EXHIBIT 10.8
LOAN NUMBER
GP 000 000 0000 PRO
U.S. SMALL BUSINESS ADMINISTRATION
PROVIDENCE DISTRICT OFFICE
000 XXXXXXXXXXX XXXXXX
XXXXXXXXXX, XX 00000
AUTHORIZATION AND LOAN AGREEMENT
(GUARANTY LOAN)
Home Loan & Investment Bank. F.S.B.
Xxx Xxxx Xxxx Xxxxx, Xxxxx 0
Xxxxxxx, XX 00000
Your request dated January 8, 1996 for SBA to Guarantee Seventy-five percent
(75%) of a loan in the amount of Three Hundred Fifty Thousand Dollars
($350,000.00) to be made by Lender to
Cafe La France Inc.
d/b/a Cafe La France
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx XX 00000
is hereby approved pursuant to Section 7(a)of the Small Business Act as amended.
1. The following forms are herewith enclosed:
A. Three copies of SBA Note (Form 147 - revised), one to be executed by the
Borrower, the other two to be conformed. The original executed copy must
be retained by you and one conformed copy must be sent to SBA immediately
after first disbursement, together with a guaranty fee equal to
$7,937.50. This fee should be paid by Xxxxxx within 90 days of the date
of this Authorization and may be charged to Xxxxxxxx, only after Xxxxxx
has paid fee to SBA and initial disbursement made to Borrower. This fee
may be deducted from loan proceeds.
B. Copies of SBA Settlement Sheet, (Form 1050), are to be completed and
executed by Xxxxxx and Borrower to reflect each disbursement. Prompt
reporting of disbursements is necessary. Return the first two copies
("Denver FOD" copy and "Servicing Office" copy) to SBA.
C. Compensation Agreements (Form 159) shall be executed by Xxxxxxxx, his
representatives and Xxxxxx and returned to SBA if Xxxxxxxx has employed
an attorney, accountant or other representative, or if Borrower is
charged fees for services by Xxxxxx or an associate of Lender. If no such
fees have been charged, please write "None" and return the form, executed
by the Lender, to SBA.
D. The original copy of this Authorization (and documentation itemized
below, if any), shall be executed prior to first disbursement and
retained in the loan file by the Lender. (A copy of the Authorization,
amendments and itemized documents should be given to the Borrower.)
(1) SBA Form 148, Guaranty (3)
(2) SBA Form 155, Standby Agreement
(3) SBA Form 160, Corporate Resolution of Board of Directors
(4) SBA Form 652, Assurance of Compliance for Nondiscrimination
(5) SBA Form 722, Equal Opportunity Poster
(6) SBA Form 928, Mortgage (Participation)
(7) IRS Form 4506, Request for Copy or Transcript of Tax Form
2. This Authorization is subject to:
A. Provisions of the Guaranty Agreement(SBA Form 750) between Lender and SBA
dated February 22, 1980.
B. First disbursement of the loan being made not later than six (6) months,
and no disbursement being made later than twelve (12) months, from the
date of this Authorization, unless such time is extended pursuant to
prior written consent by SBA.
C. Receipt by Lender of evidence satisfactory to it in its sole discretion,
that there has been no unremedied adverse change since the date of the
Application, or since any of the preceding disbursements, in the
financial or any other conditions of Borrower, which would warrant
withholding or not making any such disbursement or any further
disbursement.
D. The representations made by Borrower in its loan application, the
requirements or conditions set forth in Lender's application form,
including the supporting documents thereto, the conditions set forth
herein and any future conditions imposed by Xxxxxx (with prior SBA
approval).
X. Xxxxx to loan disbursement Lender and Borrower will comply with
provisions of SBA Policy Notice 9000-941, Obtaining IRS Tax Return
Information to Verify Financial Information Submitted in Program
Applications." Xxxxxx to follow IRS letter attached.
3. Terms of Loan:
A. Repayment terms, interest rate(s) and maturity:
(1) NOTE PAYABLE: Ten (10) years from date of Note, with interest at the
initial rate of eleven and one quarter percent (11.25%) and initial
installments, including principal and interest, each in the amount of
Four Thousand Eight Hundred Seventy-one Dollars ($4,871.00), payable
monthly, beginning on the first day of the second month from the date of
the Note, and the balance of principal and interest payable at maturity.
With the further provision that each said monthly installment shall be
applied first to interest accrued to the date of receipt of said
installment, and the balance, if any, to principal. Upon each interest
rate adjustment the monthly installment of principal and interest shall
be adjusted to amortize the loan over the originally stated maturity.
(2) This is a variable interest rate loan in which the interest rate will
fluctuate in accordance with the prime rate published in the Wall Street
Journal. The prime rate published as of January 11, 1996 in that
publication was eight and one half percent (8.5%). The interest rate
(spread) to be added to the prime rate on the beginning of each
adjustment period will be two and three quarters percent (2.75%).
