession of any Collateral, whether before or after an
Event of Default, Lender shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if Lender takes such action for that purpose as Grantor shall
request or as Lender, in Lender’s sole discretion, shall deem appropriate under the circumstances,
but failure to honor any request by Grantor shall not of itself be deemed to be a failure to
exercise reasonable care. Lender shall not be required to take any steps necessary to preserve any
rights in the Collateral against prior parties, nor to protect, preserve or maintain any security
interest given to secure the Indebtedness.
LENDER’S EXPENDITURES. If any action or proceeding is commenced that would materially affect
Lender’s interest in the Collateral or if Grantor fails to comply with any provision of this
Agreement or any Related Documents, including but not limited to Grantor’s failure to discharge or
pay when due any amounts Grantor is required to discharge or pay under this Agreement or any
Related Documents, Lender on Grantor’s behalf may (but shall not be obligated to) take any action
that Lender deems appropriate, including but not limited to discharging or paying all taxes,
liens, security interests, encumbrances and other claims, at any time levied or placed on the
Collateral and paying all costs for insuring, maintaining and preserving the Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear interest at the rate
charged under the Note from the date incurred or paid by Lender to the date of repayment by
Grantor. All such expenses will become a part of the Indebtedness and, at Lender’s option, will
(A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be
payable with any installment payments to become due during either (1) the term of any applicable
insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment
which will be due and payable at the Note’s maturity. The Agreement also will secure payment of
these amounts. Such right shall be in addition to all other rights and remedies to which Lender
may be entitled upon Default.
DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:
Payment Default. Grantor fails to make any payment when due under the Indebtedness.
Other Defaults. Grantor fails to comply with or to perform any other term, obligation,
covenant or condition contained in this Agreement or in any of the Related Documents or to
comply with or to perform any term, obligation, covenant or condition contained in any other
agreement between Lender and Grantor.
Default in Favor of Third Parties. Grantor defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Grantor’s property or ability to
perform Grantor’s
obligations under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or furnished to Lender by
Grantor or on Grantor’s behalf under this Agreement or the Related Documents is false or
misleading in any material respect, either now or at the time made or furnished or becomes
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false or misleading at any time thereafter.
Defective Collateralization. This Agreement or any of the Related Documents ceases to be in
full force and effect (including failure of any collateral document to create a valid and
perfected security interest or lien) at any time and for any reason.
Insolvency. The dissolution or termination of Grantor’s existence as a going business, the
insolvency of Grantor, the appointment of a receiver for any part of Grantor’s property, any
assignment for the benefit of creditors, any type of creditor workout, or the commencement of
any proceeding under any bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any other method, by
any creditor of Grantor or by any governmental agency against any collateral securing the
Indebtedness. This includes a garnishment of any of Grantor’s accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply if there is a good
faith dispute by Grantor as to the validity or reasonableness of the claim which is the basis
of the creditor or forfeiture proceeding and if Grantor gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the
creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion,
as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor,
endorser, surety, or accommodation party of any of the Indebtedness or guarantor, endorser,
surety, or accommodation party dies or becomes incompetent or revokes or disputes the
validity of, or liability under, any Guaranty of the Indebtedness.
Adverse Change. A material adverse change occurs in Grantor’s financial condition, or Lender
believes the prospect of payment or performance of the Indebtedness is impaired.
Insecurity. Lender in good faith believes itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Agreement, at any time
thereafter, Lender shall have all the rights of a secured party under the Colorado Uniform
Commercial Code. In addition and without limitation, Lender may exercise any one or more of the
following rights and remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness, including any prepayment
penalty which Grantor would be required to pay, immediately due and payable, without notice
of any kind to Grantor.
