<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____ to ____
--------------
Commission File Number 333-75913
URBAN JUICE & SODA COMPANY LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
WYOMING 91-1696175
(State or other jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization)
234 9TH AVENUE NORTH (206) 624-3357
SEATTLE, WASHINGTON 98109 (Registrant's telephone number,
(Address of principal executive office) including area code)
</TABLE>
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
for such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes /X/ No / /
As of March 31, 2000, the issuer had 18,813,398 shares of common stock,
$10,486,249 par value, outstanding.
Transitional Small Business Disclosure Format: Yes / / No /X/
1
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URBAN JUICE & SODA COMPANY LTD.
FORM 10-QSB
<TABLE>
<CAPTION>
INDEX PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
a) Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 3
b) Consolidated Statements of Income for the Quarters Ended March 31, 2000 4
and March 31, 1999
c) Interim Consolidated Statement of Stockholder's Equity for the Quarters 5
Ended March 31, 2000 and March 31, 1999
d) Consolidated Statements of Cash Flows for the
Quarters Ended March 31, 2000 and March 31, 1999 6
e) Notes to Condensed Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis or Plan of Operation 10
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 13
Item 2 Changes in Securities and Use of Proceeds 13
Item 3 Defaults Upon Senior Securities 13
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8-K 13
</TABLE>
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
URBAN JUICE & SODA COMPANY LTD.
AND SUBSIDIARIES
Interim Consolidated Balance Sheet
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
March 31, December 31,
2000 1999
- ----------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Assets
Curent assets:
Cash and cash equivalents $ 389,198 $ 344,551
Accounts receivable 2,001,277 1,267,102
Inventory 1,855,463 1,347,375
Prepaid expenses 270,419 169,493
- ----------------------------------------------------------------------------------------------------------------------
4,516,357 3,128,521
Fixed assets 545,205 560,396
Intangible assets 111,358 114,646
- ----------------------------------------------------------------------------------------------------------------------
$ 5,172,920 $ 3,803,563
======================================================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Line of credit $ 866,981 $ 401,122
Accounts payable and accrued liabilities 2,216,485 1,031,179
Current portion of capital lease obligations 44,776 33,009
- ----------------------------------------------------------------------------------------------------------------------
3,128,242 1,465,310
Capital lease obligations, less current portion 79,254 70,558
Stockholders' equity :
Common stock:
Authorized: 100,000,000 shares, no par value
Issued and outstanding: 18,813,398 shares (1999 - 18,754,398) 10,486,249 10,461,318
Additional paid-in capital 406,558 362,298
Deficit (9,003,565) (8,663,673)
Accumulated other comprehensive income 76,182 107,752
- ----------------------------------------------------------------------------------------------------------------------
1,965,424 2,267,695
- ----------------------------------------------------------------------------------------------------------------------
$ 5,172,920 $ 3,803,563
======================================================================================================================
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
<PAGE>
URBAN JUICE & SODA COMPANY LTD.
AND SUBSIDIARIES
Interim Consolidated Statement of Operations
(Expressed in U.S. Dollars)
Three months ended March 31, 2000 with comparative figure for 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
2000 1999
- ----------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C>
Revenue $ 3,197,962 $ 1,917,970
Cost of goods sold 2,008,485 1,374,542
- ----------------------------------------------------------------------------------------------------------------------
Gross margin 1,189,477 543,428
Operating expenses:
Promotion and selling 1,031,686 490,862
General and administrative 505,620 344,373
-----------------------------------------------------------------------------------------------------------------
1,537,306 835,235
- ----------------------------------------------------------------------------------------------------------------------
Loss from operations (347,829) (291,807)
Other income (expense):
Interest income, net 8,555 (4,076)
Other income (618) 1,292
-----------------------------------------------------------------------------------------------------------------
7,937 (2,784)
- ----------------------------------------------------------------------------------------------------------------------
Loss for the period $ (339,892) $ (294,591)
======================================================================================================================
Loss per share, basic and diluted $ (0.02) $ (0.02)
======================================================================================================================
Weighted average common stock, basic and diluted 18,792,250 12,537,202
======================================================================================================================
</TABLE>
See accompanying notes to interim consolidated financial statements.
4
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URBAN JUICE & SODA COMPANY LTD.
AND SUBSIDIARIES
Interim Consolidated Statement of Stockholders' Equity
(Unaudited)
(Expressed in U.S. Dollars)
Three months ended March 31, 2000 Two years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Additional other Total
Common paid-in comprehensive Accumulated Comprehensive Stockholders'
stock Amount capital income (loss) deficit income (loss) equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 13,651,164 $ 8,360,685 $ 151,106 $ 160,516 $ (6,319,662) $ 2,352,645
Common stock repurchased (20,000) (13,960) - - - (13,960)
Options exercised 605,000 319,780 - - - 319,780
Common stock issued for cash 914,000 281,080 10,133 - - 291,213
Options issued in connection
with debt financing - - 12,137 - - 12,137
Comprehensive loss:
Net loss - - - - (1,534,835) $(1,534,835) (1,534,835)
Translation adjustments - - - (65,191) - (65,191) (65,191)
-----------
Total comprehensive loss $(1,600,026)
-----------
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 15,150,164 8,947,585 173,376 95,325 (7,854,497) 1,361,789
Options exercised 25,000 15,610 - - - 15,610
Warrants exercised 68,480 35,585 - - - 35,585
Common stock issued for cash 3,510,754 1,462,538 188,922 - - 1,651,460
Comprehensive loss:
Net loss - - - - (809,176) $ (809,176) (809,176)
Translation adjustments - - - 12,427 - 12,427 12,427
-----------
Total comprehensive loss $ (796,749)
-----------
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 18,754,398 10,461,318 362,298 107,752 (8,663,673) 2,267,695
Warrants issued - - 9,600 - - 9,600
Stock-based compensation - - 34,660 - - 34,660
Warrants exercised 59,000 24,931 - - - 24,931
Comprehensive loss:
Net loss - - - - (339,892) $ (339,892) (339,892)
Translation adjustments - - - (31,570) - (31,570) (31,570)
-----------
Total comprehensive loss $ (371,462)
-----------
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2000 18,813,398 $10,486,249 $ 406,558 $ 76,182 $ (9,003,565) $ 1,965,424
===================================================================================================================================
</TABLE>
See accompanying notes to interim consolidated financial statements.
5
<PAGE>
URBAN JUICE & SODA COMPANY LTD.
AND SUBSIDIARIES
Interim Consolidated Statement of Cash Flows
(Expressed in U.S. Dollars)
Three months ended March 31, 2000 with comparative figure for 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
2000 1999
- -----------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Loss for the period $ (339,892) $ (294,591)
Items not involving cash:
Depreciation and amortization 61,465 52,392
Non-cash interest expense 400 -
Stock-based compensation expense 34,661 -
Changes in assets and liabilities:
Accounts receivable (734,175) (464,122)
Inventory (508,089) (309,478)
Prepaid expenses (91,726) (17,389)
Accounts payable and accrued liabilities 1,185,306 879,461
--------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (392,050) (153,727)
Cash flows from investing activities:
Purchase of fixed assets (6,292) (17,263)
Purchase of intangible assets - (13,974)
------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (6,292) (31,237)
Cash flows from financing activities:
Net borrowing under line of credit 465,859 7,812
Repayment of capital lease obligations (16,231) (4,284)
Proceeds from exercise of warrants 24,931 -
------------------------------------------------------------------------------------------------------------------
Cash flows provided by financing activities 474,559 3,528
Effect of foreign exchange rate changes on cash (31,570) 47,513
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 44,647 (133,923)
Cash and cash equivalents, beginning of period 344,551 219,819
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 389,198 $ 85,896
=======================================================================================================================
Supplemental disclosure of non-cash financing and investing activities:
Stock-based compensation expense $ 34,660 $ -
Assets acquired under capital lease 36,694 -
Cash paid during year to:
Interest payments 13,034 5,976
</TABLE>
See accompanying notes to interim consolidated financial statements.
6
<PAGE>
URBAN JUICE & SODA COMPANY LTD.
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Unaudited)
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
- -------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS:
Urban Juice & Soda Company Ltd. (the "Company" or "Urban Juice") develops,
produces, markets, and distributes "alternative" or "new age" beverages.
The Company's main product lines include the brands: JONES SODA CO., a
carbonated soft drink; WHOOPASS, a high energy drink; and WAZU, a natural
spring water. The Company was incorporated in 1986 under the Company Act of
British Columbia. On December 31, 1999, the Urban Juice continued its
incorporation in Wyoming.
The Company's future operations are dependent upon the market's acceptance
of its products. There can be no assurance the Company's products will be
able to secure market acceptance. Operations to date have primarily been
financed through the issuance of common stock and long-term debt. These
consolidated financial statements have been prepared on a basis which
assumes the realization of assets and settlement of liabilities in the
normal course of business. During the years ended December 31, 1999 and
1998, the Company incurred losses of $809,176 and $1,534,835, respectively.
The Company incurred further losses of $339,892 during the three months
ended March 31, 2000. The Company's ability to continue as a going concern
is dependent upon raising additional financing and generating future
profitable operations. In March 2000, the Company entered into an agreement
with a financial institution for an operating line of credit in the amount
of $3,000,000 (note 3).
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of consolidation
These consolidated financial statements have been prepared using
generally accepted accounting principles in the United States. The
financial statements include the accounts of the Company's wholly-owned
subsidiaries and reflect all adjustments, consisting solely of normal
recurring adjustments, which, in management's opinion, are necessary
for a fair presentation of the financial results for the interim
period. All significant inter-company accounts and transactions have
been eliminated in consolidation.
(b) Use of estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Accordingly, actual
results may differ from these estimates.
7
<PAGE>
URBAN JUICE & SODA COMPANY LTD.
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Unaudited)
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
- ------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(c) Foreign currency translation:
The functional currency of Urban Juice & Soda Company is the United
States (U.S.) dollar. The functional currency of the Company's Canadian
subsidiary is the Canadian dollar. These financial statements have been
prepared using the U.S. dollar as the reporting currency. Assets and
liabilities are translated into U.S. dollars at the exchange rate in
effect at the balance sheet date. Revenue and expenses are translated
at the average rates of exchange prevailing during the year. The
translation adjustment resulting from the process is presented
separately as a component of accumulated other comprehensive income in
stockholders' equity. Exchange gains or losses arising on translation
or settlement of foreign currency denominated monetary items are
included in the consolidated statement of operations.
(d) Net loss per share:
Basic loss per share is computed using the weighted average number of
shares of common stock outstanding during the periods. Diluted loss per
share is computed using the weighted average number of shares of common
and potentially dilutive common stock outstanding during the period. As
the Company has a net loss in each of the periods presented, basic and
diluted net loss per share is the same.
Excluded from the computation of diluted loss per share for the three
months ended March 31, 2000 are options and warrants to purchase
4,684,898 shares of common stock as their effect would be
anti-dilutive.
(d) Comprehensive loss:
The Company discloses comprehensive loss in the Consolidated Statement
of Stockholders' Equity. Comprehensive loss includes net loss and
foreign currency translation adjustments.
3. BANK INDEBTEDNESS:
In March, 2000, the Company secured a three-year line of credit with a
financial institution. Borrowings under the agreement are limited to a
function of the Company's accounts receivable and inventory balances to
a maximum of $3,000,000. Borrowings bear interest at prime plus 1.5%
(9.0% at March 31, 2000) and are secured by substantially all of the
Company's accounts receivable and inventories. The line of credit
agreement also provides for an annual facility fee of 1.5% of
$3,000,000.
In connection with the line of credit agreement, the Company issued
warrants to purchase 25,000 shares of the Company's common stock at a
price of C$1.26. The warrant was recorded on issuance at its estimated
fair value (FV) of $9,600. The deferred financing charge was recorded
with a corresponding increase to additional paid in capital. The FV
will be amortized to interest expense over the two year term of the
warrant.
8
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URBAN JUICE & SODA COMPANY LTD.
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Unaudited)
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
- ------------------------------------------------------------------------------
4. STOCKHOLDERS' EQUITY:
(a) Stock options and stock-based compensation:
During the three months ended March 31, 2000, the Company recorded
non-cash compensation expense of $34,660 relating to the issuance of
options to consultants.
During the three months ended March 31, 2000, the Company issued
incentive stock options to purchase 97,500 shares of the Company's
common stock to employees. The options have exercise prices ranging
from C$1.10 to C$1.20 per share. The fair value of these options were
measured using the intrinsic value method under APB 25. No compensation
expense was recorded as a result of the issuance of these options.
(b) Warrants:
During the three months ended March 31, 2000, warrants to purchase
59,000 shares of the company's common stock were exercised for proceeds
of $24,931.
5. SEGMENTED INFORMATION AND EXPORT SALES:
The Company operates in one industry segment and substantially all of its
operations are based in the United States. During the three months ended
March 31, 2000, export sales to Canada were approximately $485,155 (1999 -
$297,505).
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD-LOOKING INFORMATION
This commentary should be read in conjunction with the following
documents for a full understanding of the Company's financial condition and
results of operations: (i) our Registration Statement of Form S-4 (File No.
333-75913), as amended, which was filed with the Securities and Exchange
Commission on April 8, 1999 and declared effective on November 12, 1999; (ii)
our Current Report on Form 8-K dated February 17, 2000; and (iii) our Annual
Report on Form 10-KSB filed March 31, 2000.
All statements, trend analysis and other information contained herein
relative to markets for the Company's services and products and trends in
revenue, gross margin and anticipated expense levels, as well as other
statements including words such as "seek," "anticipate," "believe," "plan,"
"estimate," "expect," "intend," and other similar expressions, constitute
forward-looking statements. These forward-looking statements are subject to
business and economic risks, and the Company's actual results of operations may
differ materially from those contained in the forward-looking statements.
OVERVIEW
Urban Juice & Soda Company Ltd. currently produces and markets two New
Age Beverages. In 1994 we created, and in 1995 launched, two unique beverage
brands, JONES SODA CO., a "premium" soda, and WAZU, a natural spring water. In
June 1998 we launched NATURAL JONES Soda, a product extension of JONES SODA CO.
In November 1999 we re-formulated, and in January 2000 re-launched NATURAL JONES
Soda. We also introduced a new flavor of NATURAL JONES Soda in January 2000. In
January 1999, we launched SLIM JONES, another product extension of JONES SODA
CO. and added a new flavor in June 1999. In August 1999 we created, and in
October 1999 launched, JONES WHOOPASS Soda, the third product extension of JONES
SODA CO. Prior to the launch of these two Urban Juice brands, we were solely a
regional distributor of licensed and unlicensed alternative or New Age beverage
brands and products in various territories located in Western Canada.
In connection with transforming our business focus from being solely a
regional distributor of licensed and unlicensed brands and products to being
solely a developer, producer, marketer and distributor of our own brands and
products, we believe our short-term sales growth will be substantially dependent
on our ability to build the JONES SODA CO. brand franchise and expand our
distributor network. We believe that our long-term sales growth will be largely
dependent on the ability to continue to build the quality of our distributor
network for our brands, and to successfully launch new unique beverage brands
and products through that network when the lifecycle of our existing brands and
products warrant doing so.
One of the main reasons for our change in strategic direction was the
potential to earn higher gross margins from the sale of our own unique beverage
brands. We anticipate that gross margins will improve as we increase the volume
of sales of our brands. This increase, we believe, will come from falling
marginal costs as we increase our sales volume.
10
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QUARTER ENDED MARCH 31, 2000 COMPARED TO QUARTER ENDED MARCH 31, 1999
NET SALES
For the three months ended March 31, 2000, net sales were $3,197,962, an
increase of $1,279,992, or 66.7% over the $1,917,970 sales for the first three
months ended March 31, 1999. The increase in net sales was attributable to
increased sales of Jones Soda Co. through the existing distribution network, and
to a lesser extent, to increasing sales of Jones WhoopAss soda, a functional
energy drink and product extension of Jones Soda Co. which was launched in
October 1999. As of March 31, 2000, Jones Soda products were sold in 40 states
of the United States and eight provinces of Canada.
GROSS PROFIT
Gross profit was $1,189,477 for the three months ended March 31, 2000, an
increase of $646,049, or 118.9% over the $543,428 gross profit for the three
months ended March 31, 2000. Gross profit as a percentage of net sales increased
to 37.2% for the three months ended March 31, 1999 from 28.3% for the three
months ended March 31, 1999. The increase in gross profit was primarily
attributable to increased net sales as well as cost reductions achieved in
certain raw materials and packaging for Jones Soda as well as higher margins on
the Jones WhoopAss soda item.
TOTAL OPERATING EXPENSES
Total operating expenses were $1,537,306 for the three months ended March 31,
2000, an increase of $702,071, or 84% higher than total operating expenses of
$835,235 for the three months ended March 31, 1999. Total operating expenses as
a percentage of sales increased to 48.1% for the three months ended March 31,
2000 from 43.5% for the three months ended March 31, 1999. The increase in total
operating expenses was primarily attributable to increased selling, general and
administration expenses incurred in the first three months of 2000 to prepare
for 2000 summer season.
PROMOTION AND SELLING EXPENSES
Promotion and selling expenses were $1,031,686 for the three months ended March
31, 2000, an increase of $540,824, or 110.2% from $490,862 for the three months
ended March 31, 1999. Promotion and selling expenses as a percentage of net
sales increased to 32.3% for the three months ended March 31, 2000 from 25.6%
for the three months ended March 31, 1999. The increase in promotion and selling
expenses was primarily attributable to increased selling expenses associated
with an increasing size of the Company's sales force to prepare for the 2000
summer season. In addition, there were increases in promotional allowances and
material associated with the ongoing development of Jones Soda within the
Company's distribution network.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $505,620 for the three months ended
March 31, 2000, an increase of $161,247, or 46.8% compared to $344,373 for the
three months ended March 31, 1999. General and administrative expenses as a
percentage of net sales decreased to 15.8% for the three months ended March 31,
2000 from 18.0% for the three months ended March 31, 1999. The increase in
general and administrative expenses was primarily attributable to expenses
associated with the Company's
11
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continuation and physical re-location into the United States as well as legal
fees associated with the Company's litigation against Tastemaker.
OTHER EXPENSES
Other income was $7,937 for the three months ended March 31, 2000, an increase
of $10,721 over other income (expense) of ($2,784) for the three months ended
March 31, 1999. This increase was primarily attributable to the increase in
interest income associated with cash balances during the first three months of
2000.
