SECURED PROMISSORY NOTE
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$500,000 Los Angeles, California
October 9, 1998
FOR VALUE RECEIVED, ORGANIC FOOD PRODUCTS, INC., a California corporation
("Borrower"), promises to pay to the order of FINOVA CAPITAL CORPORATION, a
Delaware corporation ("FINOVA"), at its offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place or places as FINOVA
may from time to time designate in writing, the principal sum of Five Hundred
Thousand Dollars ($500,000), or so much that is borrowed under the Loan
Agreement (as defined herein) as the Term Loan, plus interest in the manner and
upon the terms and conditions set forth below. This Secured Promissory Note
("Note") is made pursuant to that certain Loan and Security Agreement, of even
date herewith, between FINOVA and Borrower (the "Loan Agreement"), the
provisions of which are incorporated herein by this reference. Capitalized terms
herein, unless otherwise noted, shall have the meaning set forth in the Loan
Agreement.
1. Equipment Advances. Borrower may from time to time request advances from
FINOVA (individually an "Advance" and collectively the "Advances") for the
purpose of financing Borrower's acquisition of Eligible Equipment (the "Financed
Equipment") by giving written notice to FINOVA in accordance with the terms
hereof, which notice shall indicate (i) the amount of the Advance requested,
which shall be an integral multiple of Twenty-Five Thousand Dollars ($25,000),
and (ii) the Financed Equipment to be acquired with the Advance proceeds.
"Eligible Equipment" means equipment other than software, leasehold
improvements, fixtures, custom use equipment, special tooling and any other
equipment FINOVA, in its sole discretion, deems ineligible for purposes of an
Advance. An Equipment Advance may not exceed eighty percent (80%) of the Invoice
Cost of the Financed Equipment that is to be acquired with such Advance.
"Invoice Cost" means, with respect to an item of Equipment, the purchase price
paid by Borrower for the Financed Equipment, but deducting therefrom the portion
of the purchase price attributable to shipping charges, installation costs and
sales, use and other taxes. FINOVA shall be required to make a requested Advance
only if (i) no Event of Default exists as of the date of the Advance and the
Advance would not cause an Event of Default to occur, (ii) Borrower's Operating
Cash Flow for the consecutive 12-month period ending as of the last day of the
month preceding the date of the Advance was at least 1.1 times the amount
necessary to meet ▇▇▇▇▇▇▇▇'s Senior Contractual Debt Service for such 12-month
period, and (iii) such Advance, when aggregated with all prior Advances, would
not exceed Five Hundred Thousand Dollars ($500,000). "Operating Cash
Flow/Actual" means, for any period, ▇▇▇▇▇▇▇▇'s net income or loss (excluding the
effect of any extraordinary gains or losses), determined in accordance with
GAAP, plus or minus each of the following items, to the extent deducted from or
added to the revenues of Borrower in the calculation of net income or loss: (i)
depreciation; (ii) amortization and other non-cash charges; (iii) interest
expense paid or accrued; and (iv) total federal and state income tax expense
determined as the accrued liability of Borrower in respect of such period,
regardless of what portion of such expense has actually been paid by Borrower
during such period; and after deduction for each of (a) federal and state income
taxes, to the extent actually paid during such period; (b) any non-cash income;
and (c) all actual Capital Expenditures made during such period and not
financed. By making a request for an Advance, Borrower is making a
representation and warranty that the Financed Equipment that is being financed
with such Advance will be acquired by Borrower free and clear of all Liens,
except for the Lien created hereunder. Borrower shall not have the right to
re-borrow any Advance to the extent that it has been repaid.
2. Schedule of Payments; Rate and Payment of Interest; Prepayment.
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2.1 Each Advance hereunder shall be payable as follows:
a. on the first day of each month, commencing with the first month
after the date of the Advance and continuing through and including the first day
of the last month of the Contract Year in which the Advance was made, all
accrued interest;
b. on the first day of each month, beginning with the first month to
commence after the last month described in clause (a) of this section, and
continuing through and including October 1, 2001, principal installments,
together with accrued interest, based on a five (5) year amortization schedule;
and
c. A final installment of all outstanding principal and accrued
interest on the third anniversary of the Closing Date.