(3) Quarterly Fluctuations: Shall be for three (3) full calendar months
Each adjustment period occurring on the first business day of the month
at least three (3) months from the date of Note hereof. Subsequent
adjustments shall be made on the first business day of the month
commencing a new quarterly period.
(4) The interest rate on this Note shall increase or decrease by adding
the interest rate
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spread on the prime rate as of the beginning of each adjustment period.
Holder should give written notice to the Undersigned of each increase or
decrease in the interest rate within thirty days after the effective date
of each rate adjustment; however, the fluctuation of the interest rate is
not contingent on whether the notice is given.
(5) Borrower shall provide Lender with written notice of intent to prepay
part or all of this loan at least three (3) weeks prior to the
anticipated prepayment date. A prepayment shall be defined as any payment
made ahead of schedule that exceeds 20% of the then outstanding balance.
(6) If the Borrower is in default on payments when SBA purchases its
guaranteed portion, the rate of interest on the unguaranteed portion
shall become fixed at the rate in effect as of the initial date of
default. If the Borrower is not in default on payments when SBA purchases
its guaranteed portion, the rate of interest on the unguaranteed portion
shall be fixed at the rate in effect as of the initial date of purchase
by SBA.
Provided, however, in no event shall the amount of interest payment
hereunder, together with all amounts reserved, charged, or taken by the
Lender/SBA as compensation for fees, services, expenses incidental in the
making, negotiating or collection of the loan evidenced hereby exceed the
maximum rate of interest on the unpaid principal balance hereof allowable
by applicable law. In the event that any sum is collected, said sum shall
be applied to reduce the principal in an inverse order of maturity.
B. Use of Proceeds of Loan as follows:
(1) Approximately $350,000.00 for debt payments as follows:
a. Fleet Bank, S350,000.00
Note: Funds not disbursed as a result of minor variations in above
amounts may be disbursed as working capital.
C. Collateral:
Prior to initial disbursement, Lender shall be assured of the following
lien positions:
(1) First security interest (under UCC) in all machinery, equipment,
furniture, fixtures, inventory, general intangibles, and Accounts
Receivable, now owned, to be acquired with loan proceeds and hereinafter
acquired or created by Xxxxxxxx, including all substitutions and
accessions thereto and the proceeds thereof. Said assets to be located at
all locations owned by borrowers. Lender to obtain a detailed listing of
collateral prior to disbursement of loan proceeds.
(2) Assignment of life insurance on Xxxxxx X. XxXxxxx in the amount of
S350,000.00. (This must be the decreasing term type unless the Borrower
specifically requests in writing that he be permitted to assign existing
whole life or other permanent type of insurance.)
NOTE: Assignment of life insurance shall be an Absolute Collateral
Assignment properly acknowledged by Home Office of Insurer. Xxxxxx should
not be named as beneficiary of these policies. There shall be no purchase
of additional life insurance from business income or assets during the
time of the loan without prior written approval of Lender.
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(3) Guaranty on SBA Form 148 of CLF 2, Inc., secured by the following:
First security interest (under UCC) in all machinery, equipment,
furniture, fixtures, inventory, general intangibles, and Accounts
Receivable, now owned, to be acquired with loan proceeds and hereinafter
acquired or created by Xxxxxxxx, including all substitutions and
accessions thereto and the proceeds thereof.
(4) Guaranty on SBA Form 148 of CLF Franchise Corporation secured by the
following: First security interest (under UCC) in all machinery,
equipment, furniture, fixtures, inventory, general intangibles, and
Accounts Receivable, now owned, to be acquired with loan proceeds and
hereinafter acquired or created by Xxxxxxxx, including all substitutions
and accessions thereto and the proceeds thereof.
(5) Guaranty on SBA Form 148 of Xxxxxx X. XxXxxxx secured by the
following: Second mortgage on real property located at 000 Xxxxxxxxx
Xxxxxx, Xxxxxxxx, XX, subject to lien of prior mortgage held by STM
Mortgage in the approximate balance of $181,000.00.
(6) Assignment of leases for all locations owned by the borrowers.
4. To further induce Lender to make and SBA to guarantee this Loan Lender and
SBA impose the following conditions:
A. Execution of all documents required in Item 1 above.
B. Reimbursable expenses - Borrower will, on demand, reimburse Lender for
any and all expenses incurred, or which may be hereafter incurred, by
Xxxxxx from time to time in connection with or by reason of Xxxxxxxx's
application for, and the making and administration of the Loan.