NET LOSS
Net loss was $339,892 for the three months ended March 31, 2000, compared to
$294,591 for the three months ended March 31, 1999. The $45,301 increase in the
net loss was attributable to increased selling, general & administrative
expenses, offset by increased sales and improved gross profit margins. Net loss
as a percentage of sales decreased to 10.6% for the three months ended March 31,
2000 from 15.4% for the three months ended March 31, 1999 primarily due to
increasing sales volume.
LIQUIDITY AND CAPITAL RESOURCES
The operations of the Company historically have primarily been funded through
the issuance of common stock and external borrowings.
As at March 31, 2000, the Company had working capital of $1,388,115 compared to
working capital of $1,663,211 as at December 31, 1999. The decrease in working
capital was primarily attributable to the increase in accounts payable to build
inventory for the summer beverage season.
On March 22, 2000, a credit facility was granted to the Company by Banc of
America Commercial Finance, consisting of a three year revolving line of credit
of up to $3,000,000. The utilization of the revolving line of credit by the
Company is dependent upon certain levels of eligible accounts receivable and
inventory from time to time. Such revolving line of credit is secured by all of
the Company's assets, including accounts receivable, inventory, trademark
license and trademarks, and certain equipment. Borrowings under the credit
facility bear interest at a rate of Prime + 1.5%. The credit facility does not
impose any financial covenants.
12
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
See Exhibit Table on page14.
(B) REPORTS ON FORM 8-K
The Company filed a Form 8-K on February 17, 2000, reporting the
continuation of the Company from Province of British Columbia into the State of
Wyoming effective on December 31, 1999.
13
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated this 15th day of URBAN JUICE & SODA COMPANY LTD.
May, 2000.
By: /s/ Jennifer L Cue
-----------------------------------
Jennifer L Cue
Chief Financial Officer
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER AND DULY AUTHORIZED OFFICER)
EXHIBITS
<TABLE>
<CAPTION>
PAGE EXHIBIT NUMBER EXHIBIT NAME
- ---- -------------- ------------
<S> <C> <C>
10.1 Loan and Security Agreement entered into on March 22, 2000
between Banc of America Commercial Finance, Urban Juice & Soda
Company Ltd. and Jones Soda Co. (USA) Inc.
10.2 Lease Agreement between R2H2 LLC and Urban Juice & Soda Company
Ltd.
27.1 Financial Data Schedule
</TABLE>
14
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
- ------------------------------------------------------------------------------
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (as it may be amended, this
"AGREEMENT") is entered into on March 22, 2000 between BANC OF AMERICA
COMMERCIAL FINANCE CORPORATION, THROUGH ITS COMMERCIAL FUNDING DIVISION
("LENDER"), having an address at 222 North LaSalle Street, Chicago, Illinois
60601 and URBAN JUICE & SODA COMPANY LTD., a Wyoming corporation, and JONES SODA
CO. (USA) INC., a Washington corporation (collectively, "BORROWER"), whose chief
executive offices are located at 1356 Frances Street, Vancouver, British
Columbia, Canada V5L 1Y9 and 234 Ninth Avenue, Seattle, Washington 98109
(collectively, "BORROWER'S ADDRESS"). All references to Borrower shall mean each
of them, jointly and severally, individually and collectively, and the
successors and assigns of each. The Schedules to this Agreement are an integral
part of this Agreement and are incorporated herein by reference. Terms used, but
not defined elsewhere, in this Agreement are defined in Schedule B.
1. LOANS AND CREDIT ACCOMMODATIONS.
1.1 AMOUNT. Subject to the terms and conditions contained in this
Agreement, Lender will:
(a) REVOLVING LOANS AND CREDIT ACCOMMODATIONS. From time to time
during the Term at Borrower's request, make revolving loans to Borrower
("REVOLVING LOANS"), and make letters of credit, bankers acceptances and other
credit accommodations ("CREDIT ACCOMMODATIONS") available to Borrower, in each
case to the extent that there is sufficient Availability at the time of such
request to cover, dollar for dollar, the requested Revolving Loan or Credit
Accommodation; PROVIDED, that after giving effect to such Revolving Loan or
Credit Accommodation, (x) the outstanding balance of all monetary Obligations
(INCLUDING the principal balance of any Term Loan and, solely for the purpose of
determining compliance with this provision, the Credit Accommodation Balance)
will not exceed the Maximum Facility Amount set forth in Section 1(a) of
Schedule A and (y) none of the other Loan Limits set forth in Section 1 of
Schedule A will be exceeded. For this purpose, "AVAILABILITY" means:
(i) the aggregate amount of Eligible Accounts (less
maximum existing or asserted taxes, discounts, credits and allowances)
multiplied by the Accounts Advance Rate set forth in Section 1(b)(i) of
Schedule A but not to exceed the Accounts Sublimit set forth in Section
1(c) of Schedule A;
16
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
- ------------------------------------------------------------------------------
PLUS
(ii) the lower of cost or market value of Eligible
Inventory multiplied by the Inventory Advance Rate(s) set forth in
Section 1(b)(ii) of Schedule A, but not to exceed the Inventory
Sublimit(s) set forth in Section 1(d) of Schedule A;
MINUS
(iii)all Reserves which Lender has established pursuant to
Section 1.2 (including those to be established in connection with the
requested Revolving Loan or Credit Accommodation);
MINUS
(iv) the outstanding balance of all of the monetary
Obligations (EXCLUDING the Credit Accommodation Balance and the
principal balance of the Term Loan); and
PLUS
(v) the Overadvance Amount, if any, set forth in Section
1(g) of Schedule A.
(b) TERM LOAN. On the date of this Agreement, make (i) an advance
to Borrower computed with respect to the value of Borrower's Eligible Equipment
(the ("EQUIPMENT ADVANCE") in the principal amount, if any, set forth in Section
2(a)(i) of Schedule A, and (ii) an advance to Borrower computed with respect to
the value of Borrower's Eligible Real Property (the "REAL PROPERTY ADVANCE") in
the principal amount, if any, set forth in Section 2(a)(ii) of Schedule A. The
Equipment Advance and the Real Property Advance are collectively referred to as
the "TERM LOAN."
1.2 RESERVES. Lender may from time to time establish and revise such
reserves as Lender deems appropriate in its sole discretion ("RESERVES") to
reflect (i) events, conditions, contingencies or risks which affect or may
affect (A) the Collateral or its value, or the security interests and other
rights of Lender in the Collateral or (B) the assets, business or prospects of
Borrower or any Obligor, (ii) Lender's good faith concern that any Collateral
report or financial information furnished by or on behalf of Borrower or any
Obligor to Lender is or may have been incomplete, inaccurate or misleading in
any material respect, (iii) any fact or circumstance which Lender determines in
good faith constitutes, or could constitute, a Default or Event of Default or
(iv) any other events or circumstances which Lender determines in good faith
make the establishment or revision of a Reserve prudent. Without limiting the
foregoing, Lender shall (x) in the case of each Credit Accommodation issued for
the purchase of Inventory (a) which meets the criteria for Eligible Inventory
set forth in clauses (i), (ii), (iii), (v) and (vi) of the definition of
Eligible Inventory, (b) which is or will be in transit to one of the locations
set forth in Section 9(d) of Schedule A, (c) which is fully insured in a manner
satisfactory to Lender and (d) with respect to which Lender is in
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possession of all bills of lading and all other documentation which Lender has
requested, all in form and substance satisfactory to Lender in its sole
discretion, establish a Reserve equal to the cost of such Inventory (plus all
duties, freight, taxes, insurance, costs and other charges and expenses relating
to such Credit Accommodation or such Eligible Inventory) multiplied by a
percentage equal to 100% minus the Inventory Advance Rate applicable to Eligible
Inventory and (y) in the case of any other Credit Accommodation issued for any
purpose, establish a Reserve equal to the full amount of such Credit
Accommodation plus all costs and other charges and expenses relating to such
Credit Accommodation. In addition, (x) Lender shall establish a permanent
Reserve in the amount set forth in Section 1(f) of Schedule A, and (y) if the
outstanding principal balance of the Term Loan advance with respect to Eligible
Equipment exceeds the percentage set forth in Section 2(a)(i) of Schedule A of
the appraised value of such Eligible Equipment, Lender may establish an
additional Reserve in the amount of such excess (and, for this purpose, if
payments of principal on the Term Loan advances against Eligible Equipment and
Real Property are not calculated separately, payments of principal of the Term
Loan made by Borrower shall be deemed to apply to the Term Loan advance with
respect to Eligible Equipment and Real Property, respectively, in proportion to
the original principal amounts of such advances). Lender may, in its discretion,
establish and revise Reserves by deducting them in determining Availability or
by reclassifying Eligible Accounts or Eligible Inventory as ineligible. In no
event shall the establishment of a Reserve in respect of a particular actual or
contingent liability obligate Lender to make advances hereunder to pay such
liability or otherwise obligate Lender with respect thereto.
1.3 OTHER PROVISIONS APPLICABLE TO CREDIT ACCOMMODATIONS. Lender may, in
its sole discretion and on terms and conditions acceptable to Lender, make
Credit Accommodations available to Borrower either by issuing them, or by
causing other financial institutions to issue them supported by Lender's
guaranty or indemnification; PROVIDED, that after giving effect to each Credit
Accommodation, the Credit Accommodation Balance will not exceed the Credit
Accommodation Limit set forth in Section 1(e) of Schedule A. Any amounts paid by
Lender in respect of a Credit Accommodation will be treated for all purposes as
a Revolving Loan which shall be secured by the Collateral and bear interest, and
be payable, in the same manner as a Revolving Loan. Borrower agrees to execute
all documentation required by Lender or the issuer of any Credit Accommodation
in connection with any such Credit Accommodation.
1.4 REPAYMENT. Accrued interest on all monetary Obligations shall be
payable on the first day of each month. Principal of the Term Loan shall be
repaid as set forth in Section 2(b) of Schedule A. If at any time any of the
Loan Limits are exceeded, Borrower will immediately pay to Lender such amounts
(or provide cash collateral to Lender with respect to the Credit Accommodation
Balance in the manner set forth in Section 7.3), as shall cause Borrower to be
in full compliance with all of the Loan Limits. Notwithstanding the foregoing,
Lender may, in its sole discretion, make or permit Revolving Loans, the Term
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Loan, any Credit Accommodations or any other monetary Obligations to be in
excess of any of the Loan Limits; PROVIDED, that Borrower shall, upon Lender's
demand, pay to Lender such amounts as shall cause Borrower to be in full
compliance with all of the Loan Limits. All unpaid monetary Obligations shall be
payable in full on the Maturity Date (as defined in Section 7.1) or, if earlier,
the date of any early termination pursuant to Section 7.2.
1.5 MINIMUM BORROWING. Subject to the terms and conditions of this
Agreement, Borrower agrees to (i) borrow sufficient amounts to cause the
outstanding principal balance of the Loans to equal or exceed, at all times
prior to the Maturity Date, the Minimum Loan Amount set forth in Section 4 of
Schedule A and (ii) maintain Availability sufficient to enable Borrower to do
so. However, Lender shall not be obligated to loan Borrower the Minimum Loan
Amount other than in accordance with all of the terms and conditions of this
Agreement.
1.6 JOINT AND SEVERAL LIABILITY. The liability of each Borrower for all
amounts due to Lender under this Agreement shall be joint and several regardless
of which Borrower actually receives Loans or other extensions of credit
hereunder or the amount of such Loans received or the manner in which Lender
accounts for such Loans or other extensions of credit or on its books and
records. Each Borrower's Obligations with respect to Revolving Loans made to it,
and related fees, costs and expenses, and each Borrower's Obligations arising as
a result of the joint and several liability of each Borrower hereunder, with
respect to Revolving Loans and made to the other Borrowers hereunder, together
with the related fees, costs and expenses, shall be separate and distinct
obligations, all of which are primary obligations of each Borrower.
Each Borrower's Obligations arising as a result of the joint and
several liability of the Borrower hereunder with respect to Loans or other
extensions of credit made to the other Borrower hereunder shall, to the fullest
extent permitted by law, be unconditional irrespective of (i) the validity,
enforceability, avoidance or subordination of the Obligations of the other
Borrower or of any promissory note or other document evidencing all or any part
of the Obligations of the other Borrower, (ii) the absence of any attempt to
collect the Obligations from the other Borrower, any other guarantor, or any
other security therefor, or the absence of any other action to enforce the same,
(iii) the waiver, consent, extension, forbearance or granting of any indulgence
by Lender with respect to any provision of any instrument evidencing the
Obligations of the other Borrower, or any part thereof, or any other agreement
now or hereafter executed by the other Borrower and delivered to Lender, (iv)
the failure by Lender to take any steps to perfect and maintain its security
interest in, or to preserve its rights to, any security or collateral for the
Obligations of the other Borrower, (v) Lender's election, in any proceeding
instituted under the Bankruptcy Code, of the application of Section 1111(b)(2)
of the Bankruptcy Code, (vi) any borrowing or grant of a security interest by
the other Borrower, as debtor-in-possession under Section 364 of the Bankruptcy
Code, (vii) the disallowance of all or any portion of Lender's claim(s) for
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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repayment of the Obligations of the other Borrower under Section 502 of the
Bankruptcy Code, or (viii) any other circumstance which might constitute a legal
or equitable discharge or defense of a guarantor or of the other Borrower. With
respect to each Borrower's Obligations arising as a result of the joint and
several liability of the Borrowers hereunder with respect to Loans or other
extensions of credit made to the other Borrowers hereunder, such Borrower
waives, until the Obligations shall have been indefeasibly paid in full and the
Loan Agreement shall have been terminated, any right to enforce any right of
subrogation or any remedy which Lender now has or may hereafter have against any
Borrower, any endorser of any guarantor of all or any part of the Obligations,
and any benefit of, and any right to participate in, any security or collateral
given to Lender to secure payment of the Obligations or any other liability of
the Borrowers to Lender, whether any such right arises by way of suretyship or
otherwise. Borrowers hereby further waive, to the fullest extent permitted by
law, all suretyship or similar defense in respect of Lender and the transactions
contemplated herein.
Upon any Event of Default, Lender may, at its sole election, proceed
directly and at once, without notice, against any Borrower to collect and
recover the full amount, or any portion of the Obligations, without first
proceeding against any other Borrower or any other person, or against any
security or collateral for the Obligations. Each Borrower consents and agrees
that Lender shall not be under any obligation to marshal any assets in favor of
such Borrower or against or in payment of any or all of the Obligations.
1.7 ADMINISTRATION OF REVOLVING LOANS AND COLLATERAL ON A POOLED BASIS
(a) All Revolving Loans made or advanced to either Borrower pursuant to
this Agreement from time to time may (but need not) be deposited in the general
corporate account of Jones Soda Co. (USA) Inc. All such deposits shall
constitute the discharge, pro tanto, of Lender's obligation to the Borrower
under this Agreement, or an advance to either Jones Soda Co. (USA) Inc. or Urban
Juice & Soda Company Ltd. of that amount, as the case may be.
(b) All Collateral assigned to Lender pursuant to this Agreement may
(but need not) be handled by Lender in a single account on Lender's books in the
name of Jones Soda Co. (USA) Inc. without any attempted differentiation based
upon the true original ownership thereof.
(c) Lender may accept the instructions or other communications of
either Jones Soda Co. (USA) Inc. or Urban Juice & Soda Company Ltd. in
connection with the advances, Revolving Loans and the Collateral under the
Agreement with the same effect as if given by both Borrowers.
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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2. INTEREST AND FEES.
2.1 INTEREST. All Loans and other monetary Obligations shall bear
interest at the Interest Rate(s) set forth in Section 3 of Schedule A, except
where expressly set forth to the contrary in this Agreement or another Loan
Document; PROVIDED, that after the occurrence of an Event of Default, all Loans
and other monetary Obligations shall, at Lender's option, bear interest at a
rate per annum equal to two percent (2%) in excess of the rate otherwise
applicable thereto (the "DEFAULT RATE") until paid in full (notwithstanding the
entry of any judgment against Borrower or the exercise of any other right or
remedy by Lender), and all such interest shall be payable on demand. Changes in
the Interest Rate shall be effective as of the date of any change in the Prime
Rate. Notwithstanding anything to the contrary contained in this Agreement, the
aggregate of all amounts deemed to be interest hereunder and charged or
collected by Lender is not intended to exceed the highest rate permissible under
any applicable law, but if it should, such interest shall automatically be
reduced to the extent necessary to comply with applicable law and Lender will
refund to Borrower any such excess interest received by Lender.
2.2 FEES AND WARRANTS. Borrower shall pay Lender the following fees, and
issue Lender the following warrants, which are in addition to all interest and
other sums payable by Borrower to Lender under this Agreement, and are not
refundable:
(a) CLOSING FEE. A closing fee in the amount set forth in Section
6(a) of Schedule A, which shall be deemed to be fully earned as of, and payable
on, the date hereof.
(b) FACILITY FEES. (i) A facility fee for the Initial Term in the
amount set forth in Section 6(b)(i) of Schedule A, which shall be fully earned
as of the date of this Agreement, and shall be payable in two equal installments
on each anniversary of this Agreement during the Initial Term, and (ii) a
facility fee for each Renewal Term in the amount set forth in Section 6(b)(ii)
of Schedule A, which shall be fully earned as of the first day of such Renewal
Term, and shall be payable in equal three installments on the first day of such
Renewal Term and on each anniversary thereof during such Renewal Term.
(c) SERVICING FEE. A monthly servicing fee in the amount set
forth in Section 6(c) of Schedule A, in consideration of Lender's administration
and other services for each month (or part thereof), which shall be fully earned
as of, and payable in advance on, the date of this Agreement and on the first
day of each month thereafter so long as any of the Obligations are outstanding.
(d) UNUSED LINE FEE. An unused line fee at a rate equal to the
percentage per annum set forth in Section 6(d) of Schedule A of the amount by
which the Maximum Facility Amount exceeds the average daily outstanding
principal balance of the Loans and the Credit Accommodation Balance during the
immediately preceding month (or part
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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thereof), which fee shall be payable, in arrears, on the first day of each
month so long as any of the Obligations are outstanding and on the Maturity
Date.
(e) MINIMUM BORROWING FEE. A minimum borrowing fee equal to
the excess, if any, of (i) interest which would have been payable in respect
of each period set forth in Section 6(e)(i) of Schedule A if, at all times
during such period, the principal balance of the Loans was equal to the
Minimum Loan Amount over (ii) the actual interest payable in respect of such
period, which fee shall be fully earned as of the last day of such period and
payable on the date set forth in Section 6(e)(ii) of Schedule A and on the
Maturity Date, commencing with the immediately following period.
