BUSINESS LOAN AGREEMENT
Exhibit 10.3
| Principal | Loan Date | Maturity | Loan No | Call / Coll | Account | Officer | Initials | |||||||
| $5,000,000.00 | 07-31-2010 | 07-31-2011 | 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. |
||||||||||||||
Borrower:
|
Rocky Mountain Chocolate Factory, Inc. | Lender: | Xxxxx Fargo Bank, National Association | |||
| 000 Xxxxxx Xxxxx | Xxxxxxx Xxxx | |||||
| Xxxxxxx.XX 81303 | 000 Xxxx Xxxxxxx Xxxxx | |||||
| Durango, CO 81301 |
THIS
BUSINESS LOAN AGREEMENT dated July 31, 2010, is made and executed between Rocky Mountain
Chocolate Factory, Inc. (“Borrower”) and Xxxxx Fargo Bank, National Association (“Lender”) on the
following terms and conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans or other financial accommodations, including
those which may be described on any exhibit or schedule attached to this Agreement. Xxxxxxxx
understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying
upon Borrower’s representations, warranties, and agreements as set forth in this Agreement; (B)
the granting, renewing, or extending of any Loan by Xxxxxx at all times shall be subject to
Lender’s sole judgment and discretion; and (C) all such Loans shall be and remain subject to the
terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of July 31, 2010, and shall continue in full force and
effect until such time as all of Borrower’s Loans in favor of Lender have been paid in full,
including principal, interest, costs, expenses, attorneys’ fees, and other fees and charges, or
until such time as the parties may agree in writing to terminate this Agreement.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender’s obligation to make the initial Advance and each
subsequent Advance under this Agreement shall be subject to the fulfillment to Lender’s
satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the
Note; (2) Security Agreements granting to Lender security interests in the Collateral; (3)
financing statements and all other documents perfecting Lender’s Security Interests; (4)
evidence of insurance as required below; (5) together with all such Related Documents as Lender
may require for the Loan; all in form and substance satisfactory to Lender and Lender’s
counsel.
Borrower’s Authorization. Borrower shall have provided in form and substance satisfactory to
Lender properly certified resolutions, duly authorizing the execution and delivery of this
Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such
other resolutions, authorizations, documents and instruments as Lender or its counsel, may
require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other
expenses which are then due and payable as specified in this Agreement or any Related Document.
Representations and Warranties. The representations and warranties set forth in this Agreement,
in the Related Documents, and in any document or certificate delivered to Lender under this
Agreement are true and correct.
No Event of Default. There shall not exist at the time of any Advance a condition which would
constitute an Event of Default under this Agreement or under any Related Document.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this
Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal,
extension or modification of any Loan, and at all times any Indebtedness exists:
Organization. Borrower is a corporation for profit which is, and at all times shall be, duly
organized, validly existing, and in good standing under and by virtue of the laws of the State
of Colorado. Borrower is duly authorized to transact business in all other states in which
Borrower is doing business, having obtained all necessary filings, governmental licenses and
approvals for each state in which Borrower is doing business. Xxxxxxxx maintains an office at
000 Xxxxxx Xxxxx, Xxxxxxx, XX 00000. Unless Borrower has designated otherwise in writing, the
principal office is the office at which Borrower keeps its books and records including its
records concerning the Collateral. Borrower will notify Lender prior to any change in the
location of Borrower’s state of organization or any change in Borrower’s name.
Assumed Business Names. Xxxxxxxx has filed or recorded all documents or filings required by law
relating to all assumed business names used by Xxxxxxxx. Excluding the name of Xxxxxxxx, the
following is a complete list of all assumed business names under which Borrower does business:
None.
Authorization. Borrower’s execution, delivery, and performance of this Agreement and all the
Related Documents have been duly authorized by all necessary action by Borrower and do not
conflict with, result in a violation of, or constitute a default under (1) any provision of (a)
Borrower’s articles of incorporation or organization, or bylaws, or (b) any agreement or other
instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or
order applicable to Borrower or to Borrower’s properties.