Assemble Collateral. Lender may require Grantor to deliver to Lender all or any portion of
the Collateral and any and all certificates of title and other documents relating to the
Collateral. Lender may require Grantor to assemble the Collateral and make it available to
Lender at a place to be designated by Lender. Lender also shall have full power to enter upon
the property of Grantor to take possession of and remove the Collateral. If the Collateral
contains other goods not covered by this Agreement at the time of repossession, Grantor
agrees Lender may take such other goods, provided that Lender makes reasonable efforts to
return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell, lease, transfer, or otherwise deal
with the Collateral or proceeds thereof in Lender’s own name or that of Grantor. Lender may
sell the Collateral at public auction or private sale. Unless the Collateral threatens to
decline speedily in value or is of a type customarily sold on a recognized market, Lender
will give Grantor, and other persons as required by law, reasonable notice of the time and
place of any public sale, or the time after which any private sale or any other disposition
of the Collateral is to be made. However, no notice need be provided to any person who, after
Event of Default occurs, enters into and authenticates an agreement waiving that person’s
right to notification of sale. The requirements of reasonable notice shall be met if such
notice is given at least ten (10) days before the time of the sale or disposition. All
expenses relating to the disposition of the Collateral, including without limitation the
expenses of retaking, holding, insuring, preparing for sale and selling the Collateral, shall
become a part of the Indebtedness secured by this Agreement and shall be payable on demand,
with interest at the Note rate from date of expenditure until repaid.
Appoint Receiver. Lender shall have the right to have a receiver appointed to take possession
of all or any part of the Collateral, with the power to protect and preserve the Collateral,
to operate the Collateral preceding foreclosure or sale, and to collect the Rents from the
Collateral and apply the proceeds, over and above the cost of the receivership, against the
Indebtedness. The receiver may serve without bond if permitted by law. Lender’s right to the
appointment of a receiver shall exist whether or not the apparent value of the Collateral
exceeds the Indebtedness by a substantial amount. Employment by Lender shall not disqualify a
person from serving as a receiver. Receiver may be appointed by a court of competent
jurisdiction upon ex parte application and without notice, notice being expressly waived
Collect Revenues, Apply Accounts. Lender, either itself or through a receiver, may collect
the payments, rents, income, and revenues from the Collateral. Lender may at any time in
Lender’s discretion transfer any Collateral into Lender’s own name or that of Lender’s
nominee and receive the payments, rents, income, and revenues therefrom and hold the same as
security for the Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of accounts, general
intangibles, insurance policies, instruments, chattel paper, choses in action, or similar
property, Lender may demand, collect, receipt for, settle, compromise, adjust, xxx for,
foreclose, or realize on the Collateral as Lender may determine, whether or not Indebtedness
or Collateral is then due. For these purposes, Lender may, on behalf of and in the name of
Grantor, receive, open and dispose of mail addressed to Grantor; change any address to which
mail and payments are to be sent; and endorse notes, checks, drafts, money orders, documents
of title, instruments and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account debtors and obligors on any
Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral, Lender may obtain
a judgment against Grantor for any deficiency remaining on the Indebtedness due to Lender
after application of all amounts received from the exercise of the rights provided in this
Agreement. Grantor shall be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies of a secured
creditor under the provisions of the Uniform Commercial Code, as may be amended from time to
time. In addition, Lender shall have and may exercise any or all other rights and remedies it
may have available at law, in equity, or otherwise.
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Election of Remedies. Except as may be prohibited by applicable law, all of Lender’s rights
and remedies, whether evidenced by this Agreement, the Related Documents, or by any other
writing, shall be cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to
make expenditures or to take action to perform an obligation of Grantor under this Agreement,
after Grantor’s failure to perform, shall not affect Lender’s right to declare a default and
exercise its remedies.
FURTHER ASSURANCES. The parties hereto agree to do all things deemed necessary by Lender in order
to fully document the loan evidenced by this Note and any related agreements, and will fully
cooperate concerning the execution and delivery of security agreements, stock powers, instructions
and/or other documents pertaining to any collateral intended to secure the Indebtedness. The
undersigned agree to assist in the cure of any defects in the execution, delivery or substance of
the Note and related agreements, and in the creation and perfection of any liens, security
interests or other collateral rights securing the Note. Borrower further agrees to pay
Lender immediately upon demand the full amount of all charges, costs and expenses (to include fees
paid to third parties) expended or incurred by Lender to monitor Lender’s interest in any real
property pledged as collateral for this Note, including without limitation all costs of appraisals.