(f) SUCCESS FEE. A success fee in the amount set forth in
Section 6(f) of Schedule A, which shall be fully earned as of the date of
this Agreement and payable as set forth in Section 6(f) of Schedule A.
(g) WARRANTS. Warrants to acquire the capital stock of URBAN
JUICE & SODA COMPANY LTD., a Wyoming corporation, as summarized in Section
6(g) of Schedule A and as more fully set forth in a separate warrant
agreement executed by Borrower contemporaneously with this Agreement.
(h) CREDIT ACCOMMODATION FEES. All of the fees relating to Credit
Accommodations set forth in Section 6(i) of Schedule A.
2.3 COMPUTATION OF INTEREST AND FEES. All interest and fees shall be
calculated daily on the closing balances in the Loan Account based on the actual
number of days elapsed in a year of 360 days. For purposes of calculating
interest and fees, if the outstanding daily principal balance of the Revolving
Loans is a credit balance, such balance shall be deemed to be zero.
2.4 LOAN ACCOUNT; MONTHLY ACCOUNTINGS. Lender shall maintain a loan
account for Borrower reflecting all advances, charges, expenses and payments
made pursuant to this Agreement (the "LOAN ACCOUNT"), and shall provide Borrower
with a monthly accounting reflecting the activity in the Loan Account. Each
accounting shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Lender), unless Borrower notifies Lender in
writing to the contrary within sixty days after such account is rendered,
describing the nature of any alleged errors or omissions. However, Lender's
failure to maintain the Loan Account or to provide any such accounting shall not
affect the legality or binding nature of any of the Obligations. Interest, fees
and other monetary Obligations due and owing under this Agreement (including
fees and other amounts paid by Lender to issuers of Credit Accommodations) may,
in Lender's discretion, be charged to the Loan Account, and will thereafter be
deemed to be Revolving Loans and will bear interest at the same rate as other
Revolving Loans.
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3. SECURITY INTEREST.
3.1 To secure the full payment and performance of all of the
Obligations, Borrower hereby grants to Lender a continuing security interest in
all of Borrower's property and interests in property, whether tangible or
intangible, now owned or in existence or hereafter acquired or arising, wherever
located, including Borrower's interest in all of the following, whether or not
eligible for lending purposes: (i) all Accounts, Chattel Paper, Instruments,
Documents, Goods (including Inventory, Equipment, farm products and consumer
goods), Investment Property, General Intangibles, Deposit Accounts and money,
(ii) all proceeds and products of all of the foregoing (including proceeds of
any insurance policies, proceeds of proceeds and claims against third parties
for loss or any destruction of any of the foregoing) and (iii) all books and
records relating to any of the foregoing.
4. ADMINISTRATION.
4.1 LOCK BOXES AND BLOCKED ACCOUNTS. Borrower will, at its expense,
establish (and revise from time to time as Lender may require) collection
procedures acceptable to Lender, in Lender's sole discretion, for the collection
of checks, wire transfers and other proceeds of Accounts ("ACCOUNT PROCEEDS"),
which may include (i) directing all Account Debtors to send all such proceeds
directly to a post office box designated by Lender either in the name of
Borrower (but as to which Lender has exclusive access) or, at Lender's option,
in the name of Lender (a "LOCK BOX") or (ii) depositing all Account Proceeds
received by Borrower into one or more bank accounts maintained in Lender's name
(each, a "BLOCKED ACCOUNT"), under an arrangement acceptable to Lender with a
depository bank acceptable to Lender, pursuant to which all funds deposited into
each Blocked Account are to be transferred to Lender in such manner, and with
such frequency, as Lender shall specify or (iii) a combination of the foregoing.
Borrower agrees to execute, and to cause its depository banks to execute, such
Lock Box and Blocked Account agreements and other documentation as Lender shall
require from time to time in connection with the foregoing.
4.2 REMITTANCE OF PROCEEDS. Except as provided in Section 4.1, all
proceeds arising from the sale or other disposition of any Collateral shall be
delivered, in kind, by Borrower to Lender in the original form in which received
by Borrower not later than the following Business Day after receipt by Borrower.
Until so delivered to Lender, Borrower shall hold such proceeds separate and
apart from Borrower's other funds and property in an express trust for Lender.
Nothing in this Section 4.2 shall limit the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
4.3 APPLICATION OF PAYMENTS. Lender may, in its sole discretion, apply,
reverse and re-apply all cash and non-cash proceeds of Collateral or other
payments received with respect to the Obligations, in such order and manner as
Lender shall determine, whether or not the Obligations are due, and whether
before or after the occurrence of a Default or an Event of Default. For purposes
of determining Availability, such amounts will be credited to
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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the Loan Account and the Collateral balances to which they relate upon Lender's
receipt of advice from Lender's Bank (set forth in Section 11 of Schedule A)
that such items have been credited to Lender's account at Lender's Bank (or upon
Lender's deposit thereof at Lender's Bank in the case of payments received by
Lender in kind), in each case subject to final payment and collection. However,
for purposes of computing interest on the Obligations, such items shall be
deemed applied by Lender three Business Days after Lender's receipt of advice of
deposit thereof at Lender's Bank.
4.4 NOTIFICATION; VERIFICATION. Lender or its designee may, from time to
time, whether or not a Default or Event of Default has occurred: (i) verify
directly with the Account Debtors the validity, amount and other matters
relating to the Accounts and Chattel Paper, by means of mail, telephone or
otherwise, either in the name of Borrower or Lender or such other name as Lender
may choose; (ii) notify Account Debtors that Lender has a security interest in
the Accounts and that payment thereof is to be made directly to Lender; and
(iii) demand, collect or enforce payment of any Accounts and Chattel Paper (but
without any duty to do so).
4.5 POWER OF ATTORNEY. Borrower hereby grants to Lender an irrevocable
power of attorney, coupled with an interest, authorizing and permitting Lender
(acting through any of its officers, employees, attorneys or agents), at any
time (whether or not a Default or Event of Default has occurred and is
continuing, except as expressly provided below), at Lender's option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise: (i) execute on
behalf of Borrower any documents that Lender may, in its sole discretion, deem
advisable in order to perfect and maintain Lender's security interests in the
Collateral, to exercise a right of Borrower or Lender, or to fully consummate
all the transactions contemplated by this Agreement and the other Loan Documents
(including such financing statements and continuation financing statements, and
amendments thereto, as Lender shall deem necessary or appropriate) and to file
as a financing statement any copy of this Agreement or any financing statement
signed by Borrower; (ii) execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose of
or lease (as lessor or lessee) any real or personal property which is part of
the Collateral or in which Lender has an interest; (iii) execute on behalf of
Borrower any invoices relating to any Accounts, any draft against any Account
Debtor, any proof of claim in bankruptcy, any notice of Lien or claim, and any
assignment or satisfaction of mechanic's, materialman's or other Lien; (iv)
execute on behalf of Borrower any notice to any Account Debtor; (v) receive and
otherwise take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; (vi) endorse Borrower's name on all checks and other
forms of remittances received by Lender; (vii) pay, contest or settle any Lien,
charge, encumbrance, security interest and adverse claim in or to any of the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; (viii) after the occurrence of a Default or
Event of Default, grant extensions of time to pay,
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compromise claims relating to, and settle Accounts, Chattel Paper and General
Intangibles for less than face value and execute all releases and other
documents in connection therewith; (ix) pay any sums required on account of
Borrower's taxes or to secure the release of any Liens therefor; (x) pay any
amounts necessary to obtain, or maintain in effect, any of the insurance
described in Section 5.12; (xi) settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain payment
therefor; (xii) instruct any third party having custody or control of any
Collateral or books or records belonging to, or relating to, Borrower to give
Lender the same rights of access and other rights with respect thereto as Lender
has under this Agreement; and (xiii) after the occurrence of a Default or Event
of Default, change the address for delivery of Borrower's mail and receive and
open all mail addressed to Borrower. Any and all sums paid, and any and all
costs, expenses, liabilities, obligations and reasonable attorneys' fees
incurred, by Lender with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations.
Borrower agrees that Lender's rights under the foregoing power of attorney or
any of Lender's other rights under this Agreement or the other Loan Documents
shall not be construed to indicate that Lender is in control of the business,
management or properties of Borrower.
4.6 DISPUTES. Borrower shall promptly notify Lender of all disputes or
claims relating to Accounts and Chattel Paper. Borrower will not, without
Lender's prior written consent, compromise or settle any Account or Chattel
Paper for less than the full amount thereof, grant any extension of time of
payment of any Account or Chattel Paper, release (in whole or in part) any
Account Debtor or other person liable for the payment of any Account or Chattel
Paper or grant any credits, discounts, allowances, deductions, return
authorizations or the like with respect to any Account or Chattel Paper; except
that prior to the occurrence of an Event of Default, Borrower may take any of
such actions in the ordinary course of its business, PROVIDED that Borrower
promptly reports the same to Lender.
4.7 INVOICES. At Lender's request, Borrower will cause all invoices and
statements which it sends to Account Debtors or other third parties to be
marked, in a manner satisfactory to Lender, to reflect Lender's security
interest therein.
4.8 INVENTORY.
(A)RETURNS. Provided that no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower will promptly determine the reason for
such return and promptly issue a credit memorandum to the Account Debtor in the
appropriate amount (sending a copy to Lender). After the occurrence of an Event
of Default, Borrower will not accept any return without Lender's prior written
consent. Regardless of whether an Event of Default has occurred, Borrower will
(i) hold the returned Inventory in trust for Lender; (ii) segregate all returned
Inventory from all of Borrower's other property; (iii) conspicuously label the
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returned Inventory as Lender's property; and (iv) immediately notify Lender of
the return of such Inventory, specifying the reason for such return, the
location and condition of the returned Inventory and, at Lender's request,
deliver such returned Inventory to Lender at an address specified by Lender.
(b) OTHER COVENANTS. Borrower will not, without Lender's prior
written consent, (i) store any Inventory with any warehouseman or other third
party other than as set forth in Section 9(d) of Schedule A or (ii) sell any
Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent
basis. All of the Inventory produced in the United States has been produced only
in accordance with the Fair Labor Standards Act of 1938 and all rules,
regulations and orders promulgated thereunder.
4.9 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on
one Business Day's notice, prior to the occurrence of a Default or an Event of
Default, and at any time and with or without notice after the occurrence of a
Default or an Event of Default, Lender or its agents shall have the right to
inspect the Collateral, and the right to examine and copy Borrower's books and
records. Lender shall take reasonable steps to keep confidential all information
obtained in any such inspection or examination, but Lender shall have the right
to disclose any such information to its auditors, regulatory agencies, attorneys
and participants, and pursuant to any subpoena or other legal process. Borrower
agrees to give Lender access to any or all of Borrower's premises to enable
Lender to conduct such inspections and examinations. Such inspections and
examinations shall be at Borrower's expense and the charge therefor shall be
$750 per person per day (or such higher amount as shall represent Lender's then
current standard charge), plus reasonable out-of-pocket expenses. Lender may, at
Borrower's expense, use Borrower's personnel, computer and other equipment,
programs, printed output and computer readable media, supplies and premises for
the collection, sale or other disposition of Collateral to the extent Lender, in
its sole discretion, deems appropriate. Borrower hereby irrevocably authorizes
all accountants and third parties to disclose and deliver to Lender, at
Borrower's expense, all financial information, books and records, work papers,
management reports and other information in their possession regarding Borrower.
Borrower will not enter into any agreement with any accounting firm, service
bureau or third party to store Borrower's books or records at any location other
than Borrower's Address without first obtaining Lender's written consent (which
consent may be conditioned upon such accounting firm, service bureau or other
third party agreeing to give Lender the same rights with respect to access to
books and records and related rights as Lender has under this Agreement).
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5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
To induce Lender to enter into this Agreement, Borrower represents,
warrants and covenants as follows (it being understood that (i) each such
representation and warranty will be deemed remade as of the date on which each
Loan is made and each Credit Accommodation is provided and shall not be affected
by any knowledge of, or any investigation by, Lender, and (ii) the accuracy of
each such representation, warranty and covenant will be a condition to each Loan
and Credit Accommodation):
5.1 EXISTENCE AND AUTHORITY. Borrower is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation. Borrower is qualified and licensed to do business in
all jurisdictions in which any failure to do so would have a material adverse
effect on Borrower. The execution, delivery and performance by Borrower of this
Agreement and all of the other Loan Documents have been duly and validly
authorized, do not violate Borrower's articles or certificate of incorporation,
by-laws or other organizational documents, or any law or any agreement or
instrument or any court order which is binding upon Borrower or its property, do
not constitute grounds for acceleration of any indebtedness or obligation under
any agreement or instrument which is binding upon Borrower or its property, and
do not require the consent of any Person. This Agreement and such other Loan
Documents have been duly executed and delivered by, and are enforceable against,
Borrower, and all other Obligors who have signed them, in accordance with their
respective terms. Sections 9(g) and 9(h) of Schedule A set forth the ownership
of Borrower and the names and ownership of Borrower's Subsidiaries as of the
date of this Agreement.
5.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct and complete legal name as of the date
hereof. Listed in Sections 9(a), 9(b) and 9(c) of Schedule A are all prior names
of Borrower and all of Borrower's present and prior trade names. Borrower shall
give Lender at least thirty days' prior written notice before changing its name
or doing business under any other name. Borrower has complied with all laws
relating to the conduct of business under a fictitious business name. Borrower
represents and warrants that (i) each trade name does not refer to another
corporation or other legal entity; (ii) all Accounts invoiced under any such
trade names are owned exclusively by Borrower and are subject to the security
interest of Lender and the other terms of this Agreement and (iii) all schedules
of Accounts, including any sales made or services rendered using any trade name
shall show Borrower's name as assignor.
5.3 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower has good and
marketable title to the Collateral. The Collateral now is and will remain free
and clear of any and all liens, charges, security interests, encumbrances and
adverse claims, except for Permitted Liens. Lender now has, and will continue to
have, a first-priority perfected and enforceable security interest in all of the
Collateral, subject only to the Permitted Liens, and Borrower will at all times
defend Lender and the Collateral against all claims of others. None of the
Collateral
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which is Equipment is or will be affixed to any real property in such a manner,
or with such intent, as to become a fixture. Except for leases or subleases as
to which Borrower has delivered to Lender a landlord's waiver in form and
substance satisfactory to Lender, Borrower is not a lessee or sublessee under
any real property lease or sublease pursuant to which the lessor or sublessor
may obtain any rights in any of the Collateral, and no such lease or sublease
now prohibits, restrains, impairs or conditions, or will prohibit, restrain,
impair or condition, Borrower's right to remove any Collateral from the
premises. Whenever any Collateral is located upon premises in which any third
party has an interest (whether as owner, mortgagee, beneficiary under a deed of
trust, lien or otherwise), Borrower shall, whenever requested by Lender, cause
each such third party to execute and deliver to Lender, in form and substance
acceptable to Lender, such waivers and subordinations as Lender shall specify,
so as to ensure that Lender's rights in the Collateral are, and will continue to
be, superior to the rights of any such third party. Borrower will keep in full
force and effect, and will comply with all the terms of, any lease of real
property where any of the Collateral now or in the future may be located.
5.4 ACCOUNTS AND CHATTEL PAPER. As of each date reported by Borrower,
all Accounts which Borrower has reported to Lender as being Eligible Accounts
comply in all respects with the criteria for eligibility established by Lender
and in effect at such time. All Accounts and Chattel Paper are genuine and in
all respects what they purport to be, arise out of a completed, bona fide and
unconditional and non-contingent sale and delivery of goods or rendition of
services by Borrower in the ordinary course of its business and in accordance
with the terms and conditions of all purchase orders, contracts or other
documents relating thereto, each Account Debtor thereunder had the capacity to
contract at the time any contract or other document giving rise to such Accounts
and Chattel Paper were executed, and the transactions giving rise to such
Accounts and Chattel Paper comply with all applicable laws and governmental
rules and regulations.
5.5 INVESTMENT PROPERTY. Borrower will take any and all actions required
or requested by Lender, from time to time, to (i) cause Lender to obtain
exclusive control of any Investment Property in a manner acceptable to Lender
and (ii) obtain from any issuers of Investment Property and such other Persons
as Lender shall specify, for the benefit of Lender, written confirmation of
Lender's exclusive control over such Investment Property and take such other
actions as Lender may request to perfect Lender's security interest in such
Investment Property. For purposes of this Section 5.5, Lender shall have
exclusive control of Investment Property if (A) such Investment Property
consists of certificated securities and Borrower delivers such certificated
securities to Lender (with appropriate endorsements if such certificated
securities are in registered form); (B) such Investment Property consists
of uncertificated securities and either (x) Borrower delivers such
uncertificated securities to Lender or (y) the issuer thereof agrees, pursuant
to documentation in form and substance satisfactory to Lender, that it will
comply with instructions originated by Lender without further consent by
Borrower, and (C) such Investment Property consists
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of security entitlements and either (x) Lender becomes the entitlement holder
thereof or (y) the appropriate securities intermediary agrees, pursuant to
documentation in form and substance satisfactory to Lender, that it will
comply with entitlement orders originated by Lender without further consent
by Borrower.
5.6 PLACE OF BUSINESS; LOCATION OF COLLATERAL. Borrower's Address is
Borrower's chief executive office and the location of its books and records. In
addition, except as provided in the immediately following sentence, Borrower has
places of business and Collateral located only at the locations set forth on
Sections 9(d) and 9(e) of Schedule A. Borrower will give Lender at least thirty
days' prior written notice before opening any additional place of business,
changing its chief executive office or the location of its books and records, or
moving any of the Collateral to a location other than Borrower's Address or one
of the locations set forth in Sections 9(d) and 9(e) of Schedule A, and will
execute and deliver all financing statements and other agreements, instruments
and documents which Lender shall require as a result thereof.
5.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements delivered to Lender by or on behalf of Borrower have been prepared in
conformity with GAAP and completely and fairly reflect the financial condition
of Borrower, at the times and for the periods therein stated. Between the last
date covered by any such financial statement provided to Lender and the date
hereof (or, with respect to the remaking of this representation in connection
with the making of any Loan or the providing of any Credit Accommodation, the
date such Loan is made or such Credit Accommodation is provided), there has been
no material adverse change in the financial condition or business of Borrower.