Properties. Except as contemplated by this Agreement or as previously disclosed in Xxxxxxxx’s
financial statements or in writing to Lender and as accepted by Xxxxxx, and except for property
tax liens for taxes not presently due and payable, Borrower owns and has good title to all of
Borrower’s properties free and clear of all liens and security interests, and has not executed
any security documents or financing statements relating to such properties. All of Xxxxxxxx’s
properties are titled in Borrower’s legal name, and Xxxxxxxx has not used or filed a financing
statement under any other name for at least the last five (5) years.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Xxxxxx that, so long as this Agreement
remains in effect. Borrower will:
Notices of Claims and Litigation. Promptly inform Xxxxxx in writing of (1) all material adverse
changes in Borrower’s financial condition, and (2) all existing and all threatened litigation,
claims, investigations, administrative proceedings or similar actions affecting Borrower or any
Guarantor which could materially affect the financial condition of Borrower or the financial
condition of any Guarantor.
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Financial Records. Maintain its books and records in accordance with accounting principles
acceptable to Xxxxxx, applied on a consistent basis, and permit Lender to examine and audit
Xxxxxxxx’s books and records at all reasonable times.
Financial Statements. Furnish Lender with such financial statements and other related
information at such frequencies and in such detail as Lender may reasonably request.
Loan Proceeds. Use all Loan proceeds solely for Xxxxxxxx’s business operations, unless
specifically consented to the contrary by Xxxxxx in writing.
Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations,
including without limitation all assessments, taxes, governmental charges, levies and liens,
of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior
to the date on which penalties would attach, and all lawful claims that, if unpaid, might
become a lien or charge upon any of Borrower’s properties, income, or profits. Provided
however, Xxxxxxxx will not be required to pay and discharge any such assessment, tax, charge,
xxxx, xxxx or claim so long as (1) the legality of the same shall be contested in good faith
by appropriate proceedings, and (2) Borrower shall have established on Borrower’s books
adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim
in accordance with GAAP.
Performance. Perform and comply, in a timely manner, with all terms, conditions, and
provisions set forth in this Agreement, in the Related Documents, and in all other instruments
and agreements between Borrower and Lender. Borrower shall notify Xxxxxx immediately in
writing of any default in connection with any agreement.
Operations. Maintain executive and management personnel with substantially the same
qualifications and experience as the present executive and management personnel; provide
written notice to Lender of any change in executive and management personnel; conduct its
business affairs in a reasonable and prudent manner.
Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations,
now or hereafter in effect, of all governmental authorities applicable to the conduct of
Borrower’s properties, businesses and operations, and to the use or occupancy of the
Collateral, including without limitation, the Americans With Disabilities Act. Borrower may
contest in good faith any such law, ordinance, or regulation and withhold compliance during
any proceeding, including appropriate appeals, so long as Borrower has notified Lender in
writing prior to doing so and so long as, in Xxxxxx’s sole opinion, Xxxxxx’s interests in the
Collateral are not jeopardized. Lender may require Borrower to post adequate security or a
surety bond, reasonably satisfactory to Lender, to protect Xxxxxx’s interest.
Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all
Collateral for the Loan or Loans and Xxxxxxxx’s other properties and to examine or audit
Xxxxxxxx’s books, accounts, and records and to make copies and memoranda of Xxxxxxxx’s books,
accounts, and records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer software programs for
the generation of such records) in the possession of a third party, Borrower, upon request of
Xxxxxx, shall notify such party to permit Lender free access to such records at all reasonable
times and to provide Lender with copies of any records it may request, all at Borrower’s
expense.
XXXXXX’S EXPENDITURES. If any action or proceeding is commenced that would materially affect
Lender’s interest in the Collateral or if Borrower fails to comply with any provision of this
Agreement or any Related Documents, including but not limited to Borrower’s failure to
discharge or pay when due any amounts Borrower is required to discharge or pay under this
Agreement or any Related Documents, Lender on Borrower’s behalf may (but shall not be
obligated to) take any action that Lender deems appropriate on any Collateral and paying all
costs for insuring, maintaining and preserving any 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 Xxxxxxxx. 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.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether
under this Agreement or under any other agreement, Lender shall have no obligation to make
Loan advances or to disburse Loan proceeds if: (A) Borrower or any guarantor is in default
under the terms of this Agreement or any other agreement that Borrower or any guarantor has
with Lender; (B) Borrower or any guarantor dies, becomes incompetent or becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there
occurs a material adverse change in Borrower’s financial condition, in the financial condition
of any guarantor, or in the value of any collateral securing any Loan; or (D) any guarantor
seeks, claims or otherwise attempts to limit, modify or revoke such guarantor’s guaranty of
the Loan or any other loan with Lender; or (E) Lender in good xxxxx xxxxx itself insecure,
even though no Event of Default shall have occurred.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff
in all Borrower’s accounts with Lender (whether checking, savings, or some other account).