CONSENT TO SELL LOAN. The parties hereto agree: (a) Lender may sell or transfer all or part of this
loan to one or more purchasers, whether related or unrelated to Lender; (b) Lender may provide to
any purchaser, or potential purchaser, any information or knowledge Lender may have about the
parties or about any other matter relating to this loan obligation, and the parties waive any
rights to privacy it may have with respect to such matters; (c) the purchaser of a loan will be
considered its absolute owner and will have all the rights granted under the loan documents or
agreements governing the sale of the loan; and (d) the purchaser of a loan may enforce its
interests irrespective of any claims or defenses that the parties may have against Lender.
FACSIMILE AND COUNTERPART. This document may be signed in any number of separate copies, each of
which shall be effective as an original, but all of which taken together shall constitute a single
document. An electronic transmission or other facsimile of this document or any related document
shall be deemed an original and shall be admissible as evidence of the document and the signer’s
execution.
ARBITRATION AGREEMENT. Arbitration — Binding Arbitration. Lender and each party to this agreement,
hereby agree, upon demand by any party, to submit any Dispute to binding arbitration in accordance
with the terms of this Arbitration Program. A “Dispute” shall include any dispute, claim or
controversy of any kind, whether in contract or in tort, legal or equitable, now existing or
hereafter arising, relating in any way to any aspect of this agreement, or any related agreement
incorporating this Arbitration Program (the “Documents”), or any renewal, extension, modification
or refinancing of any indebtedness or obligation relating thereto, including without limitation,
their negotiation, execution, collateralization, administration, repayment, modification,
extension, substitution, formation, inducement, enforcement, default or termination. DISPUTES
SUBMITTED TO ARBITRATION ARE NOT RESOLVED IN COURT BY A JUDGE OR JURY.
A. Governing Rules. Any arbitration proceeding will (i) be governed by the Federal Arbitration Act
(Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any
of the documents between the parties; and (ii) be conducted by the American Arbitration Association
(“AAA”), or such other administrator as the parties shall mutually agree upon, in accordance with
the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least
$1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the
arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex
commercial disputes (the commercial dispute resolution procedures or the optional procedures for
large, complex commercial disputes to be referred to herein, as applicable, as the “Rules”). If
there is any inconsistency between the terms hereof and the Rules, the terms and procedures set
forth herein shall control. Arbitration proceedings hereunder shall be conducted at a location
mutually agreeable to the parties, or if they cannot agree, then at a location selected by the AAA
in the state of the applicable substantive law primarily governing the Note. Any party who fails or
refuses to submit to arbitration following a demand by any other party shall bear all costs and
expenses incurred by such other party in compelling arbitration of any Dispute. Arbitration may be
demanded at any time, and may be compelled by summary proceedings in Court. The institution and
maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall
not constitute a waiver of the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such action for judicial relief.
The arbitrator shall award all costs and expenses of the arbitration proceeding. Nothing contained
herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it
under 12 U.S.C. Section 91 or any similar applicable state law.
B. No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does
not limit the right of any party to (i) foreclose against real or personal property collateral;
(ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or
repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the pendency of any
arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of
any party to submit any Dispute to arbitration or reference hereunder, including those arising from
the exercise of the actions detailed in sections (i), Oil and (iii) of this paragraph.
C. Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in
controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to
the Rules, and who shall not render an award of greater than $5,000,000.00. Any Dispute in which
the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of
three arbitrators; provided however, that all three arbitrators must actively participate in all
hearings and deliberations. Every arbitrator must be a neutral practicing attorney or a retired
member of the state or federal judiciary, in either case with a minimum of ten years experience in
the substantive law applicable to the subject matter of the Dispute. The arbitrator will determine
whether or not an issue is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only
or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are similar to
motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator
shall resolve all Disputes in accordance with the applicable substantive law and may grant any
remedy or relief that a court of such state could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award. The arbitrator shall also have the
power to award recovery of all costs and fees, to impose sanctions and to take such other action as
the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the applicable state rules of civil procedure, or other applicable law. Judgment
upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff,
to submit the controversy or claim to arbitration if any other party contests such action
for judicial relief.