Borrower is solvent and able to pay its debts as they come due, and has
sufficient capital to carry on its business as now conducted and as proposed to
be conducted. All schedules, reports and other information and documentation
delivered by Borrower to Lender with respect to the Collateral are, or will be,
when delivered, true, correct and complete as of the date delivered or the date
specified therein.
5.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed all tax returns and reports required by applicable law, has timely paid
all applicable taxes, assessments, deposits and contributions owing by Borrower
and will timely pay all such items in the future as they became due and payable.
In addition, Borrower will pay any and all taxes, including, without limitation,
withholding taxes which may be imposed upon Lender on account of Borrower's or
Borrower's Affiliates' operations in Canada. Borrower may, however, defer
payment of any contested taxes; PROVIDED, that Borrower (i) in good faith
contests Borrower's obligation to pay such taxes by appropriate proceedings
promptly and diligently instituted and conducted; (ii) notifies Lender in
writing of the commencement of, and any material development in, the
proceedings; (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a Lien upon any of the Collateral and (iv)
maintains adequate reserves therefor in conformity with GAAP. Borrower is
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay, all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not withdrawn from
participation in, permitted partial or complete termination of, or permitted the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or any other governmental agency.
5.9 COMPLIANCE WITH LAWS. Borrower has complied in all material respects
with all provisions of all applicable laws and regulations, including those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, the payment and withholding of taxes, ERISA
and other employee matters, safety and environmental matters.
5.10 LITIGATION. Section 9(f) of Schedule A discloses all claims,
proceedings, litigation or investigations pending or (to the best of Borrower's
knowledge) threatened against Borrower. There is no claim, suit, litigation,
proceeding or investigation pending or (to the best of Borrower's knowledge)
threatened by or against or affecting Borrower in any court or before any
governmental agency (or any basis therefor known to Borrower) which may result,
either separately or in the aggregate, in any material adverse change in the
financial condition or business of Borrower, or in any material impairment in
the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Lender in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower.
5.11 USE OF PROCEEDS. All proceeds of all Loans will be used solely for
lawful business purposes.
5.12 INSURANCE. Borrower will at all times carry property, liability and
other insurance, with insurers acceptable to Lender, in such form and amounts,
and with such deductibles and other provisions, as Lender shall require, and
Borrower will provide evidence of such insurance to Lender, so that Lender is
satisfied that such insurance is, at all times, in full force and effect. Each
property insurance policy shall name Lender as loss payee and shall contain a
lender's loss payable endorsement in form acceptable to Lender, each liability
insurance policy shall name Lender as an additional insured, and each business
interruption insurance policy shall be collaterally assigned to Lender, all in
form and substance satisfactory to Lender. All policies of insurance shall
provide that they may not be cancelled or changed without at least thirty days'
prior written notice to Lender, shall contain breach of warranty coverage, and
shall otherwise be in form and substance satisfactory to Lender. Upon receipt of
the proceeds of any such insurance, Lender shall apply such proceeds in
reduction of the Obligations as Lender shall determine in its sole discretion.
Borrower will promptly deliver to Lender copies of all reports made to insurance
companies.
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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5.13 FINANCIAL AND COLLATERAL REPORTS. Borrower has kept and will keep
adequate records and books of account with respect to its business activities
and the Collateral in which proper entries are made in accordance with GAAP
reflecting all its financial transactions, and will cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with GAAP,
unless Borrower's certified public accountants concur in any change therein and
such change is disclosed to Lender):
(a) COLLATERAL REPORTS. On or before the fifteenth day of each
month, an aging of Borrower's Accounts, Chattel Paper and notes receivable, and
weekly Inventory reports, all in such form, and together with such additional
certificates, schedules and other information with respect to the Collateral or
the business of Borrower or any Obligor, as Lender shall request; PROVIDED, that
Borrower's failure to execute and deliver the same shall not affect or limit
Lender's security interests and other rights in any of the Accounts, nor shall
Lender's failure to advance or lend against a specific Account affect or limit
Lender's security interest and other rights therein. Together with each such
schedule, Borrower shall furnish Lender with copies (or, at Lender's request,
originals) of all contracts, orders, invoices, and other similar documents, and
all original shipping instructions, delivery receipts, bills of lading, and
other evidence of delivery, for any goods the sale or disposition of which gave
rise to such Accounts, and Borrower warrants the genuineness of all of the
foregoing. In addition, Borrower shall deliver to Lender the originals of all
Instruments, Chattel Paper, security agreements, guaranties and other documents
and property evidencing or securing any Accounts, immediately upon receipt
thereof and in the same form as received, with all necessary endorsements.
Lender may destroy or otherwise dispose of all documents, schedules and other
papers delivered to Lender pursuant to this Agreement (other than originals of
Instruments, Chattel Paper, security agreements, guaranties and other documents
and property evidencing or securing any Accounts) six months after Lender
receives them, unless Borrower requests their return in writing in advance and
arranges for their return to Borrower at Borrower's expense.
(b) ANNUAL STATEMENTS. Not later than ninety days after the close
of each fiscal year of Borrower, unqualified (except for a qualification for a
change in accounting principles with which the accountant concurs) audited
financial statements of Borrower and its Subsidiaries as of the end of such
year, on a consolidated and consolidating basis, certified by a firm of
independent certified public accountants of recognized standing selected by
Borrower but acceptable to Lender, together with a copy of any management letter
issued in connection therewith and a letter from such accountants acknowledging
that Lender is relying on such financial statements;
(c) INTERIM STATEMENTS. Not later than twenty days after the end
of each month hereafter, including the last month of Borrower's fiscal year,
unaudited interim financial statements of Borrower and its Subsidiaries as of
the end of such month and of the portion of Borrower's fiscal year then elapsed,
on a consolidated and consolidating basis,
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certified by the principal financial officer of Borrower as prepared in
accordance with GAAP and fairly presenting the consolidated financial position
and results of operations of Borrower and its Subsidiaries for such month and
period subject only to changes from audit and year-end adjustments and except
that such statements need not contain notes;
(d) PROJECTIONS, ETC. Such business projections, Availability
projections, business plans, budgets and cash flow statements for Borrower and
its Subsidiaries as Lender shall request from time to time;
(e) SHAREHOLDER REPORTS, ETC. Promptly after the sending or
filing thereof, as the case may be, copies of any proxy statements, financial
statements or reports which Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration statements
which Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any national
securities exchange;
(f) ERISA REPORTS. Upon request by Lender, copies of any annual
report to be filed pursuant to the requirements of ERISA in connection with each
plan subject thereto; and
(g) OTHER INFORMATION. Such other data and information (financial
and otherwise) as Lender, from time to time, may reasonably request, bearing
upon or related to the Collateral or Borrower's and each of its Subsidiary's
financial condition or results of operations.
5.14 LITIGATION COOPERATION. Should any third-party suit or proceeding
be instituted by or against Lender with respect to any Collateral or in any
manner relating to Borrower, Borrower shall, without expense to Lender, make
available Borrower and its officers, employees and agents, and Borrower's books
and records, without charge, to the extent that Lender may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
5.15 MAINTENANCE OF COLLATERAL, ETC. Borrower will maintain all of its
Equipment in good working condition, ordinary wear and tear excepted, and
Borrower will not use the Collateral for any unlawful purpose. Borrower will
immediately advise Lender in writing of any material loss or damage to the
Collateral and of any investigation, action, suit, proceeding or claim relating
to the Collateral or which may result in an adverse impact upon Borrower's
business, assets or financial condition.
5.16 NOTIFICATION OF CHANGES. Borrower will promptly notify Lender in
writing of any change in its officers or directors, the opening of any new bank
account or other deposit account, or any material adverse change in the business
or financial affairs of Borrower or the existence of any circumstance which
would make any representation or warranty of
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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Borrower untrue in any material respect or constitute a material breach of any
covenant of Borrower.
5.17 FURTHER ASSURANCES. Borrower agrees, at its expense, to take all
actions, and execute or cause to be executed and delivered to Lender all
promissory notes, security agreements, agreements with landlords, mortgagees and
processors and other bailees, subordination and intercreditor agreements and
other agreements, instruments and documents as Lender may request from time to
time, to perfect and maintain Lender's security interests in the Collateral and
to fully effectuate the transactions contemplated by this Agreement.
5.18 NEGATIVE COVENANTS. Except as set forth in Section 13 of Schedule
A, Borrower will not, without Lender's prior written consent, (i) merge or
consolidate with another Person, form any new Subsidiary or acquire any interest
in any Person; (ii) acquire any assets except in the ordinary course of business
and as otherwise permitted by this Agreement and the other Loan Documents; (iii)
enter into any transaction outside the ordinary course of business; (iv) sell or
transfer any Collateral or other assets, except that Borrower may sell finished
goods Inventory in the ordinary course of its business; (v) make any loans to,
or investments in, any Affiliate or other Person in the form of money or other
assets; (vi) incur any debt outside the ordinary course of business; (vii)
guaranty or otherwise become liable with respect to the obligations of another
party or entity; (viii) pay or declare any dividends or other distributions on
Borrower's stock, if Borrower is a corporation (except for dividends payable
solely in capital stock of Borrower) or with respect to any equity interests, if
Borrower is not a corporation; (ix) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of Borrower's capital stock or other equity
interests; (x) make any change in Borrower's capital structure; (xi) dissolve or
elect to dissolve; (xii) pay any principal or interest on any indebtedness owing
to an Affiliate, (xiii) enter into any transaction with an Affiliate other than
on arms-length terms; or (xiv) agree to do any of the foregoing.
5.19 FINANCIAL COVENANTS.
(a) CAPITAL EXPENDITURES. Borrower will not expend or commit to
expend, directly or indirectly, for capital expenditures (including capital
lease obligations) in excess of the amount set forth in Section 8(a) of Schedule
A as the Capital Expenditure Limitation in any fiscal year.
(b) NET WORTH. Borrower will at all times maintain a net worth of
at least the amount set forth in Section 8(b) of Schedule A.
(c) TANGIBLE NET WORTH. Borrower will at all times maintain a
minimum tangible net worth of at least the amount set forth in Section 8(c) of
Schedule A.
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(d) WORKING CAPITAL. Borrower will at all times maintain working
capital of at least the amount set forth in Section 8(d) of Schedule A.
(e) NET LOSSES. Borrower will not permit its cumulative net loss
to exceed the amount set forth in Section 8(e) of Schedule A.
(f) NET INCOME. Borrower will not permit its cumulative net
income to be less than the amount set forth in Section 8(f) of Schedule A.
(g) LEVERAGE. Borrower will not permit the ratio of its total
liabilities to its net worth to exceed, at any time, the ratio set forth in
Section 8(g) of Schedule A.
(h) OTHER FINANCIAL COVENANTS. Borrower will comply with any
additional financial covenants set forth in Section 8(j) of Schedule A.
5.20 YEAR 2000 COMPLIANCE REPRESENTATION. Borrower has (i) initiated a
review and assessment of all areas within its and each of its Subsidiaries'
business and operations (including those affected by suppliers and vendors) that
could be adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by the Borrower or any of its Subsidiaries (or its
suppliers and vendors) may be unable to recognize and perform properly
date-sensitive functions involving certain dated prior to and any date after
December 31, 1999), (ii) developed a plan and timeline for addressing the Year
2000 Problem on a timely basis, and (iii) to date, reasonably believes that all
computer applications (including those of its suppliers and vendors) that are
material to its or any of its Subsidiaries' business and operations will on a
timely basis be able to perform properly date-sensitive functions for all dates
before and after January 1, 2000 (that is, be "Year 2000 compliant"), except to
the extent that a failure to do so could not reasonably be expected to have a
material adverse effect on Borrower's business or on the condition or value of
the Collateral ("Material Adverse Effect").
6. RELEASE AND INDEMNITY.
6.1 RELEASE. Borrower hereby releases Lender and its Affiliates and
their respective directors, officers, employees, attorneys and agents and any
other Person affiliated with or representing Lender (the "RELEASED PARTIES")
from any and all liability arising from acts or omissions under or pursuant to
this Agreement, whether based on errors of judgment or mistake of law or fact,
except for those arising from willful misconduct. However, in no circumstance
will any of the Released Parties be liable for lost profits or other special or
consequential damages. Such release is made on the date hereof and remade upon
each request for a Loan or Credit Accommodation by Borrower. Without limiting
the foregoing:
(a) Lender shall not be liable for (i) any shortage or
discrepancy in, damage to, or loss or destruction of, any goods, the sale or
other disposition of which gave
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rise to an Account; (ii) any error, act, omission, or delay of any kind
occurring in the settlement, failure to settle, collection or failure to collect
any Account; (iii) settling any Account in good faith for less than the full
amount thereof; or (iv) any of Borrower's obligations under any contract or
agreement giving rise to an Account; and
(b) In connection with Credit Accommodations or any underlying
transaction, Lender shall not be responsible for the conformity of any goods to
the documents presented, the validity or genuineness of any documents, delay,
default or fraud by Borrower, shippers and/or any other Person. Borrower agrees
that any action taken by Lender, if taken in good faith, or any action taken by
an issuer of any Credit Accommodation, under or in connection with any Credit
Accommodation, shall be binding on Borrower and shall not create any resulting
liability to Lender. In furtherance thereof, Lender shall have the full right
and authority to clear and resolve any questions of non-compliance of documents,
to give any instructions as to acceptance or rejection of any documents or
goods, to execute for Borrower's account any and all applications for steamship
or airway guaranties, indemnities or delivery orders, to grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents, and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the Credit Accommodations or applications and other documentation pertaining
thereto.
6.2 INDEMNITY. Borrower hereby agrees to indemnify the Released Parties
and hold them harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses
(including attorneys' fees), of every nature, character and description, which
the Released Parties may sustain or incur based upon or arising out of any of
the transactions contemplated by this Agreement or the other Loan Documents or
any of the Obligations, including any transactions or occurrences relating to
the issuance of any Credit Accommodation, the Collateral relating thereto, any
drafts thereunder and any errors or omissions relating thereto (including any
loss or claim due to any action or inaction taken by the issuer of any Credit
Accommodation) (and for this purpose any charges to Lender by any issuer of
Credit Accommodations shall be conclusive as to their appropriateness and may be
charged to the Loan Account), or any other matter, cause or thing whatsoever
occurred, done, omitted or suffered to be done by Lender relating to Borrower or
the Obligations (except any such amounts sustained or incurred as the result of
the willful misconduct of the Released Parties). Notwithstanding any provision
in this Agreement to the contrary, the indemnity agreement set forth in this
Section shall survive any termination of this Agreement.
7. TERM.
7.1 MATURITY DATE. LENDER'S OBLIGATION TO MAKE LOANS AND TO PROVIDE
CREDIT ACCOMMODATIONS UNDER THIS AGREEMENT SHALL INITIALLY CONTINUE IN EFFECT
UNTIL THE INITIAL MATURITY DATE SET
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FORTH IN SECTION 7 OF SCHEDULE A (THE "INITIAL TERM"); PROVIDED, THAT SUCH DATE
SHALL AUTOMATICALLY BE EXTENDED (THE INITIAL MATURITY DATE, AS IT MAY BE SO
EXTENDED, BEING REFERRED TO AS THE "MATURITY DATE") FOR SUCCESSIVE ADDITIONAL
TERMS OF THREE YEARS EACH (EACH A "RENEWAL TERM"), UNLESS ONE PARTY GIVES
WRITTEN NOTICE TO THE OTHER, NOT LESS THAN SIXTY DAYS PRIOR TO THE MATURITY
DATE, THAT SUCH PARTY ELECTS NOT TO EXTEND THE MATURITY DATE. THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS AND LENDER'S SECURITY INTERESTS IN AND LIENS UPON THE
COLLATERAL, AND ALL REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER
CONTAINED HEREIN AND THEREIN, SHALL REMAIN IN FULL FORCE AND EFFECT AFTER THE
MATURITY DATE UNTIL ALL OF THE MONETARY OBLIGATIONS ARE INDEFEASIBLY PAID IN
FULL.
7.2 EARLY TERMINATION. Lender's obligation to make Loans and to provide
Credit Accommodations under this Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective thirty business days after
written notice of termination is given to Lender or (ii) by Lender at any time
after the occurrence of an Event of Default, without notice, effective
immediately; PROVIDED, that if any Affiliate of Borrower is also a party to a
financing arrangement with Lender, no such early termination shall be effective
unless such Affiliate simultaneously terminates its financing arrangement with
Lender. If so terminated under this Section 7.2, Borrower shall pay to Lender
(i) an early termination fee (the "EARLY TERMINATION FEE") in the amount set
forth in Section 6(h) of Schedule A plus (ii) any earned but unpaid Facility
Fee. Such fee shall be due and payable on the effective date of termination and
thereafter shall bear interest at a rate equal to the highest rate applicable to
any of the Obligations. In addition, if Borrower so terminates and repays the
Obligations without having provided Lender with at least thirty days' prior
written notice thereof, an additional amount equal to thirty days of interest at
the applicable Interest Rate(s), based on the average outstanding amount of the
Obligations for the six month period immediately preceding the date of
termination.
7.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay in full all Obligations,
whether or not all or any part of such Obligations are otherwise then due and
payable. Without limiting the generality of the foregoing, if, on the Maturity
Date or on any earlier effective date of termination, there are any outstanding
Credit Accommodations, then on such date Borrower shall provide to Lender cash
collateral in an amount equal to 110% of the Credit Accommodation Balance to
secure all of the Obligations (including estimated attorneys' fees and other
expenses) relating to said Credit Accommodations or such greater percentage or
amount as Lender reasonably deems appropriate, pursuant to a cash pledge
agreement in form and substance satisfactory to Lender.
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7.4 EFFECT OF TERMINATION. No termination shall affect or impair any
right or remedy of Lender or relieve Borrower of any of the Obligations until
all of the monetary Obligations have been indefeasibly paid in full. Upon
indefeasible payment and performance in full of all of the monetary Obligations
(and the provision of cash collateral with respect to any Credit Accommodation
Balance as required by Section 7.3) and termination of this Agreement, Lender
shall promptly deliver to Borrower termination statements, requests for
reconveyances and such other documents as may be reasonably required to
terminate Lender's security interests in the Collateral.