This includes all accounts Borrower holds jointly with someone else and all accounts Borrower
may open in the future. However, this does not include any IRA or Xxxxx accounts, or any trust
accounts for which setoff would be prohibited by law. Xxxxxxxx authorizes Xxxxxx, 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 Xxxxxx’s option, to administratively freeze all
such accounts to allow Lender to protect Xxxxxx’s charge and setoff rights provided in this
paragraph.
DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:
Payment Default. Xxxxxxxx fails to make any payment when due under the Loan.
Other Default. Borrower fails to comply with any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents.
Default in Favor of Third Parties. Borrower 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 Borrower’s property or Borrower’s ability
to repay the Loans or perform Borrower’s obligations under this Agreement or any related
document.
False Statements. Any representation or statement made by Borrower to Lender is false in any
material respect.
Insolvency. The dissolution or termination of Xxxxxxxx’s existence as a going business, the
insolvency of Xxxxxxxx, the appointment of a receiver for any part of Xxxxxxxx’s property, any
assignment for the benefit of creditors, any type of creditor workout, or the commencement of
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any proceeding under any bankruptcy or insolvency laws by or against Xxxxxxxx.
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 Borrower or by any governmental agency against any collateral securing the Loan.
Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor
of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or
disputes the validity of, or liability under, any Guaranty of the Indebtedness.
Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the
common stock of Borrower.
Insecurity. Lender in good faith believes itself insecure.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise
provided in this Agreement or the Related Documents, all commitments and obligations of Lender
under this Agreement immediately will terminate (including any obligation to make further Loan
Advances or disbursements), and, at Xxxxxx’s option, all Indebtedness immediately will become due
and payable, all without notice of any kind to Borrower, except that in the case of an Event of
Default of the type described in the “Insolvency” subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and remedies provided in
the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by
applicable law, all of Lender’s rights and remedies shall be cumulative and may be exercised
singularly or concurrently. Election by Xxxxxx 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 Borrower or of any Grantor shall not affect Xxxxxx’s right to declare a default and to exercise
its rights and remedies.
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.
SECURITY INTEREST AND RIGHT OF SETOFF. In addition to all liens upon and rights of setoff arising
by law, Borrower pledges and grants to Lender as security for Borrower’s indebtedness and
obligations under the Note (excluding any consumer obligations subject to the Federal Truth In
Lending Act) a security interest and lien upon all monies, securities, securities accounts,
brokerage accounts, deposit accounts and other property of Borrower now or hereafter in the
possession of or on deposit with Lender or any Xxxxx Fargo Affiliate, whether held in a general or
special account or for safekeeping or otherwise, excluding however all IRA and Xxxxx accounts. No
security interest, lien or right of setoff will be deemed to have been waived by any act or
conduct on the part of Lender, or by any neglect to exercise such right, or by any delay in so
doing, and every right of setoff, lien and security interest will continue in full force and
effect until specifically waived or released by Xxxxxx in writing. INSURANCE. Borrower shall
assure that insurance is maintained pursuant to any insurance requirements set forth in the
Agreement To Provide Insurance and /or other Related Documents, if applicable.
A. 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.
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, 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), (ii) 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
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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 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. The resolution of any Dispute shall be determined by a
separate arbitration proceeding and such Dispute shall not be consolidated with other disputes or
included in any class proceeding. 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 shallbe 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 main fully valid and enforceable. If any such Dispute is not
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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).LOAN AGREEMENT PROVISION. The following covenants apply to the loan evidenced by the Note
and to all other loans or other credit accommodations from Lender to Borrower now existing or
subsequently arising under any
future confirmation letter, agreement or promissory note, excluding any loans or financial
accommodations which are not serviced by the Xxxxx Fargo Business Banking Group, or its successors
(“Excluded Loans”). These covenants supersede and replace any prior financial reporting and
condition covenants and shall survive the payoff of the Note, but shall not affect any Excluded
Loans or covenants which by their nature relate only to a specific credit transaction.