D. Discovery. In any arbitration proceeding discovery will be permitted in accordance with the
Rules. All discovery shall be expressly limited to matters directly relevant to the Dispute being
arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an
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extension of the discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is essential for the
party’s presentation and that no alternative means for obtaining information is available.
E. Class Proceedings and Consolidations. No party shall be entitled to join or consolidate disputes
by or against others who are not parties to this agreement in any arbitration, or to include in any
arbitration any dispute as a representative or member of a class, or to act in any arbitration in
the interest of the general public or in a private attorney general capacity.
F. Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall
take all action required to conclude any arbitration proceeding within 180 days of the filing of
the Dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose
the existence, content or results thereof, except for disclosures of information by a party
required in the ordinary course of its business or by applicable law or regulation. If more than
one agreement for arbitration by or between the parties potentially applies to a Dispute, the
arbitration provision most directly related to the documents between the parties or the subject
matter of the Dispute shall control. This arbitration provision shall survive the repayment of the
Note and the termination, amendment or expiration of any of the documents or any relationship
between the parties.
G. State-Specific Provisions.
If California law governs the Dispute, the following provision is included:
Real Property Collateral; Judicial Reference. Notwithstanding anything herein to the contrary,
no Dispute shall be submitted to arbitration if the Dispute concerns indebtedness secured directly
or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage,
lien or security interest specifically elects in writing to proceed with the arbitration, or (ii)
all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of
the single action rule statute of California, thereby agreeing that all indebtedness and
obligations of the parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any such Dispute is not
submitted to arbitration, the Dispute shall be referred to a referee in accordance with California
Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be
specifically enforceable in accordance with said Section 638. A referee with the qualifications
required herein for arbitrators shall be selected pursuant to the AAA’s selection procedures.
Judgment upon the decision rendered by a referee shall be entered in the court in which such
proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and
645.
Small Claims Court. Any party may require that a Dispute be resolved in Small Claims Court if
the Dispute and related claims are fully within that court’s jurisdiction.
If Idaho law governs the Dispute, the following provision is included:
Real Property Collateral. Notwithstanding anything herein to the contrary, no Dispute shall be
submitted to arbitration if the Dispute concerns indebtedness secured directly or indirectly, in
whole or in part, by any real property unless (i) the holder of the mortgage, lien or security
interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the
arbitration waive any rights or benefits that might accrue to them by virtue of the single action
rule statute of Idaho, thereby agreeing that all indebtedness and obligations of the parties, and
all mortgages, liens and security interests securing such indebtedness and obligations, shall
remain fully valid and enforceable.
If Montana law governs the Dispute, the following provision is included:
Real Property Collateral. Notwithstanding anything herein to the contrary, no Dispute shall be
submitted to arbitration if the Dispute concerns indebtedness secured directly or indirectly, in
whole or in part, by any real property unless (i) the holder of the mortgage, lien or security
interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the
arbitration waive any rights or benefits that might accrue to them by virtue of the single action
rule statute of Montana, thereby agreeing that all indebtedness and obligations of the parties, and
all mortgages, liens and security interests securing such indebtedness and obligations, shall
remain fully valid and enforceable.
If Nevada law governs the Dispute, the following provision is included:
Real Property Collateral. Notwithstanding anything herein to the contrary, no Dispute shall be
submitted to arbitration if the Dispute concerns indebtedness secured directly or indirectly, in
whole or in part, by any real property unless (i) the holder of the mortgage, lien or security
interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the
arbitration waive any rights or benefits that might accrue to them by virtue of the single action
rule statute of Nevada, thereby agreeing that all indebtedness and obligations of the parties, and
all mortgages, liens and security interests securing such indebtedness and obligations, shall
remain fully valid and enforceable.
If South Dakota law governs the Dispute, the following provision is included:
Real Property Collateral. Notwithstanding anything herein to the contrary, no Dispute shall be
submitted to arbitration if the Dispute concerns indebtedness secured directly or indirectly, in
whole or in part, by any real property unless (i) the holder of the mortgage, lien or security
interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the
arbitration waive any rights or benefits that might accrue to them by virtue of the single action
rule statute of South Dakota, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such indebtedness and
obligations, shall remain fully valid and enforceable.