8. EVENTS OF DEFAULT AND REMEDIES.
8.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "EVENT OF DEFAULT" under this Agreement, and Borrower shall
give Lender immediate written notice thereof: (i) if any warranty,
representation, statement, report or certificate made or delivered to Lender by
Borrower or any of Borrower's officers, employees or agents is untrue or
misleading; (ii) if Borrower fails to pay when due any principal or interest on
any Loan or any other monetary Obligation; (iii) if Borrower breaches any
covenant or obligation contained in this Agreement or any other Loan Document or
fails to perform any other non-monetary Obligation; (iv) if any levy,
assessment, attachment, seizure, lien or encumbrance (other than a Permitted
Lien) is made or permitted to exist on all or any part of the Collateral; (v) if
one or more judgments aggregating in excess of $25,000, or any injunction or
attachment, is obtained against Borrower or any Obligor which remains unstayed
for more than ten days or is enforced; (vi) the occurrence of any default under
any financing agreement, security agreement or other agreement, instrument or
document executed and delivered by (A) Borrower with, or in favor of, any Person
other than Lender or (B) Borrower or any Affiliate of Borrower with, or in favor
of, Lender or any Affiliate of Lender; (vii) the dissolution, death, termination
of existence in good standing, insolvency or business failure or suspension or
cessation of business as usual of Borrower or any Obligor (or of any general
partner of Borrower or any Obligor if it is a partnership) or the appointment of
a receiver, trustee or custodian for all or any part of the property of, or an
assignment for the benefit of creditors by Borrower or any Obligor, or the
commencement of any proceeding by Borrower or any Obligor under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, or if Borrower makes or sends a notice of a bulk transfer or
calls a meeting of its creditors; (viii) the commencement of any proceeding
against Borrower or any Obligor under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; (ix) the actual or
attempted revocation or termination of, or limitation or denial of liability
upon, any guaranty of the Obligations, or any security document securing the
Obligations, by any Obligor; (x) if Borrower makes any payment on account of any
indebtedness or obligation which has been subordinated to the Obligations other
than as permitted in the applicable subordination agreement, or if any
37
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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Person who has subordinated such indebtedness or obligations attempts to limit
or terminate its subordination agreement; (xi) if there is any actual or
threatened indictment of Borrower or any Obligor under any criminal statute or
commencement or threatened commencement of criminal or civil proceedings against
Borrower or any Obligor, pursuant to which the potential penalties or remedies
sought or available include forfeiture of any property of Borrower or such
Obligor; (xii) if there is a change in the record or beneficial ownership of an
aggregate of more than 20% of the outstanding shares of stock of Jones Soda Co.
(USA) Inc. (or partnership or membership interests if it is a partnership or
limited liability company), in one or more transactions, compared to the
ownership of outstanding shares of stock (or partnership or membership
interests) of Borrower as of the date hereof, without the prior written consent
of Lender; (xiii) if there is any change in the chief executive officer, or
chief financial officer of Borrower, without prior written consent of Lender;
(xiv) if an Event of Default occurs under any Loan and Security Agreement
between Lender and an Affiliate of Borrower; or (xv) if Lender determines in
good faith that the Collateral is insufficient to fully secure the Obligations
or that the prospect of payment of performance of the Obligations is impaired.
38
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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8.2 REMEDIES. Upon the occurrence of any Default, and at any time
thereafter, Lender, at its option, may cease making Loans or otherwise extending
credit to Borrower under this Agreement or any other Loan Document. Upon the
occurrence of any Event of Default, and at any time thereafter, Lender, at its
option, and without notice or demand of any kind (all of which are hereby
expressly waived by Borrower), may do any one or more of the following: (i)
cease making Loans or otherwise extending credit to Borrower under this
Agreement or any other Loan Document; (ii) accelerate and declare all or any
part of the Obligations to be immediately due, payable and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any of the Obligations; (iii) take possession of any
or all of the Collateral wherever it may be found, and for that purpose Borrower
hereby authorizes Lender, without judicial process, to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain (or cause a custodian
to remain) on the premises in exclusive control thereof, without charge for so
long as Lender deems it reasonably necessary in order to complete the
enforcement of its rights under this Agreement or any other agreement; PROVIDED,
that if Lender seeks to take possession of any of the Collateral by court
process, Borrower hereby irrevocably waives (A) any bond and any surety or
security relating thereto required by law as an incident to such possession, (B)
any demand for possession prior to the commencement of any suit or action to
recover possession thereof and (C) any requirement that Lender retain possession
of, and not dispose of, any such Collateral until after trial or final judgment;
(iv) require Borrower to assemble any or all of the Collateral and make it
available to Lender at one or more places designated by Lender which are
reasonably convenient to Lender and Borrower, and to remove the Collateral to
such locations as Lender may deem advisable; (v) complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, Lender shall have the right to
use Borrower's premises, vehicles and other Equipment and all other property
without charge; (vi) sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Lender obtains possession of it or after further
manufacturing, processing or repair, at one or more public or private sales, in
lots or in bulk, for cash, exchange or other property, or on credit (a "SALE"),
and to adjourn any such Sale from time to time without notice other than oral
announcement at the time scheduled for Sale (and, in connection therewith, (A)
Lender shall have the right to conduct such Sale on Borrower's premises without
charge, for such times as Lender deems reasonable, on Lender's premises, or
elsewhere, and the Collateral need not be located at the place of Sale; (B)
Lender may directly or through any of its Affiliates purchase or lease any of
the Collateral at any such public disposition, and if permissible under
applicable law, at any private disposition and (C) any Sale of Collateral shall
not relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title, physical condition or otherwise at the time of sale);
(vii) demand payment of and collect any Accounts, Chattel Paper, Instruments and
General Intangibles included in the Collateral and, in connection therewith,
Borrower irrevocably authorizes Lender to endorse or sign Borrower's name on all
collections, receipts, Instruments and other documents, to take possession of
and open mail
39
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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addressed to Borrower and remove therefrom payments made with respect to any
item of Collateral or proceeds thereof and, in Lender's sole discretion, to
grant extensions of time to pay, compromise claims and settle Accounts, General
Intangibles and the like for less than face value; and (viii) demand and receive
possession of any of Borrower's federal and state income tax returns and the
books and records utilized in the preparation thereof or relating thereto. In
addition to the foregoing remedies, upon the occurrence of any Event of Default
resulting from a breach of any of the financial covenants set forth in Section
5.19, Lender may, at its option, upon not less than ten days' prior notice to
Borrower, reduce any or all of the Advance Rates set forth in Section 1(b) of
Schedule A to the extent Lender, in its sole discretion, deems appropriate. In
addition to the rights and remedies set forth above, Lender shall have all the
other rights and remedies accorded a secured party after default under the UCC
and under all other applicable laws, and under any other Loan Document, and all
of such rights and remedies are cumulative and non-exclusive. Exercise or
partial exercise by Lender of one or more of its rights or remedies shall not be
deemed an election or bar Lender from subsequent exercise or partial exercise of
any other rights or remedies. The failure or delay of Lender to exercise any
rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations
have been fully paid and performed. If notice of any sale or other disposition
of Collateral is required by law, notice at least seven days prior to the sale
designating the time and place of sale in the case of a public sale or the time
after which any private sale or other disposition is to be made shall be deemed
to be reasonable notice, and Borrower waives any other notice. If any Collateral
is sold or leased by Lender on credit terms or for future delivery, the
Obligations shall not be reduced as a result thereof until payment is collected
by Lender.
8.3 APPLICATION OF PROCEEDS. Subject to any application required by law,
all proceeds realized as the result of any Sale shall be applied by Lender to
the Obligations in such order as Lender shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled thereto;
but Borrower shall remain liable to Lender for any deficiency. If Lender, in its
sole discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any Sale, Lender shall have the option,
exercisable at any time, in its sole discretion, of either reducing the
Obligations by the principal amount of the purchase price or deferring the
reduction of the Obligations until the actual receipt by Lender of the cash
therefor.
40
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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9. GENERAL PROVISIONS.
9.1 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally, by reputable private delivery
service, by regular first-class mail or certified mail return receipt requested,
addressed to Lender or Borrower at the address shown in the heading to this
Agreement, or by facsimile to the facsimile number shown in Section 9(i) of
Schedule A, or at any other address (or to any other facsimile number)
designated in writing by one party to the other party in the manner prescribed
in this Section 9.1. All notices shall be deemed to have been given when
received or when delivery is refused by the recipient.
9.2 SEVERABILITY. If any provision of this Agreement, or the application
thereof to any party or circumstance, is held to be void or unenforceable by any
court of competent jurisdiction, such defect shall not affect the remainder of
this Agreement, which shall continue in full force and effect.
9.3 INTEGRATION. This Agreement and the other Loan Documents represent
the final, entire and complete agreement between Borrower and Lender and
supersede all prior and contemporaneous negotiations, oral representations and
agreements, all of which are merged and integrated into this Agreement. THERE
ARE NO ORAL UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES
WHICH ARE NOT SET FORTH IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
9.4 WAIVERS. The failure of Lender at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other Loan Documents shall not waive or diminish any right of Lender later to
demand and receive strict compliance therewith. Any waiver of any default shall
not waive or affect any other default, whether prior or subsequent, and whether
or not similar. None of the provisions of this Agreement or any other Loan
Document shall be deemed to have been waived by any act or knowledge of Lender
or its agents or employees, but only by a specific written waiver signed by an
authorized officer of Lender and delivered to Borrower. Borrower waives demand,
protest, notice of protest and notice of default or dishonor, notice of payment
and nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, Instrument, Account, General Intangible, Document, Chattel
Paper, Investment Property or guaranty at any time held by Lender on which
Borrower is or may in any way be liable, and notice of any action taken by
Lender, unless expressly required by this Agreement, and notice of acceptance
hereof.
9.5 AMENDMENT. The terms and provisions of this Agreement may not be
amended or modified except in a writing executed by Borrower and a duly
authorized officer of Lender.
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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9.6 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement and the other Loan
Documents.
9.7 ATTORNEYS FEES AND COSTS. Borrower shall reimburse Lender for all
reasonable attorneys' and paralegals' fees (including in-house attorneys and
paralegals employed by Lender) and all filing, recording, search, title
insurance, appraisal, audit, and other costs incurred by Lender, pursuant to, in
connection with, or relating to this Agreement, including all reasonable
attorneys' fees and costs Lender incurs to prepare and negotiate this Agreement
and the other Loan Documents; to obtain legal advice in connection with this
Agreement and the other Loan Documents or Borrower or any Obligor; to administer
this Agreement and the other Loan Documents (including the cost of periodic
financing statement, tax lien and other searches conducted by Lender); to
enforce, or seek to enforce, any of its rights; prosecute actions against, or
defend actions by, Account Debtors; to commence, intervene in, or defend any
action or proceeding; to initiate any complaint to be relieved of the automatic
stay in bankruptcy; to file or prosecute any probate claim, bankruptcy claim,
third-party claim, or other claim; to examine, audit, copy, and inspect any of
the Collateral or any of Borrower's books and records; to protect, obtain
possession of, lease, dispose of, or otherwise enforce Lender's security
interests in, the Collateral; and to otherwise represent Lender in any
litigation relating to Borrower. If either Lender or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including reasonable attorneys' fees and costs incurred in the enforcement
of, execution upon or defense of any order, decree, award or judgment. All
attorneys' fees and costs to which Lender may be entitled pursuant to this
Section shall immediately become part of the Obligations, shall be due on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations.
9.8 BENEFIT OF AGREEMENT; ASSIGNABILITY. The provisions of this
Agreement shall be binding upon and inure to the benefit of the respective
successors, assigns, heirs, beneficiaries and representatives of Borrower and
Lender; PROVIDED, that Borrower may not assign or transfer any of its rights
under this Agreement without the prior written consent of Lender, and any
prohibited assignment shall be void. No consent by Lender to any assignment
shall release Borrower from its liability for any of the Obligations. Lender
shall have the right to assign all or any of its rights and obligations under
the Loan Documents, and to sell participating interests therein, to one or more
other Persons, and Borrower agrees to execute all agreements, instruments and
documents requested by Lender in connection with each such assignment and
participation.
9.9 HEADINGS; CONSTRUCTION. Section and subsection headings are used in
this Agreement only for convenience. Borrower and Lender acknowledge that the
headings may not describe completely the subject matter of the applicable
Sections or subsections, and the headings shall not be used in any manner to
construe, limit, define or interpret any term or
42
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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provision of this Agreement. This Agreement has been fully reviewed and
negotiated between the parties and no uncertainty or ambiguity in any term or
provision of this Agreement shall be construed strictly against Lender or
Borrower under any rule of construction or otherwise.
9.10 GOVERNING LAW; CONSENT TO FORUM, ETC. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED, AND SHALL BE DEEMED TO HAVE BEEN MADE, IN
CHICAGO, ILLINOIS, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF SUCH STATE. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE AND
FEDERAL COURTS IN CHICAGO, ILLINOIS OR THE STATE IN WHICH ANY OF THE COLLATERAL
IS LOCATED SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT, ANY
OTHER LOAN DOCUMENTS OR ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. BORROWER ALSO AGREES THAT
ANY CLAIM OR DISPUTE BROUGHT BY BORROWER AGAINST LENDER PURSUANT TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING OUT OF THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT EXCLUSIVELY IN THE STATE AND FEDERAL
COURTS OF COOK COUNTY. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE IN THE MANNER
AND SHALL BE DEEMED RECEIVED AS SET FORTH IN SECTION 9.1 FOR NOTICES, TO THE
EXTENT PERMITTED BY LAW. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE THE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
9.11 WAIVER OF JURY TRIAL, ETC. BORROWER WAIVES (i) THE RIGHT TO TRIAL
BY JURY (WHICH LENDER ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL OR ANY CONDUCT, ACTS OR OMISSIONS OF LENDER OR
43
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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BORROWER OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR
AGENTS OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE; (ii) THE RIGHT TO INTERPOSE ANY CLAIMS,
DEDUCTIONS, SETOFFS OR COUNTERCLAIMS OF ANY KIND IN ANY ACTION OR PROCEEDING
INSTITUTED BY LENDER WITH RESPECT TO THE LOAN DOCUMENTS OR ANY MATTER RELATING
THERETO, EXCEPT FOR COMPULSORY COUNTERCLAIMS; (iii) NOTICE PRIOR TO LENDER'S
TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH
MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'S REMEDIES AND (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND
EXEMPTION LAWS. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING
UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS
LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, Borrower and Lender have signed this Agreement as of
the date set forth in the heading.
BORROWER: LENDER:
URBAN JUICE & SODA COMPANY LTD. BANC OF AMERICA COMMERCIAL FINANCE
CORPORATION, THROUGH ITS
COMMERCIAL FUNDING DIVISION
By /s/ Jennifer Cue By /s/ R.A. Simons
Its Chief Financial Officer Its Authorized Signatory
JONES SODA CO. (USA) INC.
By /s/ Jennifer Cue
Its Chief Financial Officer
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BANC OF AMERICA COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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STATE OF WASHINGTON )
) ss.
County of Pierce )
I certify that I know or have satisfactory evidence that Jennifer Cue
is the person who appeared before me, and said person acknowledged that he
signed this instrument, on oath, stated that he was authorized to execute the
instrument and acknowledged it as the CFO of URBAN JUICE & SODA COMPANY LTD., to
be the free and voluntary act of such party for the uses and purposes mentioned
in the instrument.
DATED: March 17, 2000.
/s/ Malcolm C. Lindquist
NOTARY PUBLIC
Printed Name: Malcolm C. Lindquist
My appointment expires: 5-20-00
STATE OF WASHINGTON )
) ss.
County of Pierce )
I certify that I know or have satisfactory evidence that Jennifer Cue
is the person who appeared before me, and said person acknowledged that he
signed this instrument, on oath, stated that he was authorized to execute the
instrument and acknowledged it as the CFO of JONES SODA CO. (USA) INC., to be
the free and voluntary act of such party for the uses and purposes mentioned in
the instrument.
DATED: March 17, 2000.
/s/ Malcolm C. Lindquist
NOTARY PUBLIC
Printed Name: Malcolm C. Lindquist
My appointment expires: 5-20-00
45
<PAGE>
SCHEDULE A
DESCRIPTION OF CERTAIN TERMS
This Schedule is an integral part of the Loan and Security Agreement
between URBAN JUICE & SODA COMPANY LTD., a Wyoming corporation, JONES SODA CO.
(USA) INC., a Washington corporation, and BANC OF AMERICA COMMERCIAL FINANCE
CORPORATION, THROUGH ITS COMMERCIAL FUNDING DIVISION (the "AGREEMENT").
<TABLE>
<C> <S> <S>
1. Loan Limits for Revolving Loans:
(a) Maximum Facility
Amount: $3,000,000.00
(b) Advance Rates: -0-
(i) Accounts Advance 80%; PROVIDED, THAT IF THE DILUTION
Rate: PERCENTAGE EXCEEDS 8%, SUCH ADVANCE
RATE WILL BE REDUCED BY THE NUMBER OF
FULL OR PARTIAL PERCENTAGE POINTS OF SUCH EXCESS
(ii) Inventory
Advance Rate(s):
(A) Finished goods: 55%
(B) Raw materials: 55%
(C) Work in process: N/A
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<PAGE>
(c) Accounts Sublimit: N/A
(d) Inventory Sublimit(s):
(i) Overall sublimit on THE LESSER OF $1,250,000.00 AND 100% OF ADVANCES
advances against AGAINST ACCOUNTS.
Eligible Inventory
(ii) Sublimit on advances N/A
against finished
goods
(iii) Sublimit on advances N/A
against work in
process
(e) Credit
Accommodation N/A
Limit:
(f) Permanent Reserve
Amount: N/A
(g) Overadvance Amount: N/A
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<PAGE>
2. Loan Limits for Term
Loan:
(a) Principal Amount:
(i) Equipment Advance N/A
(ii) Real Property Advance: N/A
(b) Repayment Schedule:
(i) Equipment Advance: N/A
(ii) Real Property N/A
Advance:
3. Interest Rates:
(a) Revolving Loans: 1.5% PER ANNUM IN EXCESS OF THE PRIME RATE
(b) Term Loan: N/A
4. Minimum Loan Amount: $1,000,000.00
5. Maximum Days:
(a) Maximum days after original
INVOICE DATE for Eligible
Accounts: 90 DAYS
(b) Maximum days after original
INVOICE DUE DATE for
Eligible Accounts: 60 DAYS
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<PAGE>
6. Fees:
(a) Closing Fee: $22,500.00
(b) Facility Fee:
(i) Initial Term: 1.5% OF THE MAXIMUM FACILITY
(ii) Renewal Term(s): 2.25% OF THE MAXIMUM FACILITY
(c) Servicing Fee: N/A
(d) Unused Line Fee: N/A
(e) Minimum Borrowing Fee:
(i) Applicable period: EACH YEAR
(ii) Date payable: EACH ANNIVERSARY OF THE DATE OF THE AGREEMENT
(f) Success Fee: N/A
(g) Warrant: WARRANT TO ACQUIRE 25,000 SHARES OF URBAN JUICE & SODA
COMPANY LTD., A WYOMING CORPORATION, AT 105% OF ITS
VALUE ON THE CLOSING DATE, EXERCISABLE WITHIN TWO YEARS
AFTER THE CLOSING DATE. THE WARRANT PRICE IS TO BE SET
AS OF THE CLOSING DATE. THE WARRANTS ARE TO ISSUE
WITHIN 30 DAYS OF THE CLOSING DATE IN FORM APPROVED BY
THE CANADIAN VENTURE EXCHANGE AND ACCEPTABLE TO LENDER
IN ALL OTHER RESPECTS. FAILURE OF THE WARRANTS TO ISSUE
AS PROVIDED HEREUNDER WILL CONSTITUTE AN EVENT OF
DEFAULT.