COVENANTS FOR. Rocky Mountain Chocolate Factory, Inc..
FINANCIAL CONDITION. Borrower shall maintain its financial condition as follows using generally
accepted accounting principles consistently applied and used consistently with prior practices
(except to the extent modified by the definitions herein):
Definitions:
“Cash Flow” means the sum of net income after taxes plus depreciation expense, amortization
expense, and interest expense less the sum of dividends and distributions.
“Current Maturities of Long Term Debt” means that portion of the Borrower’s long term debt and
capital leases maturing or scheduled to be paid in the prior period.
“Current Liabilities” means the aggregate amount of Borrower’s items properly shown as current
liabilities on its balance sheet less any portion of such current liabilities that constitute
Subordinated Debt.
“EBITDA” means net income before tax plus interest expense (net of capitalized interest expense),
depreciation expense and amortization expense.
“Net Worth” means total owners equity.
“Subordinated Debt” means debt that is expressly subordinated to Lender in a writing acceptable to
Xxxxxx.
“Tangible Net Worth” means Net Worth less any intangible assets.
“Total Liabilities” means the aggregate amount of Borrower’s items properly shown as liabilities
on its balance sheet.
Current Ratio as of the end of each month not less than 1.5000 to 1.0, with “Current Ratio”
defined as current assets divided by Current Liabilities.
Working Capital as of the end of each month not less than $3,750,000.00, with “Working Capital”
defined as current assets minus Current Liabilities.
Tangible Net Worth as of the end of each month not less than $9,000,000.00.
Total Liabilities divided by Tangible Net Worth as of the end of each quarter not greater than
1.6000 to 1.0.
Debt Coverage Ratio on a rolling four-quarter basis not less than 1.2500 to 1.0, with “Debt
Coverage Ratio” defined as the ratio of Cash Flow to the sum of Current Maturities of Long Term
Debt plus interest expense.
INTERIM FINANCIAL STATEMENTS. Borrower shall provide to Lender interim financial statements not
later than 45 days after and as of the end of each month, prepared by Borrower to include a
balance sheet as of the end of each such period, and an income statement and a statement of
changes to owner’s equity, from the beginning of the then fiscal year to the end of such period.
If Xxxxxxxx has subsidiaries, interim financial statements shall be provided on a consolidated and
consolidating basis. Such financial statements shall be sighed and dated by Xxxxxxxx, and by any
other party preparing such financial statements or otherwise authenticated to Lenders
satisfaction.
LINE REST REQUIREMENT. Borrower shall maintain a zero balance on the line of credit governed by
this Agreement for a minimum of 30 consecutive days during the first twelve months of the line of
credit, and during each successive twelve-month period.
ACCOUNTS RECEIVABLES ADVANCE RATES. Limitation on Advances. Amounts outstanding under any line of
credit governed by this Agreement, to a maximum of the principal remaining available, shall not
exceed 75% of Borrowers Eligible Accounts Receivable as determined by Lender (“Borrowing Base”).
All of the foregoing shall be determined by Xxxxxx upon receipt and review of all collateral
reports and borrowing base certificates required hereunder and such other documents and collateral
information as Lender may from time to time require. In the event for any reason Lender
permits the amount of any line of credit to exceed the applicable percentage of the Borrowing
Base, it shall not constitute a modification or waiver of the terms of this Agreement or Lenders
rights and remedies. If at any time the amount outstanding exceeds the applicable percentage of
the Borrowing Base, Lender in its sole discretion may require Borrower to immediately make a
principal reduction to the balance of the line of credit sufficient to restore compliance with the
Borrowing Base limitation stated herein.