2.2 Prepayment may be made under this Note in whole but not in part,
subject to the Termination Fee set forth in the Loan Agreement, provided that
such prepayment is preceded by not less than sixty (60) days' prior written
notice to FINOVA and accompanied by all accrued by unpaid interest and the full
amount of the applicable Termination Fee. Notwithstanding anything herein to the
contrary, in the event is terminated by Borrower, by FINOVA or by any other
Person at any time, then the entire unpaid principal balance of this Note,
together with all accrued and unpaid interest hereon and the full amount of the
applicable Termination Fee, shall become immediately due and payable in full on
the effective date of such termination, without presentment, notice or demand of
any kind.
2.3 Interest shall be computed on the basis of a 360-day year for the
actual number of days elapsed, and shall be at the rate of two and one-half
(2.50) percentage points above the Prime Rate (as hereinafter defined), computed
on the basis of a 360-day year; provided, however, upon the occurrence and
during the continuance of an Event of Default, interest shall accrue on the
outstanding principal balance of this Note at a default rate (the "Default
Rate") of four and one half (4.5) percentage points above the Prime Rate, and
shall be payable on demand. "Prime Rate" means, for any day, the rate of
interest per annum (over a year of 360 days) announced by ▇▇▇▇▇▇▇▇, N.A. (the
"Bank"), from time to time, as its "base rate" (or any successor thereto) in
effect on such day. The Prime Rate is not necessarily the lowest rate charged by
the Bank. As of the date of this Note, the Prime Rate is eight and one quarter
percent (8.25%) per annum. The applicable rate of interest assessed hereunder
will be increased or decreased from time to time hereafter in an amount equal to
any increase or decrease hereafter made by the Bank in the Prime Rate. A change
in the Prime Rate shall be effective on the first day following such change.
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3. Events of Defaults; Remedies.
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3.1 Upon the occurrence of any Event of Default, in addition to FINOVA's
right to charge interest on the Obligations at the Default Rate: (a) at the
option of FINOVA, the entire unpaid amount of all of the Obligations, including,
without limitation, the Termination Fee, shall become immediately due and
payable without demand, notice or legal process of any kind; (b) FINOVA may, at
its option, without demand, notice or legal process of any kind, exercise any
and all rights and remedies granted to it by the Loan Agreement or by any other
agreement now or hereafter existing between FINOVA and Borrower or between
FINOVA and any guarantor of part or all of Borrower's liabilities to FINOVA; and
(c) FINOVA may at its option exercise from time to time any other rights and
remedies available to it under the Uniform Commercial Code or other law of the
State of Arizona.
3.2 The remedies of FINOVA as provided herein and in the Loan Agreement
shall be cumulative and concurrent, and may be pursued singularly, successively,
or together, at the sole discretion of FINOVA. No act of omission or commission
of FINOVA, including specifically any failure to exercise any right, remedy or
recourse, shall be deemed to be a waiver or release of the same, such waiver or
release to be effected only through a written document executed by FINOVA and
then only to the extent specifically recited therein. A waiver or release with
reference to any one event shall not be construed as continuing, as a bar to, or
as a waiver or release of, any subsequent right, remedy or recourse as to a
subsequent event.
4. General Provisions.
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4.1 Borrower warrants and represents to FINOVA that Borrower has used and
will continue to use the loans and advances represented by this Note solely for
proper business purposes, and consistent with all applicable laws and statutes.
4.2 This Note is secured by the Collateral described in the Loan Agreement.
4.3 Borrower waives presentment, demand and protest, notice of protest,
notice of presentment and all other notices and demands in connection with the
enforcement of FINOVA's rights hereunder, except as specifically provided and
called for by this Note, and hereby consents to, and waives notice of, the
release, addition, or substitution, with or without consideration, of any
collateral or of any person liable for payment of this Note. Any failure of
FINOVA to exercise any right available hereunder or otherwise shall not be
construed as a waiver of the right to exercise the same or as a waiver of any
other right at any other time.
4.4 If this Note is not paid when due or upon the occurrence of an Event of
Default, Borrower further promises to pay all costs of collection, foreclosure
fees, attorneys fees and expert witness fees incurred by FINOVA, whether or not
suit is filed hereon, and the fees, costs and expenses as provided in the Loan
Agreement.