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<PAGE>
(h) Early Termination 3% OF THE MAXIMUM FACILITY AMOUNT IF TERMINATED DURING
Fee: THE FIRST YEAR OF THE TERM, 2% OF THE MAXIMUM FACILITY
AMOUNT IF TERMINATED DURING THE SECOND YEAR OF THE
TERM, AND 1% OF THE MAXIMUM FACILITY AMOUNT IF
TERMINATED THEREAFTER AND PRIOR TO THE MATURITY DATE;
PROVIDED, HOWEVER, NO EARLY TERMINATION FEE WILL BE DUE
IF THE OBLIGATIONS ARE PAID IN FULL FROM PROCEEDS OF A
LOAN OBTAINED BY BORROWER FROM BANK OF AMERICA, N.A.
(i) Fees for letters of credit
and other Credit
Accommodations (or guaranties
thereof by Lender): N/A
7. Initial Maturity Date: MARCH 22, 2002
8. Financial Covenants:
(a) Capital Expenditure
Limitation: N/A
(b) Minimum Net Worth
Requirement: N/A
(c) Minimum Tangible
Net Worth: N/A
(d) Minimum Working Capital: N/A
(e) Maximum Cumulative Net Loss: N/A
(f) Minimum Cumulative Net N/A
Income:
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<PAGE>
(g) Maximum Leverage
Ratio: N/A
(h) Limitation on
Purchase Money
Security Interests: N/A
(i) Limitation on
Equipment Leases: N/A
(j) Additional Financial N/A
Covenants:
9. Borrower Information:
(a) Prior Names of 2072 INVESTMENTS LTD.
Borrower:
REPUBLIC MANUFACTURING CORPORATION
INTERNATIONAL REPUBLIC AIRCRAFT MANUFACTURING
CORPORATION
URBAN JUICE AND SODA (USA) INC.
(b) Prior Trade Names of
Borrower: NONE.
(c) Existing Trade Names of SEE ATTACHED SCHEDULE "C"
Borrower:
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<PAGE>
(d) Inventory Locations: 7831 VANTAGE WAY
DELTA, B.C.
CANADA V4G 1A6
3600 BAINBRIDGE AVENUE
BURNABY, B.C.
CANADA V5A 2T4
787 AIRPARK ROAD
NAPA, CA 94558
2155-A STEELES AVE. E.
BRAMPTON, ONTARIO
CANADA L6T 5A1
1201 NORTH DIXIE AVENUE
P.O. BOX 8484
ELIZABETHTOWN, KY 42702-0848
4022 WEST PINE
ST. LOUIS, MO 63108
1410 EAST OLD HWY. 40
P.O. BOX 309
WARRANTON, MO 62282-0309
21 MAYCROFT AVE.
WOODBRIDGE, ONTARIO
CANADA L4L 5Y6
7510 HOPCOH ROAD
DELTA, B.C.
CANADA V4G1B6
(e) Other Locations: N/A
(f) Litigation: URBAN JUICE & SODA CO. LTD. V. GIVAUDAN ROURE FLAVOR
CORP. AND TASTEMAKER CANADA, INC.
51
<PAGE>
(g) Ownership of Borrower: URBAN JUICE & SODA COMPANY LTD., PUBLICLY TRADED
JONES SODA CO. (USA) INC. (100% OWNED BY URBAN JONES &
SODA COMPANY LTD.)
(h) Subsidiaries (and ownership WAZU PRODUCTS LTD.
thereof): (100% OWNED BY URBAN JUICE & SODA COMPANY LTD.)
(i) Facsimile Numbers:
Borrower: (604) 253-4501
Lender: (312) 759-4350
10. Description of Real
Property: N/A
11. Lender's Bank: BANK ONE, N.A.
12. Other Covenants: N/A
13. Exceptions to Negative
Covenants: N/A
</TABLE>
52
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule A as
of the date set forth in the heading to the Agreement.
BORROWER: LENDER:
URBAN JUICE & SODA COMPANY LTD. BANC OF AMERICA COMMERCIAL FINANCE
CORPORATION, THROUGH ITS
COMMERCIAL FUNDING DIVISION
By /s/ Jennifer Cue
Its Chief Financial Officer By /s/ R. A. Simons
Its Authorized Signatory
JONES SODA CO. (USA) INC.
By /s/ Jennifer Cue
Its Chief Financial Officer
53
<PAGE>
SCHEDULE B
DEFINITIONS
This Schedule is an integral part of the Loan and Security Agreement
between URBAN JUICE & SODA COMPANY LTD., a Wyoming corporation, JONES SODA CO.
(USA) INC., a Washington corporation, and BANC OF AMERICA COMMERCIAL FINANCE
CORPORATION, THROUGH ITS COMMERCIAL FUNDING DIVISION (the "AGREEMENT").
As used in the Agreement, the following terms have the following
meanings:
"ACCOUNT" means any right to payment for Goods sold or leased or
for services rendered which is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned by performance.
"ACCOUNT DEBTOR" means the obligor on an Account or Chattel
Paper.
"ACCOUNT PROCEEDS" has the meaning set forth in Section 4.1.
"AFFILIATE" means, with respect to any Person, a relative,
partner, shareholder, member, manager, director, officer, or employee of such
Person, any parent or subsidiary of such Person, or any Person controlling,
controlled by or under common control with such Person or any other Person
affiliated, directly or indirectly, by virtue of family membership, ownership,
management or otherwise.
"AGREEMENT" and "THIS AGREEMENT" mean the Loan and Security
Agreement of which this Schedule B is a part and the Schedules thereto.
"AVAILABILITY" has the meaning set forth in Section 1.1(a)
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11
U.S.C. Section 101 ET SEQ.).
"BLOCKED ACCOUNT" has the meaning set forth in Section 4.1.
"BORROWER" has the meaning set forth in the heading to the
Agreement.
"BORROWER'S ADDRESS" has the meaning set forth in the heading to
the Agreement.
"BUSINESS DAY" means a day other than a Saturday or Sunday or
any other day on which Lender or banks in Chicago, Illinois are authorized to
close.
"CHATTEL PAPER" has the meaning set forth in the UCC.
53
<PAGE>
"COLLATERAL" means all property and interests in property in or
upon which a security interest or other Lien is granted pursuant to this
Agreement or the other Loan Documents.
"CREDIT ACCOMMODATION" has the meaning set forth in Section
1.1(a).
"CREDIT ACCOMMODATION BALANCE" means the sum of (i) the
aggregate undrawn face amount of all outstanding Credit Accommodations and (ii)
all interest, fees and costs due or, in Lender's estimation, likely to become
due in connection therewith.
"DEFAULT" means any event which with notice or passage of time,
or both, would constitute an Event of Default.
"DEFAULT RATE" has the meaning set forth in Section 2.1.
"DEPOSIT ACCOUNT" has the meaning set forth in the UCC.
"DILUTION PERCENTAGE" means the gross amount of all returns,
allowances, discounts, credits, write-offs and similar items relating to
Borrower's Accounts computed as a percentage of Borrower's gross sales,
calculated on a ninety (90) day rolling average.
"DOCUMENT" has the meaning set forth in the UCC.
"EARLY TERMINATION FEE" has the meaning set forth in Section
7.2.
"ELIGIBLE ACCOUNT" means, at any time of determination, an
Account of Borrower or Borrower's Canadian affiliate, WAZU PRODUCTS LTD.
("WAZU") which satisfies the general criteria set forth below and which is
otherwise acceptable to Lender (PROVIDED, that Lender may, in its sole
discretion, change the general criteria for acceptability of Eligible Accounts
upon at least fifteen days' prior notice to Borrower). An Account shall be
deemed to meet the current general criteria if (i) neither the Account Debtor
nor any of its Affiliates is an Affiliate, creditor or supplier of Borrower or
WAZU; (ii) it does not remain unpaid more than the earlier to occur of (A) the
number of days after the original INVOICE DATE set forth in Section 5(a) of
Schedule A or (B) the number of days after the original INVOICE DUE DATE set
forth in Section 5(b) of Schedule A; (iii) the Account Debtor or its Affiliates
are not past due on other Accounts owing to Borrower and WAZU comprising more
than 25% of all of the Accounts owing to Borrower and WAZU by such Account
Debtor or its Affiliates; (iv) all Accounts owing by the Account Debtor or its
Affiliates do not represent more than 20% of all otherwise Eligible Accounts
(PROVIDED, that Accounts which are deemed to be ineligible solely by reason of
this clause (iv) shall be considered Eligible Accounts to the extent of the
amount thereof which does not exceed 20% of all otherwise Eligible Accounts);
(v) no covenant, representation or warranty contained in this Agreement with
respect to such Account (including any of the representations set forth in
Section 5.4) has been breached; (vi) the Account is not subject to any contra
relationship, counterclaim, dispute or set-off (PROVIDED, that Accounts which
are deemed to be ineligible solely by reason of this clause (vi) shall be
considered
54
<PAGE>
Eligible Accounts to the extent of the amount thereof which is not affected
by such contra relationships, counterclaims, disputes or set-offs); (vii) the
Account Debtor's chief executive office or principal place of business is
located in the United States or Provinces of Canada which have adopted the
Personal Property Security Act or a similar act, unless (A) the sale is fully
backed by a letter of credit, guaranty or acceptance acceptable to Lender in
its sole discretion, and if backed by a letter of credit, such letter of
credit has been issued or confirmed by a bank satisfactory to Lender, is
sufficient to cover such Account, and if required by Lender, the original of
such letter of credit has been delivered to Lender or Lender's agent and the
issuer thereof notified of the assignment of the proceeds of such letter of
credit to Lender or (B) such Account is subject to credit insurance payable
to Lender issued by an insurer and on terms and in an amount acceptable to
Lender; (viii) it is absolutely owing to Borrower or WAZU and does not arise
from a sale on a bill-and-hold, guarantied sale, sale-or-return,
sale-on-approval, consignment, retainage or any other repurchase or return
basis or consist of progress billings; (ix) Lender shall have verified the
Account in a manner satisfactory to Lender; (x) the Account Debtor is not the
United States of America or any state or political subdivision (or any
department, agency or instrumentality thereof), unless Borrower has complied
with the Assignment of Claims Act of 1940 (31 U.S.C. Section 203 et seq.) or
other applicable similar state or local law in a manner satisfactory to
Lender; (xi) it is at all times subject to Lender's duly perfected, first
priority security interest and to no other Lien that is not a Permitted Lien,
and the goods giving rise to such Account (A) were not, at the time of sale,
subject to any Lien except Permitted Liens and (B) have been delivered to and
accepted by the Account Debtor, or the services giving rise to such Account
have been performed by Borrower or WAZU and accepted by the Account Debtor;
(xii) the Account is not evidenced by Chattel Paper or an Instrument of any
kind and has not been reduced to judgment; (xiii) the Account Debtor's total
indebtedness to Borrower or WAZU does not exceed the amount of any credit
limit established by Borrower, WAZU, or Lender and the Account Debtor is
otherwise deemed to be creditworthy by Lender (PROVIDED, that Accounts which
are deemed to be ineligible solely by reason of this clause (xiii) shall be
considered Eligible Accounts to the extent the amount of such Accounts does
not exceed the lower of such credit limits); (xiv) there are no facts or
circumstances existing, or which could reasonably be anticipated to occur,
which might result in any adverse change in the Account Debtor's financial
condition or impair or delay the collectibility of all or any portion of such
Account; (xv) Lender has been furnished with all documents and other
information pertaining to such Account which Lender has requested, or which
Borrower or WAZU is obligated to deliver to Lender, pursuant to this
Agreement; (xvi) Borrower or WAZU has not made an agreement with the Account
Debtor to extend the time of payment thereof beyond the time periods set
forth in clause (ii) above; and (xvii) Borrower has not posted a surety or
other bond in respect of the contract under which such Account arose.
"ELIGIBLE EQUIPMENT" means, at any time of determination,
Equipment owned by Borrower which Lender, in its sole discretion, deems to be
eligible for borrowing purposes.
55
<PAGE>
"ELIGIBLE INVENTORY" means, at any time of determination,
Inventory owned by Borrower or WAZU (other than packaging materials and
supplies) which satisfies the general criteria set forth below and which is
otherwise acceptable to Lender (PROVIDED, that Lender may, in its sole
discretion, change the general criteria for acceptability of Eligible Inventory
upon at least fifteen days' prior written notice to Borrower). Inventory shall
be deemed to meet the current general criteria if (i) it consists of raw
materials or finished goods that is readily marketable in its current form; (ii)
it is in good, new and saleable condition; (iii) it is not slow-moving,
obsolete, unmerchantable, returned or repossessed; (iv) it is not in the
possession of a processor, consignee or bailee, or located on premises leased or
subleased to Borrower or WAZU, or on premises subject to a mortgage in favor of
a Person other than Lender, unless such processor, consignee, bailee or
mortgagee or the lessor or sublessor of such premises, as the case may be, has
executed and delivered all documentation which Lender shall require to evidence
the subordination or other limitation or extinguishment of such Person's rights
with respect to such Inventory and Lender's right to gain access thereto; (v) it
meets all standards imposed by any governmental agency or authority; (vi) it
conforms in all respects to any covenants, warranties and representations set
forth in the Agreement; (vii) it is at all times subject to Lender's duly
perfected, first priority security interest and no other Lien except a Permitted
Lien; and (viii) it is situated at an Inventory Location listed in Section 9(d)
of Schedule A or other location of which Lender has been notified as required by
Section 5.6.
"ELIGIBLE REAL PROPERTY" means, at any time of determination,
Real Property owned by Borrower which Lender, in its sole discretion, deems to
be eligible for borrowing purposes.
"EQUIPMENT" means all Goods which are used or bought for use
primarily in business (including farming or a profession) or by a Person who is
a non-profit organization or governmental subdivision or agency and which are
not Inventory, farm products or consumer goods, including all machinery, molds,
machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dies and jigs, and all attachments,
accessories, accessions, replacements, substitutions, additions or improvements
to, or spare parts for, any of the foregoing.
"EQUIPMENT ADVANCE" has the meaning set forth in Section 1.1(b).
"ERISA" means the Employee Retirement Income Security Act of
1974 and all rules, regulations and orders promulgated thereunder.
"EVENT OF DEFAULT" has the meaning set forth in Section 8.1.
"GAAP" means generally accepted accounting principles as in
effect from time to time, consistently applied.
"GENERAL INTANGIBLES" has the meaning set forth in the UCC, and
includes all books and records pertaining to the Collateral and other business
and financial records in the
56
<PAGE>
possession of Borrower or any other Person, inventions, designs, drawings,
blueprints, patents, patent applications, trademarks, trademark applications
(other than "intent to use" applications until a verified statement of use is
filed with respect to such applications) and the goodwill of the business
symbolized thereby, names, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, causes of action and other rights in all litigation presently or
hereafter pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments now or hereafter arising therefrom, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, internet addresses, proprietary
information, purchase orders, and all insurance policies and claims (including
life insurance, key man insurance, credit insurance, liability insurance,
property insurance and other insurance), tax refunds and claims, letters of
credit, banker's acceptances and guaranties, computer programs, discs, tapes and
tape files in the possession of Borrower or any other Person, claims under
guaranties, security interests or other security held by or granted to Borrower,
all rights to indemnification and all other intangible property of every kind
and nature.
"GOODS" means all things which are movable at the time the
security interest attaches or which are fixtures (other than money, Documents,
Instruments, Investment Property, Accounts, Chattel Paper, General Intangibles,
or minerals or the like (including oil and gas) before extraction), including
standing timber which is to be cut and removed under a conveyance or contract
for sale, the unborn young of animals, and growing crops.
"INITIAL TERM" has the meaning set forth in Section 7.1.
"INSTRUMENT" has the meaning set forth in the UCC.
"INVENTORY" means all Goods held for sale or lease or furnished
or to be furnished under contracts of service, including all raw materials, work
in process, finished goods, goods in transit and materials and supplies which
are or might be used or consumed in a business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such Goods,
and all products of the foregoing, and shall include interests in goods
represented by Accounts, returned, reclaimed or repossessed goods and rights as
an unpaid vendor.
"INVESTMENT PROPERTY" shall mean all of Borrower's securities,
whether certificated or uncertificated, securities entitlements, securities
accounts, commodity contracts and commodity accounts.
"LENDER" has the meaning set forth in the heading to the
Agreement.
"LIEN" means any interest in property securing an obligation
owed to, or a claim by, a Person other than the owner of the property, whether
such interest is based on common law, statute or contract, including rights of
sellers under conditional sales contracts or title retention agreements and
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting
57
<PAGE>
property. For the purpose of this Agreement, Borrower shall be deemed to be the
owner of any property which it has acquired or holds subject to a conditional
sale agreement or other arrangement pursuant to which title to the property has
been retained by or vested in some other Person for security purposes.
"LOAN ACCOUNT" has the meaning set forth in Section 2.4.
"LOAN DOCUMENTS" means the Agreement and all notes, guaranties,
security agreements, certificates, landlord's agreements, Lock Box and Blocked
Account agreements and all other agreements, documents and instruments now or
hereafter executed or delivered by Borrower or any Obligor in connection with,
or to evidence the transactions contemplated by, this Agreement.
"LOAN LIMITS" means, collectively, the Availability limits and
all other limits on the amount of Loans and Credit Accommodations set forth in
this Agreement.
"LOANS" means, collectively, the Revolving Loans and any Term
Loan.