If Utah law governs the Dispute, the following provision is included:
Real Property Collateral; Judicial Reference. Notwithstanding anything herein to the contrary,
no Dispute shall be submitted to arbitration if the Dispute concerns indebtedness secured directly
or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage,
lien or security interest specifically elects in writing to proceed with the arbitration, or (ii)
all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of
the single action rule statute of Utah, thereby agreeing that all indebtedness and obligations of
the parties, and all mortgages, liens and security interests securing such indebtedness and
obligations, shall remain fully valid and enforceable. If any such Dispute is not submitted to
arbitration, the Dispute shall be referred to a master in accordance with Utah Rule of Civil
Procedure 53, and this general reference agreement is intended to be specifically enforceable. A
master with the qualifications required herein for arbitrators shall be selected pursuant to the
AAA’s selection procedures. Judgment upon the decision rendered by a master shall be entered in the
court in which such proceeding was commenced in accordance with Utah Rule of Civil Procedure 53(e).
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes the entire
understanding and agreement of the parties as
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to the matters set forth in this Agreement. No
alteration of or amendment to this Agreement shall be effective unless given in writing and
signed by the party or parties sought to be charged or bound by the alteration or amendment.
Attorneys’ Fees; Expenses. Grantor agrees to pay upon demand all of Lender’s reasonable costs
and expenses, including Lender’s attorneys’ fees and Lender’s legal expenses, incurred in
connection with the enforcement of this Agreement. Lender may hire or pay someone else to
help enforce this Agreement, and Grantor shall pay the reasonable costs and expenses of such
enforcement. Costs and expenses include Lender’s attorneys’ fees and legal expenses whether
or not there is a lawsuit, including attorneys’ fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Grantor also shall pay all
court costs and such additional fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for convenience purposes only and
are not to be used to interpret or define the provisions of this Agreement.
Governing Law. This Agreement will be governed by federal law applicable to Lender and, to
the extent not preempted by federal law, the laws of the State of Colorado without regard to
its conflicts of law provisions. This Agreement has been accepted by Lender in the State of
Colorado.
No Waiver by Lender. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay or omission
on the part of Lender in exercising any right shall operate as a waiver of such right or any
other right. A waiver by Lender of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender’s right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by Lender, nor any course
of dealing between Lender and Grantor, shall constitute a waiver of any of Lender’s rights or
of any of Grantor’s obligations as to any future transactions. Whenever the consent of Lender
is required under this Agreement, the granting of such consent by Lender in any instance
shall not constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the sole discretion of
Lender.
Notices. Any notice required to be given under this Agreement shall be given in writing, and
shall be effective when actually delivered, when actually received by telefacsimile (unless
otherwise required by law), when deposited with a nationally recognized overnight courier,
or, if mailed, when deposited in the United States mail, as first class, certified or
registered mail postage prepaid, directed to the addresses shown near the beginning of this
Agreement. Any party may change its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the purpose of the notice is to change
the party’s address. For notice purposes, Grantor agrees to keep Lender informed at all times
of Grantor’s current address. Unless otherwise provided or required by law, if there is more
than one Grantor, any notice given by Lender to any Grantor is deemed to be notice given to
all Grantors.
Power of Attorney. Grantor hereby appoints Lender as Grantor’s irrevocable attorney-in-fact
for the purpose of executing any documents necessary to perfect, amend, or to continue the
security interest granted in this Agreement or to demand termination of filings of other
secured parties. Lender may at any time, and without further authorization from Grantor, file
a carbon, photographic or other reproduction of any financing statement or of this Agreement
for use as a financing statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender’s security interest in the
Collateral.
Severability. If a court of competent jurisdiction finds any provision of this Agreement to
be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the
offending provision illegal, invalid, or unenforceable as to any other circumstance. If
feasible, the offending provision shall be considered modified so that it becomes legal,
valid and enforceable. If the offending provision cannot be so modified, it shall be
considered deleted from this Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement shall not affect the
legality, validity or enforceability of any other provision of this Agreement.