C. Books Records and Reports - Borrower will at all times keep proper books
of account in a manner satisfactory to Lender/SBA. Borrower hereby
authorizes Lender/SBA to make or cause to be made, at Borrower's expense
and in such manner and at such times as Lender/SBA may require, (a)
inspection and audits of any books, records and paper; in the custody or
control of Borrower or others, relating to Xxxxxxxx's financial or
business conditions, including the making of copies thereof and extracts
therefrom, and (b) inspections and the appraisals of any of Borrower's
assets.
Borrower will furnish to Lender/SBA for the 12 month period ending
December 31, 1995 and annually thereafter (no later than 3 months
following the expiration of any such period) and at such other times and
in such form as Lender/SBA may prescribe, Xxxxxxxx's reviewed Balance
Sheet and Profit and Loss Statements.
Borrower hereby authorizes, all Federal, State and municipal authorities
to furnish reports of examinations, records and other information
relating to the conditions and affairs of Xxxxxxxx and any desired
information from reports, returns, files and records of such authorities
upon request by Xxxxxx/SBA.
X. Xxxxxxxx shall not execute any contracts for managemcut consulting
services without prior approval of Lender/SBA.
E. Distribution and Compensation - Borrower will not, without the prior
written consent of Lender/SBA, (a) if Borrower is a corporation, declare
or pay any dividend or make any distribution upon its capital stock, or
purchase or retire any of its capital stock, or consolidate or merge with
any other company or give any preferential treatment, make any advance,
directly
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or indirectly, by way of loan, gift, bonus or otherwise, to any company
directly indirectly controlling or affiliated with or controlled by
Borrower, or any other company, or to any officer, director or employee
of Borrower, or of any such company, (b) if Borrower is a partnership or
individual, make any distribution of assets of the business of Borrower,
other than reasonable compensation for services, or give any preferential
treatment, make any advance, directly or indirectly, by way of loan,
gift, bonus or otherwise, to any partner or any of its employees, or to
any company directly or indirectly controlling or affiliated with or
controlled by Borrower, or any other company.
Additional Financial Reporting: In addition to the financial reporting
requirements above, the Borrower will furnish to Lender income tax
returns on all borrowers and guarantors on an annual basis within 90 days
of each period end.
F. Other Provisions:
(1) Prior to any disbursement, Xxxxxx must have satisfactory evidence
that an additional $200,000.00 of equity funds have been injected by the
investors into the subject business.
(2) Standby Agreement to be executed on SBA Form 155 by Xxxxxx X. XxXxxxx
(Standby Creditor), in favor of Xxxxxx. Said Agreement shall cover the
debt or obligation owed by Borrower to Standby Creditor in the principal
amount of $9,500.00.
(3) Prior to first disbursement, on account of the loan, evidence
satisfactory to Lender that all licenses necessary for operation of
business have been issued or tentatively assured.
(4) Prior to first disbursement, Borrower to furnish executed lease
(satisfactory to Lender) covering the real property at all locations
owned by borrower. Said lease to include Landlord's Waiver.
(5) Assignment of lease, with right of reassignment to Lender/SBA
covering premises at all locations owned by borrower.
(6) Prior to first disbursement, the Lender must be in receipt of
evidence of the kind described below from an independent authoritative
source which is sufficient to indicate to the Lender that the property is
not in a special hazard area. If such evidence is not provided to the
Lender, the borrower must obtain, and maintain, Federal Flood Insurance
or other appropriate special hazard insurance in amounts and coverages
equal to the lesser of (1) the insurable value of the property or (2) the
maximum limit of coverage available. Evidence that required flood or
special hazard insurance has been acquired may be in the form of proof of
payment to any licensed insurance agent specifically relative to the
required flood or hazard insurance or a copy of the required flood or
hazard insurance policy which has been issued. Borrower will not be
eligible for either any future disaster assistance or SBA business loan
assistance if this flood or special hazard insurance is not maintained as
stipulated herein throughout the entire term of this loan.
As evidence that the property is not located within a special hazard area
subject to flooding, mudslides, erosions or earthquakes, the Lender may
rely on a determination of flood zone or special hazard area status by
the applicants property and casualty insurance company, a local
government agency or other authoritative source approved by SBA which
would ordinarily have knowledge of the special hazard area status for the
property being financed.
(7) Borrower shall provide and maintain hazard insurance (fire and
extended coverage)
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in amounts and coverage equal to the lesser of (a) the amount of this
loan, (b) the insurable value of the property, or (c) the maximum limit
of coverage available. Lender shall be named loss payee of the insurance
(8) Agreement that there will be no further borrowing or leasing without
prior written consent of Xxxxxx.
(9) Borrower shall post SBA Form 722, "Equal Opportunity Poster," where
it will be clearly visible to employees, applicants for employment and
the general public.