"LOCK BOX" has the meaning set forth in Section 4.1.
"MATERIAL ADVERSE EFFECT" has the meaning set forth in
Section 5.20.
"MATURITY DATE" has the meaning set forth in Section 7.1.
"OBLIGATIONS" means all present and future Loans, advances,
debts, liabilities, obligations, guaranties, covenants, duties and indebtedness
at any time owing by Borrower to Lender, whether evidenced by this Agreement or
any other Loan Document, whether arising from an extension of credit, opening of
a Credit Accommodation, guaranty, indemnification or otherwise (including all
fees, costs and other amounts which may be owing to issuers of Credit
Accommodations and all taxes, duties, freight, insurance, costs and other
expenses, costs or amounts payable in connection with Credit Accommodations or
the underlying goods), whether direct or indirect (including those acquired by
assignment and any participation by Lender in Borrower's indebtedness owing to
others), whether absolute or contingent, whether due or to become due, and
whether arising before or after the commencement of a proceeding under the
Bankruptcy Code or any similar statute, including all interest, charges,
expenses, fees, attorney's fees, expert witness fees, audit fees, letter of
credit fees, loan fees, Early Termination Fees, Minimum Borrowing Fees and any
other sums chargeable to Borrower under this Agreement or under any other Loan
Document.
"OBLIGOR" means any guarantor, endorser, acceptor, surety or
other person liable on, or with respect to, the Obligations or who is the owner
of any property which is security for the Obligations, other than Borrower.
"PERMITTED LIENS" means: (i) purchase money security interests
in specific items of Equipment in an aggregate amount not to exceed the limit
set forth in Section 8(h) of
58
<PAGE>
Schedule A; (ii) leases of specific items of Equipment in an aggregate amount
not to exceed the limit set forth in Section 8(i) of Schedule A; (iii) Liens for
taxes not yet due and payable; (iv) additional Liens which are fully subordinate
to the security interests of Lender and are consented to in writing by Lender;
(v) security interests being terminated concurrently with the execution of this
Agreement; (vi) Liens of materialmen, mechanics, warehousemen or carriers
arising in the ordinary course of business and securing obligations which are
not delinquent; (vii) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clause (i) or (ii) above; PROVIDED, that any extension, renewal or replacement
Lien is limited to the property encumbered by the existing Lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase; (viii) Liens in favor of customs and revenue authorities which
secure payment of customs duties in connection with the importation of goods;
and (ix) security deposits posted in connection with real property leases or
subleases. Lender will have the right to require, as a condition to its consent
under clause (iv) above, that the holder of the additional Lien sign an
intercreditor agreement in form and substance satisfactory to Lender, in its
sole discretion, acknowledging that the Lien is subordinate to the security
interests of Lender, and agreeing not to take any action to enforce its
subordinate Lien so long as any Obligations remain outstanding, and that
Borrower agree that any uncured default in any obligation secured by the
subordinate Lien shall also constitute an Event of Default under this Agreement.
"PERSON" means any individual, sole proprietorship, partnership,
joint venture, limited liability company, trust, unincorporated organization,
association, corporation, government or any agency or political division
thereof, or any other entity.
"PRIME RATE" means, at any given time, the prime rate as quoted
in THE WALL STREET JOURNAL as the base rate on corporate loans posted as of such
time by at least 75% of the nation's 30 largest banks (which rate is not
necessarily the lowest rate offered by such banks).
"REAL PROPERTY" means the real property described in Section
10 of Schedule A.
"REAL PROPERTY ADVANCE" has the meaning set forth in Section
1.1(b).
"RELEASED PARTIES" has the meaning set forth in Section 6.1.
"RENEWAL TERM" has the meaning set forth in Section 7.1.
"RESERVES" has the meaning set forth in Section 1.2.
"REVOLVING LOANS" has the meaning set forth in Section 1.1(a).
"SALE" has the meaning set forth in Section 8.2.
59
<PAGE>
"SUBSIDIARY" means any corporation or other entity of which a
Person owns, directly or indirectly, through one or more intermediaries, more
than 50% of the capital stock or other equity interest at the time of
determination.
"TERM" means the period commencing on the date of this Agreement
and ending on the Maturity Date.
"TERM LOAN" has the meaning set forth in Section 1.1(b).
"UCC" means, at any given time, the Uniform Commercial Code as
adopted and in effect at such time in the State of Illinois.
All accounting terms used in this Agreement, unless otherwise indicated,
shall have the meanings given to such terms in accordance with GAAP. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the UCC, to the extent such terms are defined therein. The
term "INCLUDING," whenever used in this Agreement, shall mean "including but not
limited to." The singular form of any term shall include the plural form, and
vice versa, when the context so requires. References to Sections, subsections
and Schedules are to Sections and subsections of, and Schedules to, this
Agreement. All references to agreements and statutes shall include all
amendments thereto and successor statutes in the case of statutes.
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule B as
of the date set forth in the heading to the Agreement.
BORROWER: LENDER:
URBAN JUICE & SODA COMPANY LTD. BANC OF AMERICA COMMERCIAL FINANCE
CORPORATION, THROUGH ITS
COMMERCIAL FUNDING DIVISION
By /s/ Jennifer Cue
Its Chief Financial Officer By /s/ Richard. A. Simons
Its Authorized Signatory
JONES SODA CO. (USA) INC.
By /s/ Jennifer Cue
Its Chief Financial Officer
60
<PAGE>
SCHEDULE "C"
URBAN JUICE & SODA COMPANY, LTD.
TRADEMARK APPLICATIONS/ISSUANCES
AND TRADE NAMES
UNITED STATES TRADEMARKS
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------------------------------- --------------------------
REGISTRATION NO. TRADEMARK REGISTRATION DATE
- ----------------------------- ------------------------------------------------------------- --------------------------
<S> <C> <C>
2115636 Urban Juice & Soda 11/25/97
- ----------------------------- ------------------------------------------------------------- --------------------------
2115637 Urban Juice & Soda Co. and Design 11/25/97
- ----------------------------- ------------------------------------------------------------- --------------------------
2291508 Slim Jones 11/09/99
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Slim Jones and Design
- ----------------------------- ------------------------------------------------------------- --------------------------
2217493 Wazu 01/12/99
- ----------------------------- ------------------------------------------------------------- --------------------------
2217492 Wet Yourself 01/12/99
- ----------------------------- ------------------------------------------------------------- --------------------------
2178918 J and Design 08/04/98
- ----------------------------- ------------------------------------------------------------- --------------------------
2118528 Jones Soda Co. 12/02/97
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jones Soda Co. and Design
(label - silver on black)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jones Soda Co. and Design
(label - black on silver)
- ----------------------------- ------------------------------------------------------------- --------------------------
2102694 Wazu and Design 10/07/97
- ----------------------------- ------------------------------------------------------------- --------------------------
2093428 I've Got a Jones for a Jones 09/02/97
- ----------------------------- ------------------------------------------------------------- --------------------------
Serial # 75-818366 Urban Juice & Soda Company Ltd. Drawing 10/12/99
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jones Whoop Ass
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Whoop Ass Energy Drink and Design
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For My Jones
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Method and Apparatus for Creating and Ordering Customized
Branded Merchandise Over a Computer Network
(My Jones)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For WWW.MYJONES.COM
- ----------------------------- ------------------------------------------------------------- --------------------------
Serial # 75-759465 Pink 07/26/99
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jones Whoop Ass
- ----------------------------- ------------------------------------------------------------- --------------------------
Serial # 75-605504 Image is Nothing Cash and Sex are Everything 12/15/98
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jonesin' For
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jonesin'
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For I'm Jonesin'
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jonesing For
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jonesing
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For I'm Jonesing
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Natural Jones
- ----------------------------- ------------------------------------------------------------- --------------------------
61
<PAGE>
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For WWW.JONESSODA.COM
- ----------------------------- ------------------------------------------------------------- --------------------------
</TABLE>
62
<PAGE>
UNITED STATES TRADEMARKS (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------------------------------- --------------------------
REGISTRATION NO. TRADEMARK REGISTRATION DATE
- ----------------------------- ------------------------------------------------------------- --------------------------
<S> <C> <C>
Applied For WWW.MYJONES.ORG
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For WWW.MYJONES.NET
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Whoop Ass Energy Drink & Oval Design
(color claim)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Whoop Ass Boy
(color claim)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Whoop Ass Boy
(no color claim)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Fufu Berry Soda
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Spiked Jones (alcoholic)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Spiked Jones (non-alcoholic)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Wazoom
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For I've Got a Jones for a Soda
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Go There
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Wamoo
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For It May Not Be Your Thing
- ----------------------------- ------------------------------------------------------------- --------------------------
</TABLE>
ARGENTINA TRADEMARKS
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------------------------------- --------------------------
REGISTRATION NO. TRADEMARK REGISTRATION DATE
- ----------------------------- ------------------------------------------------------------- --------------------------
<S> <C> <C>
Applied For Jones Soda Co.
- ----------------------------- ------------------------------------------------------------- --------------------------
</TABLE>
CANADA TRADEMARKS
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------------------------------- --------------------------
REGISTRATION NO. TRADEMARK REGISTRATION DATE
- ----------------------------- ------------------------------------------------------------- --------------------------
<S> <C> <C>
Registered Display Case
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Drink it or Dehydrate
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Fufu Berry Soda
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Go There
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For I'm Jonesin'
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For I'm Jonesing
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered I've got a Jones for a Jones
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered I've got a Jones for a Soda
- ----------------------------- ------------------------------------------------------------- --------------------------
</TABLE>
63
<PAGE>
CANADA TRADEMARKS (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------------------------------- --------------------------
REGISTRATION NO. TRADEMARK REGISTRATION DATE
- ----------------------------- ------------------------------------------------------------- --------------------------
<S> <C> <C>
Registered It May Not Be Your Thing
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered J & Design
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Jones Soda Company
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Jones Soda Co.
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jones Soda Co. and Design
(label - black on silver)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jones Soda Co. and Design
(label - silver on black)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jones Soda Co. and Design (label)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jones Whoopass
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jonesin'
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jonesin' For
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jonesing
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Jonesing For
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For My Jones
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Natural Jones
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Natural Jones and Design (Label)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Pink
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Slim Jones
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Slim Jones and Design (Label)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Spiked Jones (alcoholic)
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Spiked Jones (non-alcoholic)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Trade Dress
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Urban Juice & Soda Co.
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Urban Juice & Soda Co. and Design
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Wamoo
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Wazoom
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Wazu
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Wazu and Design
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Wet Yourself
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Whoop Ass Boy Design (colour claim)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Whoop Ass Boy Design (no colour claim)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Whoop Ass Energy Drink (oval design)
(no colour claim)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Whoop Ass Energy Drink
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Whoop Ass Energy Drink and Design
(can label)
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered WWW.JONESSODA.COM
- ----------------------------- ------------------------------------------------------------- --------------------------
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<PAGE>
CANADA TRADEMARKS (CONTINUED)
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For WWW.MYJONES.COM
- ----------------------------- ------------------------------------------------------------- --------------------------
</TABLE>
EUROPEAN UNION TRADEMARKS
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------------------------------- --------------------------
REGISTRATION NO. TRADEMARK REGISTRATION DATE
- ----------------------------- ------------------------------------------------------------- --------------------------
<S> <C> <C>
Registered Jones Soda Co.
- ----------------------------- ------------------------------------------------------------- --------------------------
</TABLE>
GERMANY TRADEMARKS
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------------------------------- --------------------------
REGISTRATION NO. TRADEMARK REGISTRATION DATE
- ----------------------------- ------------------------------------------------------------- --------------------------
<S> <C> <C>
Registered Jones Soda Co.
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Wazu
- ----------------------------- ------------------------------------------------------------- --------------------------
</TABLE>
INDONESIA TRADEMARKS
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------------------------------- --------------------------
REGISTRATION NO. TRADEMARK REGISTRATION DATE
- ----------------------------- ------------------------------------------------------------- --------------------------
<S> <C> <C>
Registered Jones Soda Co.
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Spiked Jones
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Wazu
- ----------------------------- ------------------------------------------------------------- --------------------------
</TABLE>
JAPAN TRADEMARKS
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------------------------------- --------------------------
REGISTRATION NO. TRADEMARK REGISTRATION DATE
- ----------------------------- ------------------------------------------------------------- --------------------------
<S> <C> <C>
Registered Jones Soda Co.
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Spiked Jones
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Wazu
- ----------------------------- ------------------------------------------------------------- --------------------------
</TABLE>
MALAYSIA TRADEMARKS
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------------------------------- --------------------------
REGISTRATION NO. TRADEMARK REGISTRATION DATE
- ----------------------------- ------------------------------------------------------------- --------------------------
<S> <C> <C>
Applied For Jones Soda Co.
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Wazu
- ----------------------------- ------------------------------------------------------------- --------------------------
</TABLE>
65
<PAGE>
PHILIPPINES TRADEMARK
<TABLE>
<CAPTION>
- ---------------------------- ------------------------------------------------------------- --------------------------
REGISTRATION NO. TRADEMARK REGISTRATION DATE
- ----------------------------- ------------------------------------------------------------- --------------------------
<S> <C> <C>
Applied For Jone Soda Co.
- ----------------------------- ------------------------------------------------------------- --------------------------
</TABLE>
SINGAPORE TRADEMARKS
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------------------------------- --------------------------
REGISTRATION NO. TRADEMARK REGISTRATION DATE
- ----------------------------- ------------------------------------------------------------- --------------------------
<S> <C> <C>
Applied For Jones Soda Co.
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Spiked Jones
- ----------------------------- ------------------------------------------------------------- --------------------------
Applied For Wazu
- ----------------------------- ------------------------------------------------------------- --------------------------
</TABLE>
U.K. TRADEMARKS
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------------------------------- --------------------------
REGISTRATION NO. TRADEMARK REGISTRATION DATE
- ----------------------------- ------------------------------------------------------------- --------------------------
<S> <C> <C>
Registered Jones Soda Co.
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Jones Soda Co. and Design
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Spiked Jones
- ----------------------------- ------------------------------------------------------------- --------------------------
Registered Wazu
- ----------------------------- ------------------------------------------------------------- --------------------------
</TABLE>
66
<PAGE>
EXHIBIT 10.2
LEASE AGREEMENT
This Lease is made this 14 day of March, 2000 between R2H2 LLC, a
Washington limited liability company ("Landlord") and URBAN JUICE & SODA
COMPANY, a Wyoming corporation ("Tenant"). Landlord hereby leases to Tenant and
Tenant hereby leases from Landlord the Premises upon the following terms and
conditions.
Landlord and Tenant agree:
1. DEFINITIONS Whenever used in this Lease, the following terms shall
have the meanings indicated below.
1.1 ADDITIONAL RENT. The Tax Rent and all other amounts,
except Fixed Rent, payable by Tenant under this Lease.
1.2 BUILDING. The improvements known as 234 - 9th Avenue
North, Seattle, Washington ("Building") plus the underlying land described in
Exhibit A ("Building Parcel").
1.3 PREMISES. Approximately 7,989 rentable square feet located
in the Building.
1.4 COMMENCEMENT DATE. March 1, 2000, subject to the terms of
Section 3 below.
1.5 FIXED RENT. $10,984.88 per month.
1.6 PERMITTED USES. General office purposes.
1.7 NOTICE ADDRESSES.
Landlord: R2H2 LLC
227 WESTLAKE AVENUE NORTH
SEATTLE, WASHINGTON 98109
ATTN: SCOTT REDMAN
Tenant: Urban Juice & Soda Company
234 - 9th Avenue North
Seattle, Washington 98109
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1.8 RENT. The Fixed Rent and Additional Rent.
1.9 TERM. Three (3) years.
1.10 SECURITY DEPOSIT. $10,984.88
2. RENT
2.1 PAYMENT. All Rent shall be paid in lawful money of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, at the address of Landlord set forth
in this Lease or at such other place as Landlord in writing may designate,
without any set-off or deduction whatsoever and without any prior demand
therefor. Upon execution of this Lease, Tenant shall pay to Landlord the Fixed
Rent for the first and last months of the Term as well as the Security Deposit.
2.2 FIXED RENT. Tenant shall pay the Fixed Rent in equal
monthly installments in advance on the first day of each calendar month included
in the Term.
2.3 TAX RENT. In addition to the Fixed Rent, Tenant shall pay,
prior to delinquency, all Real Property Taxes (sometimes referred to herein as
Tax Rent). "Real Property Taxes" shall mean real and personal property taxes,
LID's, assessments, and other governmental impositions and charges of every kind
and nature, now or hereafter imposed, including surcharges with respect thereto,
which may during the Term of this Lease be levied, assessed, imposed, or
otherwise become due and payable with respect to the Building, including tenant
improvements and the Building Parcel and all improvements, fixtures, and
equipment thereon, or the use, occupancy or possession thereof; taxes on
property of Tenant; and any taxes levied or assessed in addition to, in lieu of,
or as a substitute for, in whole or part, taxes now levied or assessed or any
other tax upon owning, leasing or rents receivable by Landlord from the
Building, but not including any federal or state income tax imposed on Landlord.
2.4 ADDITIONAL RENT. Unless another time shall be herein
expressly provided, Additional Rent shall be due and payable on demand or
together with the next succeeding installment of Fixed Rent, whichever shall
first occur; and Landlord shall have the same remedies for failure to pay the
Additional Rent as for a non-payment of Fixed Rent.
2.5 RENT FOR A PARTIAL MONTH. For any portion of a calendar
month included at the beginning or end of the Term, Tenant shall pay 1/30th of
each monthly installment of Rent for each day of such portion, payable in
advance at the beginning of such portion.
2.6 INTEREST AND LATE CHARGE. From and after 5 days after the
due date of any payment of Rent, interest shall accrue thereon at the rate of
the lesser of 1-1/2% per month or the maximum rate permitted by law. Any amounts
of Rent not paid within five (5) days after their due date shall be subject to a
late charge equal to five percent (5%) of the delinquent amount.
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<PAGE>
3. COMMENCEMENT DATE AND IMPROVEMENTS The Term of this Lease shall
commence on the later of: (i) March 1, 2000; or (ii) the date Landlord has
completed the installation of new carpet in the Premises and the painting of the
Premises, all to be conducted at Landlord's expense. The color of such paint
shall be subject to Tenant's reasonable approval. In addition to the foregoing,
prior to the commencement of the Term, Landlord and Tenant shall conduct a
walk-through inspection of the Premises for the purpose of identifying and
replacing any broken lighting fixtures, or broken or cracked windows. All such
items shall be replaced at Landlord's expense. Notwithstanding the foregoing,
Landlord's maximum liability for the cost of such carpeting, painting and
repairs or replacements shall be Four Dollars ($4.00) per rentable square foot
of area in the Premises. Any costs in excess of that amount shall be borne by
Tenant.