As used herein, “eligible accounts receivable” shall consist solely of trade accounts created in
the ordinary course of Xxxxxxxx’s business, upon which Xxxxxxxx’s right to receive payment is
absolute and not contingent upon the fulfillment of any condition whatsoever, and in which Xxxxxx
has a perfected security interest of first priority, and shall not include:
any account which represents an obligation of an account debtor located in a foreign country,
except to the extent any such account, in Xxxxxx’s determination, is supported by a letter of
credit or insured under a policy of foreign credit insurance, in each case in form, substance and
issued by a party acceptable to Lender;
any account which represents an obligation of any account debtor when ten percent (10%) or more of
Borrower’s accounts from such account debtor have not been fully paid within 90 days of invoice
date or within three times the length of borrower’s normal selling terms, whichever is less,
excluding accounts with extended payment terms acceptable to Lender which are not more than 30
days past due;
any account deemed ineligible by Xxxxxx when Lender, in its sole discretion, deems the
creditworthiness or financial condition of the account debtor, or the industry in which the
account debtor is engaged, to be unsatisfactory.
| Loan No: 7657418442-29 | BUSINESS LOAN AGREEMENT | Page 6 | ||
| (Continued) | ||||
ACCOUNTS RECEIVABLE AND OTHER REPORTS. Borrower shall provide the following reports to Lender, all
in a form satisfactory to Lender:
not later than 45 days following, and as of the end of each month, a Borrowing Base
certificate.
NEGATIVE COVENANTS. Borrower further covenants that so long as Xxxxxx remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated
or un-liquidated) of Borrower to Lender under any of the Loan Documents remain outstanding, and
until payment in full of all obligations of Borrower subject hereto, Borrower will not without
Lender’s prior written consent:
CAPITAL EXPENDITURES. Make any additional investment in fixed assets in any fiscal year in
excess of an aggregate of $1,750,000.00.
DIVIDENDS, DISTRIBUTIONS (CORPORATION). Declare or pay any dividends or distributions, or redeem,
retire, repurchase or otherwise acquire any shares of any class of Borrower’s stock now hereafter
outstanding, except that borrower may do the following: (1) Borrower may declare and pay dividends
and distributions to its shareholders in a total amount not to exceed $4,000,000.00 in the
aggregate in any fiscal year, either in cash, stock or any other property, and in addition, (2) if
Borrower is an S corporation, Borrower may declare and pay cash dividends or distributions to its
shareholders in any fiscal year in a total amount not to exceed the minimum amount required for
each such shareholder to cover the federal and state income tax liability of such shareholder for
the immediately preceding fiscal year arising as a direct result of Xxxxxxxx’s reported income for
said fiscal year, and shall provide to Lender, upon request, any documentation required by Lender
to substantiate the appropriateness of amounts paid or to be paid.
OTHER. Fiscal Business Plan
Quarterly 10Q Report.
Annual 10 K Report.
No outside management fee.
No change in corporate headquarters, management or management ownership without 10 day notice.
Notification to bank of franchisee uncured defaults, litigation against company or intent to
acquire additional factory facilities and or other business operations.
Borrower to give bank opportunity to consider all new borrowed funds requests.
ADDITIONAL EVENTS OF DEFAULT. In addition to the Events of Default described herein, the following
shall be an Event of Default if applicable: (i) Borrower or Guarantor fails to comply with any
terms or conditions of any agreement with Lender or any Xxxxx Fargo Affiliate; or (ii) Borrower or
Guarantor revoke or dispute the validity of any of its liabilities or obligations under the
Agreement, or any Related Documents or any other agreement with Lender or any Xxxxx Fargo
Affiliate. For purposes of this provision Xxxxx Fargo Affiliate shall mean Xxxxx Fargo & any other
agreement with Lender or any Xxxxx Fargo Affiliate. For purposes of this provision Xxxxx Fargo
Affiliate shall mean Xxxxx Fargo & Company and any present or future subsidiary of Xxxxx Fargo &
Company.
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. Accounting words and terms not otherwise
defined inthis Agreement shall have the meanings assigned to them in accordance with generally
accepted accounting principles as in effect on the date of this Agreement:
Advance. The word “Advance” means a disbursement of Loan funds made, or to be made, to
Borrower or on Borrower’s behalf on a line of credit or multiple advance basis under the terms
and conditions of this Agreement.