(10) Prior to any disbursement, Borrower shall submit satisfactory
evidence to Lender that Borrower is incorporated and that it is in good
standing with the Secretary of State.
(11) Prior to any disbursement, Lender shall be in receipt of evidence
satisfactory to it that Borrower has installed and maintained an adequate
accounting system under the supervision of a qualified public accountant.
(12) Prior to first disbursement, Borrower to present satisfactory
evidence that all Federal and State taxes are current.
(13) Borrower shall not acquire by purchase or by lease, any additional
locations without prior written consent of Lender.
(14) Borrower covenants and warrants that:
(a) Borrower is in compliance with all applicable Federal and State
environmental laws, and regulations and that they will continue to
comply with all such laws and regulations in the future.
(b) No proceedings alleging violations of environmental laws are
pending on property owned or project property to be purchased,
leased or rented by Xxxxxxxx.
(c) Borrower has no knowledge of hazardous waste contamination on
property owned or project property to be purchased, leased or rented
by Xxxxxxxx.
(d) Borrower assumes all responsibility and all liability for toxic
substance cleanup resulting from any violations, past, present or
future, and agrees to indemnify the Lender and SBA for any and all
resulting liabilities or costs.
(15) Xxxxxxxx agrees to pay a late charge equal to 5% of the payment
amount due if such payment is not received within ten days of the
due date. Funds received from the Borrower will be applied first to
interest to the date of receipt, then to principal and then to the
late fee.
(16) The Borrower recognizes such other conditions not inconsistent with
the provisions of the Authorization or of the Guarantee Agreement as
may be imposed by the Lender.
(17) Borrower certifies that no principal who owns at least 50% of the
voting interest of the company is delinquent more than 60 days under
the terms of any (a) administrative order, (b) court order, or (c)
repayment agreement that requires payment of child support.
(18) Lender to be in receipt of satisfactory evidence that $425,000.00
has already been injected into the business.
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(19) Prior to disbursement, SBA to be in receipt and satisfactory review
of year end 1995, financial statements and tax returns from an
independent qualified source showing no adverse change.
G. Franchisor Agreement:
Assignment of Franchisee's interest in the Franchise Agreement for
security purposes with agreement of Franchisor that no termination of the
Franchise Agreement will be effective until 90 days after receipt by
Lender of a written notice thereof and further, with right of Lender to
cure any default or breach of Borrower which precipitated said
termination.
Subordination
Subordination by Franchisor of any and all rights under Franchise
Agreement in and to the loan collateral.
Provisions
(1) Prior to first disbursement, on account of the loan, satisfactory
evidence to Lender/SBA that a copy of the Franchise Agreement and
disclosure statement as required by the FTC has been submitted by
Xxxxxxxx.
(2) In the event of default on the loan, payment of franchise fees,
royalties, advertising, etc., will be deferred until such time as the
Lender loan payments are brought current, deferment of aforementioned
fees shall not be cause for termination.
(3) Prior to disbursement, lender shall verify that Franchisor is
currently registered to sell franchises in the State of Rhode Island.
5. Parties Affected:
This Agreement shall be binding upon Xxxxxxxx and Xxxxxxxx's successors and
assigns. No provision stated herein shall be waived without the prior written
consent of SBA. This loan shall be administered as provided in the Guaranty
Agreement.
Xxxxxx Xxxxx
----------------------------------
Administrator
U.S. Small Business Administration
Date: January 17, 1996 By:/s/ Xxxx X. Xxxxxxxx
---------------- -----------------------------
Xxxx X Xxxxxxxx
Supervisory Loan Specialist
On behalf of Xxxxxx:
Date: 2/28/96 By:/s/ Xxxxx X. Xxxxx
----------------- ------------------------------
Small Business Lending Manager
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Xxxxxxxx hereby agrees to the conditions imposed herein and further agrees
that the terms and conditions herein are for the benefit of, and may be
enforced by, Xxxxxx and SBA. This Authorization and Loan Agreement and
amendments constitute the Loan Agreement between Xxxxxx and Borrower.
Borrower further acknowledges: (1) that the Authorization is not a commitment
by Xxxxxx to make a loan to Borrower; (2) that the Authorization is solely
for the benefit of Xxxxxx and the SBA, with no third-party rights or benefits
arising therefrom; and (3) that payments by SBA to lender shall not apply to
the loan account of Borrower, nor in any way diminish the indebtedness under
its Note, nor the obligation of any personal guarantor of Note.
Date: 2/28/96 By: /s/Xxxxxx X. XxXxxxx
-------- --------------------
Xxxxxx X. XxXxxxx
President
NOTE: Corporate Borrowers must execute this Authorization, in corporate name,
by duly authorized officer, and xxxx must be affixed and duly attested;
partnership Borrowers must execute in firm name, together with signature of
all general partners.
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