Successors and Assigns. Subject to any limitations stated in this Agreement on transfer of
Grantor’s interest, this Agreement shall be binding upon and inure to the benefit of the
parties, their successors and assigns. If ownership of the Collateral becomes vested in a
person other than Grantor, Lender, without notice to Grantor, may deal with Grantor’s
successors with reference to this Agreement and the indebtedness by way of forbearance or
extension without releasing Grantor from the obligations of this Agreement or liability under
the Indebtedness.
Survival of Representations and Warranties. All representations, warranties, and agreements
made by Grantor in this Agreement shall survive the execution and delivery of this Agreement,
shall be continuing in nature, and shall remain in full force and effect until such time as
Grantor’s Indebtedness shall be paid in full.
Time is of the Essence. Time is of the essence in the performance of this Agreement.
DEFINITIONS. The following capitalized words and terms shall have the following meanings when used
in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts
shall mean amounts in lawful money of the United States of America. Words and terms used in the
singular shall include the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed
to such terms in the Uniform Commercial Code:
Agreement. The word “Agreement” means this Commercial Security Agreement, as this Commercial
Security Agreement may be amended or modified from time to time, together with all exhibits
and schedules attached to this Commercial Security Agreement from time to time.
Borrower. The word “Borrower” means Rocky Mountain Chocolate Factory, Inc. and includes all
co-signers and co-makers signing the Note and all their successors and assigns.
Collateral. The word “Collateral” means all of Grantor’s right, title and interest in and to
all the Collateral as described in the Collateral Description section of this Agreement.
Default. The word “Default” means the Default set forth in this Agreement in the section
titled “Default”.
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Environmental Laws. The words “Environmental Laws” mean any and all state, federal and local
statutes, regulations and ordinances relating to the protection of human health or the
environment, including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
(“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
(“XXXX”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable
state or federal laws, rules, or regulations adopted pursuant thereto.
Event of Default. The words “Event of Default” mean any of the events of default set forth in
this Agreement in the default section of this Agreement.
Grantor. The word “Grantor” means Rocky Mountain Chocolate Factory, Inc..
Guaranty. The word “Guaranty” means the guaranty from guarantor, endorser, surety, or
accommodation party to Lender, including without limitation a guaranty of all or part of the
Note.
Hazardous Substances. The words “Hazardous Substances” mean materials that, because of their
quantity, concentration or physical, chemical or infectious characteristics, may cause or
pose a present or potential hazard to human health or the environment when improperly used,
treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The
words “Hazardous Substances” are used in their very broadest sense and include without
limitation any and all hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws. The term “Hazardous Substances” also includes, without
limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.
Indebtedness. The word “Indebtedness” means the indebtedness evidenced by the Note or Related
Documents, including all principal and interest together with all other indebtedness and
costs and expenses for which Grantor is responsible under this Agreement or under any of the
Related Documents. Specifically, without limitation, Indebtedness includes the future
advances set forth in the Future Advances provision, together with all interest thereon and
all amounts that may be indirectly secured by the Cross-Collateralization provision of this
Agreement.
Lender. The word “Lender” means Xxxxx Fargo Bank, National Association, its successors and
assigns.
Note. The word “Note” means the Note executed by Rocky Mountain Chocolate Factory, Inc. in
the principal amount of $5,000,000.00 dated July 31, 2010, together with all renewals of,
extensions of, modifications of, refinancings of, consolidations of, and substitutions for
the note or credit agreement.
Property. The word “Property” means all of Grantor’s right, title and interest in and to all
the Property as described in the “Collateral Description” section of this Agreement.
Related Documents. The words “Related Documents” mean all promissory notes, credit
agreements, loan agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments,
agreements and documents, whether now or hereafter existing, executed in connection with the
Indebtedness.
GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT AND AGREES
TO ITS TERMS. THIS AGREEMENT IS DATED JULY 31, 2010.
| GRANTOR: ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. |
||||
| By: | /s/ Xxxxx Xxxxxxxx | |||
| Xxxxx Xxxxxxxx, CFO/COO of Rocky Mountain | ||||
| Chocolate Factory, Inc. | ||||