Agreement. The word “Agreement” means this Business Loan Agreement, as this Business Loan
Agreement may be amended or modified from time to time, together with all exhibits and
schedules attached to this Business Loan 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 property and assets granted as collateral security
for a Loan, whether real or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security interest,
mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel
mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust,
conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
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.
GAAP. The word “GAAP” means generally accepted accounting principles.
Grantor. The word “Grantor” means each and all of the persons or entities granting a Security
Interest in any Collateral for the Loan, including without limitation all Borrowers granting
such a Security Interest.
Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party of any or
all of the Loan.
Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without
limitation a guaranty of all or part of the Note.
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 Borrower is responsible under this Agreement or under any of the
Related Documents.
Lender. The word “Lender” means Xxxxx Fargo Bank, National Association, its successors and
assigns.
| Loan No: 7657418442-29 | BUSINESS LOAN AGREEMENT | Page 7 | ||
| (Continued) | ||||
Loan. The word “Loan” means any and all loans and financial accommodations from Lender to
Borrower whether now or hereafter existing, and however evidenced, including without
limitation those loans and financial accommodations described herein or described on any
exhibit or schedule attached to this Agreement from time to time.
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, refinancing of, consolidations of, and substitutions for the
note or credit 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 Loan.
Security Agreement. The words “Security Agreement” mean and include without limitation any
agreements, promises, covenants, arrangements, understandings or other agreements, whether
created by law, contract, or otherwise, evidencing, governing, representing, or creating a
Security Interest.
Security Interest. The words “Security Interest” mean, without limitation, any and all types
of collateral security, present and future, whether in the form of a lien, charge,
encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel
mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust,
conditional sale, trust receipt, lien or title retention contract, lease or consignment
intended as a security device, or any other security or lien interest whatsoever whether
created by law, contract, or otherwise.
XXXXXXXX ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND XXXXXXXX
AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED JULY 31, 2010.
BORROWER:
| ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. |
||||
| By: | /s/ Xxxxx Xxxxxxxx | |||
| Xxxxx Xxxxxxxx, CFO/COO of Rocky Mountain | ||||
| Chocolate Factory, Inc. | ||||
| LENDER: XXXXX FARGO BANK, NATIONAL ASSOCIATION |
||||
| By: | /s/ Xxxx Xxxxx | |||
| Authorized Signer | ||||
ADDENDUM TO BUSINESS LOAN AGREEMENT
THIS ADDENDUM is attached to and made a part of that certain Business Loan Agreement (the
“Agreement”) dated 7/31/10 , executed by Rocky Mountain Chocolate Factory, Inc. (“Borrower”) in
favor of Xxxxx Fargo Bank, National Association (“Bank”), executed in connection with that
certain Note in the principal amount of $5,000,000.00 . This Addendum may be attached to and
shall be considered a part of the Loan Agreement, and shall supplement the Loan Agreement.
Capitalized terms not defined herein shall have the meanings defined for them in the Agreements.
The following provisions are hereby amended in the Agreement:
1. Loan Proceeds on Page 2 of the Agreement is amended to now read:
“Loan Proceeds. Use all Loan proceeds solely for Xxxxxxxx’s business operations to
include stock repurchase, unless specifically consented to the contrary by Xxxxxx in
writing.”
2. The third sentence under RIGHT OF SETOFF on Page 2 of the Agreement is
amended to now read:
“However, this does not include any IRA or Xxxxx accounts, 401(k)’s, or any trust accounts
for which setoff would be prohibited by law.”
3. ADDITIONAL SECURITY on Page 3 of the Agreement should also exclude 401(k)’s.
IN WITNESS WHEREOF, this Xxxxxxxx has been executed this the 31day of July, 2010, to be effective
as of the same date as the Agreement.
| Xxxxx Fargo Bank, National Association |
||||
| By: | /s/ Xxxx Xxxxx | |||
| Xxxx Xxxxx | ||||
| Sr. Business Relationship Manager | ||||
| Rocky Mountain Chocolate Factory, Inc. |
||||
| By: | /s/ Xxxxx Xxxxxxxx | |||
| Xxxxx Xxxxxxxx | ||||
| CFO/COO | ||||