4.5 The contracted for rate of interest of the loan contemplated hereby,
without limitation, shall consist of the following: (i) the interest rate set
forth on the Schedule, calculated and applied to the principal balance of this
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Note in accordance with the provisions of this Note: (ii) interest after an
Event of Default, calculated and applied to the amounts due under this Note in
accordance with the provisions hereof; and (iii) all Additional Sums (as herein
defined), if any. ▇▇▇▇▇▇▇▇ agrees to pay an effective contracted for rate of
interest which is the sum of the above-referenced elements. All examination
fees, attorneys fees, expert witness fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, Termination Fees, Minimum Interest
Charges, other charges, goods, things in action or any other sums or things of
value paid or payable by Borrower (collectively, the "Additional Sums"), whether
pursuant to this Note, the Loan Agreement or any other documents or instruments
in any way pertaining to this lending transaction, or otherwise with respect to
this lending transaction, that under any applicable law may be deemed to be
interest with respect to this lending transaction, for the purpose of any
applicable law that may limit the maximum amount of interest to be charged with
respect to this lending transaction, shall be payable by Borrower as, and shall
be deemed to be, additional interest and for such purposes only, the agreed upon
and "contracted for rate of interest" of this lending transaction shall be
deemed to be increased by the rate of interest resulting from the inclusion of
the Additional Sums.
4.6 It is the intent of the parties to comply with the usury law of the
State of Arizona (the "Applicable Usury Law"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Note, or in any of the
documents securing payment hereof or otherwise relating hereto, in no event
shall this Note or such documents require the payment or permit the collection
of interest in excess of the Maximum Interest Rate, then in any such event (1)
the provisions of the paragraph shall govern and control, (2) neither Borrower
nor any other Person now or hereafter liable for the payment hereof shall be
obligated to pay the amount of such interest to the extent that it is in excess
of the Maximum Interest Rate, (3) any such excess which may have been collected
shall be either applied as a credit against the then unpaid principal amount
hereof or refunded to Borrower, at FINOVA's option, and (4) the effective rate
of interest shall be automatically reduced to the Maximum Interest Rate. It is
further agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x) all calculations of interest
which are made for the purpose of determining whether such rate would exceed the
Maximum Interest Rate shall be made by amortizing, prorating, allocating and
spreading during the period of the full stated term of the loan evidenced
hereby, all interest at any time contracted for, charged or received from
Borrower or otherwise in connection with such loan; and (y) in the event that
the effective rate of interest on the loan should at any time exceed the Maximum
Interest Rate, such excess interest that would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law shall be paid to
FINOVA from time to time, if and when the effective interest rate on the loan
otherwise falls below the Maximum Interest Rate, until the entire amount of
interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrower further
agrees that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
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4.7 FINOVA may at any time transfer this Note and FINOVA's rights in any or
all collateral securing this Note, and FINOVA thereafter shall be relieved from
all liability with respect to such collateral arising after the date of such
transfer.
4.8 This Note shall be binding upon Borrower and its legal representatives,
successors and assigns. Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of the Note shall be prohibited by or invalid under such
law, such provision shall be severable, and be ineffective to the extent of such
prohibition or invalidity, without invalidating the remaining provision of this
Note.
THIS NOTE HAS BEEN DELIVERED FOR ACCEPTANCE BY FINOVA IN PHOENIX, ARIZONA
AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ARIZONA, AS THE SAME
MAY FROM TIME TO TIME BE IN EFFECT, INCLUDING, WITHOUT LIMITATION, THE UNIFORM
COMMERCIAL CODE AS ADOPTED IN ARIZONA. BORROWER HEREBY (i) IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN MARICOPA COUNTY,
ARIZONA OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING
FROM OR RELATED TO THIS NOTE; (ii) WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON BORROWER, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
MESSENGER, CERTIFIED MAIL OR REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS
SET FORTH BELOW AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE
EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN
POSTED TO BORROWER'S ADDRESS; (iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
BORROWER MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING; (iv) AGREES THAT A FINAL JUDGMENT
IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY
OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW; (v) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST FINOVA
OR ANY OF FINOVA'S DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY,
CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS NOTE IN ANY COURT OTHER
THAN ONE LOCATED IN MARICOPA COUNTY, ARIZONA; AND (vi) IRREVOCABLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION ARISING UNDER OR IN CONNECTION WITH THIS
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NOTE. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR IMPAIR FINOVA'S RIGHT TO SERVE
LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR FINOVA'S RIGHT TO BRING ANY
ACTION OR PROCEEDING AGAINST BORROWER OR BORROWER'S PROPERTY IN THE COURTS OF
ANY OTHER JURISDICTION.
ORGANIC FOOD PRODUCTS, INC.,
a California corporation
By:
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Name:
Title:
Federal Taxpayer Identification
No.: ▇▇-▇▇▇▇▇▇▇
Address: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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