4. SECURITY DEPOSIT As security for the performance of this Lease by
Tenant, Tenant has paid to Landlord the Security Deposit as specified in Section
1.10 hereof, receipt of which is hereby acknowledged. Landlord may apply all or
any part of the Security Deposit to the payment of any sum in default or any
other sum which Landlord may in its reasonable discretion deem necessary to
spend or incur by reason of Tenant's default. In such event, Tenant shall,
within five (5) days of written demand therefore by Landlord, deposit with
Landlord the amount so applied. The amount of the Security Deposit then held by
Landlord shall be repaid to Tenant within thirty (30) days after the expiration
or sooner termination of this Lease. Landlord shall not be required to keep any
Security Deposit separate from its general funds and Tenant shall not be
entitled to any interest thereon.
5. NET LEASE The parties agree that the rent provided for in this Lease
shall be absolutely net to Landlord, free of any and all real estate taxes,
personal property taxes and other taxes, expenses, liabilities, charges or other
deductions whatsoever with respect to the Premises and/or the ownership,
leasing, operation, maintenance, repair, rebuilding, use or occupation thereof,
or with respect to any interest of Landlord therein, it being the intention of
the parties that, by the execution of this Lease, Tenant shall, during the term
of this Lease, assume with respect to the Premises every obligation relating
thereto which the ownership thereof would entail and which, but for this Lease,
would be borne by Landlord. This Lease is a net lease and, notwithstanding any
law, all rent and other amounts payable under this Lease by Tenant shall be paid
without offset, counterclaim, abatement or defense, except as specifically
provided herein.
6. UTILITIES SERVICE Tenant shall be solely responsible and shall pay
separately, directly to the provider thereof, for all charges for fuel, heat,
water, sewer service, refuse collection, gas, electricity, telephone and for all
other utilities used or consumed in the Premises. It is understood that Landlord
shall not be required to provide any services or utilities to Tenant and shall
not be responsible for any failure or interruption thereof, and Tenant shall
make any necessary arrangements to have all of such services or utilities billed
directly to and paid directly by Tenant.
7. LANDLORD'S COVENANTS
7.1 REPAIRS BY LANDLORD. Landlord shall make necessary repairs
to the exterior foundations and structural members of the roof of the Building
and shall make necessary structural repairs to the exterior walls of the
Building, provided that Landlord shall not be obligated hereby to
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<PAGE>
do any work required to be done because of any damage caused by any act,
omission or negligence of Tenant and its visitors, agents, and employees.
Routine repairs and maintenance of the roof of the Building shall be the
responsibility of Tenant. Landlord shall commence any such repair within a
reasonable time after written notice from Tenant that the same is necessary.
Landlord warrants that all mechanical, plumbing and electrical systems in the
Building shall remain in good working condition through the period expiring
ninety (90) days after the Commencement Date. Any claim by Tenant under this
warranty must be delivered to Landlord in writing within such 90-day period.
7.2 QUIET ENJOYMENT. Landlord covenants that Tenant, on paying
the Rent and performing Tenant's obligations in this Lease, shall peacefully and
quietly have, hold and enjoy the Premises throughout the Term without hindrance,
ejection or molestation by any person lawfully claiming under Landlord, subject
to the other terms and provisions of this Lease and to all mortgages and
underlying leases of record to which this Lease is or may become subject and
subordinate.
7.3 LANDLORD'S LIABILITY. Anything in this Lease to the
contrary notwithstanding, covenants, undertakings and agreements herein made on
the part of Landlord are made and intended for the purpose of binding only the
Landlord's interest in the Building and Building Parcel, as the same may from
time to time be encumbered, and are not intended to bind personally or the
assets of Landlord (other than Landlord's interest in the Building and Building
Parcel). Except to the extent of Landlord's interest in the Building and the
Building Parcel, no personal liability or personal responsibility is assumed by,
nor shall at any time be asserted or enforceable against Landlord or its
partners or shareholders or their respective heirs, legal representatives,
successors, and assigns on account of the Lease or on account of any covenant,
undertaking or agreement of Landlord in or relating to this Lease.
7.4 INDEMNITY. Landlord shall indemnify and save Tenant
harmless of and from all loss, cost liability, damage and expense, including,
but not limited to, attorneys' fees, penalties and fines, incurred in connection
with or arising from (i) any default by Landlord in the observance or
performance of any of the terms, covenants or conditions of this Lease on
Landlord's part to be observed or performed, or (ii) the negligent acts or
omissions of Landlord or its contractors, agents or employees during or after
the expiration of the Term.
8. TENANT'S ADDITIONAL COVENANTS
8.1 AFFIRMATIVE COVENANTS. Tenant covenants, at all times
during the Term:
8.1.1 To use the Premises only for the Permitted
Use and for no other purpose and in no event shall Tenant permit the use of the
Premises in violation of any federal, state or local laws or regulations, in
violation of any covenants and restrictions affecting the Building and Building
Parcel, or for any unlawful, or noxious or offensive purpose or in such a manner
as to constitute a nuisance.
8.1.2 Except for repairs required to be made by
Landlord, to take good care of the Premises and, at Tenant's sole cost and
expense, to make all improvements, repairs
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<PAGE>
(including without limitation all routine repairs and maintenance of the roof of
the Building) and replacements, interior and exterior, structural or
nonstructural, foreseen or unforeseen as and when needed to preserve the
Premises in good working order and condition and in compliance with all
applicable laws and regulations. Without in any way limiting the foregoing,
Tenant shall make any improvements or upgrades required by applicable laws
(including without limitation the Americans With Disabilities Act) as a result
of Tenant's use of, or improvements to, the Building or the Premises.
8.1.3 To pay promptly when due the entire cost of
any work to the Premises, including equipment, facilities and fixtures therein,
undertaken by Tenant, so that the Premises and the Building shall, at all times,
be free of liens for labor and materials; to procure all governmental approvals
before undertaking such work.
8.1.4 To indemnify and save Landlord harmless of
and from all loss, cost liability, damage and expense, including, but not
limited to, attorneys' fees, penalties and fines, incurred in connection with or
arising from (i) any default by Tenant in the observance or performance of any
of the terms, covenants or conditions of this Lease on Tenant's part to be
observed or performed, (ii) the use or occupancy or manner of use or occupancy
of the Premises, the Building, or the Building Parcel by Tenant or any Person
claiming through or under Tenant, (iii) acts, omissions or negligence of Tenant
or any such Person, or the contractors, agents, servants, employees, visitors or
licensees of Tenant or any Person claiming through or under Tenant, in or about
the Premises either prior to, during or after the expiration of the Term, or
(iv) any claims by any Persons, by reason of injury to Persons or damage to
property occasioned by any use, occupancy, act, omission or negligence referred
to herein.
8.1.5 To maintain with responsible insurance
companies approved by Landlord (i) commercial general liability insurance, with
contractual liability endorsement covering the matters set forth in subsections
8.1.4(ii), (iii) and (iv) above, with a combined single limit in an amount not
less than $1,000,000 which insurance shall name Landlord and its agents as an
additional insured; (ii) fire insurance, with extended coverage, vandalism,
malicious mischief and sprinkler leakage endorsements covering all fixtures and
equipment, stock in trade, furniture, furnishings, improvements or betterments
installed or made by Tenant in, on or about the Premises to the extent of their
full replacement value. Tenant's insurance shall be in form satisfactory to
Landlord and shall provide that it shall not be subject to cancellation,
termination or material change, nor shall the policies therefor be surrendered
for termination except after at least ten (10) days' prior written notice to
Landlord and, upon Landlord's request, to any mortgagee of Landlord. In
addition, Tenant will procure and maintain, at Tenant's expense, physical damage
insurance covering all real and personal property, located on or in, or
constituting a part of, the Building in an amount equal to one hundred percent
(100%) of the replacement value of all such property. Such insurance shall
afford coverage for damages resulting from (i) perils covered by what is
commonly referred to as "broad from all perils coverage" (but excluding
earthquake and flood), and (ii) boilers and machinery coverage as appropriate
for apparatus located in the Building. All policies required pursuant to this
paragraph or duly executed certificates for such policies shall be deposited
with Landlord not less than ten (10) days from the day Tenant is expected to
take occupancy and upon
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<PAGE>
renewals of said policies not less than fifteen (15) days prior to the
expiration of the term of such coverage.
Notwithstanding anything to the contrary herein,
Landlord and Tenant mutually agree that with respect to any loss or damage to
the real or personal property of either on the Building Parcel, including the
Building itself (whether caused by the negligence of Landlord or Tenant or any
other cause), which is covered by insurance then being carried by them
respectively, or required to be carried, or as to any coverage which Landlord
agrees need not be carried, the party suffering a loss releases the other of and
from any and all claim with respect to such loss; and they further mutually
agree that their respective insurance companies shall have no right of
subrogation against the other on account thereof.
8.1.6 The Landlord and Landlord's agents and
employees shall not be liable for, and Tenant waives all claims for, loss or
damage to Tenant's business or damage to person or property sustained by Tenant
resulting from any accident or occurrence (unless caused by or resulting from
the negligence of Landlord, its agents, servants or employees other than
accidents or occurrences against which the Tenant is insured or required to be
insured) or in or upon the Premises or the Building.
8.1.7 To permit Landlord and its agents to have
access in and about the Premises including, without limitation, the right to
enter the Premises on twenty-four (24) hours' prior notice (except in the case
of emergency) to examine the Premises or for the purpose of performing any
obligation of Landlord under this Lease or exercising any right or remedy
reserved to Landlord in this Lease.
8.1.8 To pay on demand Landlord's expenses,
including reasonable attorneys' fees, at trial and on appeal, incurred in
successfully enforcing any obligation of the Tenant under this Lease or incurred
in any action or proceeding arising out of or pursuant to this Lease.
8.1.9 This Lease and all of Tenant's rights
hereunder are subject and subordinate to any mortgages or deeds of trust that
now exist or may hereafter be placed upon the Building, the Building Parcel or
any part thereof and to any and all advances to be made thereunder.
8.1.10 In addition to and not in limitation of
Section 8.1.1, Tenant shall, at its expense, comply with any existing or
hereafter-enacted environmental cleanup responsibility laws affecting Tenant's
operation at the Premises ("Cleanup Laws"). Tenant shall, at its expense, make
all submissions to, provide all information to, and comply with all requirements
of the appropriate governmental authority (the "Authority") under the Cleanup
Laws. Should the Authority determine that a cleanup plan be prepared and that a
cleanup be undertaken because of any spills or discharges of hazardous
substances or wastes at the Premises which occur during the Lease term, Tenant
shall at its expense prepare and submit the required plans and financial
assurances and carry out the approved plans. Tenant's obligations under this
Section 8.1.10 shall arise if there is any closing, terminating or transferring
of operations of an industrial establishment
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<PAGE>
at the Premises pursuant to the Cleanup Laws. At no expense to Landlord, Tenant
shall promptly provide all information requested by Landlord for preparation of
affidavits required by Landlord to determine the applicability of the Cleanup
Laws to the Premises, and shall sign the affidavits promptly when requested to
do so by Landlord.
Tenant shall indemnify, defend, and hold harmless
Landlord from all fines, suits, procedures, claims and actions of any kind
arising out of or in any way connected with any spills or discharges of
hazardous substances or wastes (as described in any Cleanup Laws) at the
Premises that occur during the Lease term, including all fines, suits,
procedures, claims and actions of any kind arising out of Tenant's failure to
provide all information, make all submissions and take all steps required by the
Authority under the Cleanup Laws or any other environmental laws. Tenant's
obligations and liabilities under this paragraph shall survive termination or
sooner expiration of this Lease. Tenant's failure to abide by the terms of this
Section shall be restrainable by injunction.
8.1.11 Upon the expiration or sooner termination of
the Term, to quit and surrender the Premises to Landlord, broom clean, in the
condition existing on the Commencement Date, ordinary wear and tear and casualty
not caused by Tenant excepted. To remove all property of Tenant and, at
Landlord's option, to remove any alteration, addition and improvement made by
Tenant and to repair all damages to the Premises caused by such removal. Any
improvements or installations which are required to be but are not so removed
shall be deemed to have been abandoned by Tenant and may be retained or disposed
of by Landlord, as Landlord shall desire, but Tenant shall be responsible for
the cost of restoration of the Premises and removal and disposal.
8.2 NEGATIVE COVENANTS. Tenant covenants at all times during
the Term and such further time as Tenant occupies the Premises or any part
thereof:
8.2.1 Not to make or perform, or permit the making
or performance of, any alterations, subdivisions, installations, decorations,
improvements, additions or other physical changes in or about the Premises
including those which are necessary to satisfy any applicable laws or
regulations (referred to collectively as "alterations") without Landlord's prior
written consent. Landlord agrees not to unreasonably withhold its consent to any
interior nonstructural alterations to be made by Tenant to adapt the Premises
for Tenant's business purposes.
8.2.2 Not to assign, sell, mortgage, pledge, or in
any manner, voluntarily or involuntarily, transfer or permit the transfer of
this Lease or any interest therein, or sublet the Premises or parts thereof
without Landlord's prior written consent, which Landlord shall not unreasonably
withhold or delay. A transfer or change in the owners of Tenant's stock or a
change in the composition of any noncorporate Tenant shall, unless such stock is
publicly traded, be deemed an assignment. Consent by Landlord to an assignment,
subletting, concession or license shall not be construed to relieve Tenant from
obtaining the express consent of Landlord to any further assignment or
subletting, nor shall the collection of Rent by Landlord from any assignee,
subtenant or other occupant be deemed a waiver of this covenant or an acceptance
of the assignee
73
<PAGE>
or subtenant as Tenant or a release of Tenant from the covenants in this Lease
on Tenant's part to be performed. Tenant and any assignee or subtenant shall be
jointly and severally liable for the obligations of this Lease. Notwithstanding
the foregoing, in lieu of granting its consent to any proposed assignment or
subletting, Landlord may elect to terminate this Lease with respect to the area
being assigned or sublet and recapture such area, in which event Tenant shall be
released from all subsequent liability hereunder with respect to such area so
recaptured.
9. DESTRUCTION: CONDEMNATION
9.1 DAMAGE OR DESTRUCTION.
9.1.1 In case of damage to the Premises or the
Building by fire or other casualty, Tenant shall give immediate notice to
Landlord. If the Building is damaged by fire or any other cause to such extent
that the cost of restoration, as reasonably estimated by Landlord, will equal or
exceed 30% of the replacement value of the Building (exclusive of foundations)
just prior to the occurrence of the damage, or if insurance proceeds sufficient
for restoration are for any reason unavailable, then Landlord may no later than
the sixtieth (60th) day following the damage, give Tenant a notice of election
to terminate this Lease. In the event of such an election this Lease shall be
deemed to terminate on the third day after the giving of said notice, Tenant
shall surrender possession of the Premises within a reasonable time thereafter,
and the Rent and Additional Rent shall be apportioned as of the date of said
surrender and any Rent paid for any period beyond said date shall be repaid to
Tenant. If the cost of restoration as estimated by Landlord shall amount to less
than 30% of such replacement value of the Building and insurance proceeds
sufficient for restoration are available, or if despite the cost Landlord does
not elect to terminate this Lease, Landlord shall restore the Building and the
Premises (to the extent of improvements to the Premises originally provided by
Landlord hereunder) with reasonable promptness, subject to delays beyond
Landlord's control and delays in the making of insurance adjustments by
Landlord, and Tenant shall have no right to terminate this Lease except as
herein provided. To the extent that the Premises are rendered untenantable, the
Rent shall proportionately abate, except in the event such damage resulted from
or was contributed to, directly, or indirectly, by the act, fault or neglect of
Tenant, Tenant's contractors, agents, employees, invitees or licensees, in which
event Rent shall abate only to the extent Landlord receives proceeds from
Landlord's rental income insurance policy to compensate Landlord for loss of
rent.
9.1.2 No damages, compensations or claim shall be
payable by Landlord for inconvenience, loss of business or annoyance arising
from any repair or restoration of any portion of the Premises or of the
Building. Landlord shall use its best efforts to effect such repairs promptly.
9.1.3 Landlord will not carry insurance of any kind
on any improvements paid for by Tenant or on Tenant's furniture or furnishings
or on any fixtures, equipment, personal property, inventory, improvements or
appurtenances of Tenant under this Lease and Landlord shall not be obligated to
repair any damage thereto or replace the same.
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<PAGE>
9.2 DOMAIN. If all of the Premises or such portions of the
Building as may be required for the reasonable use of the Premises, are taken by
eminent domain, this Lease shall automatically terminate as of the date title
vests in the condemning authority and all Rents, Additional Rents and other
payments shall be paid to that date.
10. DEFAULTS AND REMEDIES
10.1 DEFAULT. Upon the occurrence, at any time prior to or
during the Term, of any one or more of the following events (referred to as
"Events of Default"):
10.1.1 If Tenant shall default in the payment when
due of any installment of Fixed Rent or in the payment when due of any
Additional Rent, and such default shall continue for a period of five (5) days;
or
10.1.2 If Tenant shall default in the observance or
performance of any term, covenant or condition of this Lease on Tenant's part to
be observed or performed (other than covenants for the payment of Fixed Rent and
Additional Rent) and Tenant shall fail after notice by Landlord of such default
to remedy such default within twenty (20) days or if said default is not capable
of being cured within said twenty (20) day period and Tenant shall not commence
the cure within said period or shall not thereafter diligently prosecute to
completion all steps necessary to remedy such default;
Then, after the occurrence of such Event of Default, Landlord at any time
thereafter, at Landlord's option, may terminate this Lease by written notice to
Tenant but Tenant shall remain liable for damages as provided herein, or
Landlord may relet the Premises without terminating this Lease, or Landlord may
exercise any other right or remedy allowed by law or provided herein.
10.2 REMEDIES OF LANDLORD.
10.2.1 If an Event of Default has occurred, then,
in any of such events, Landlord may without notice, institute summary
proceedings, terminate all services, dispossess Tenant and the legal
representative of Tenant or other occupants of the Premises, and remove their
effects and hold the Premises as if this Lease had not been made, and Tenant
shall remain liable for damages as provided herein.
10.2.2 Upon an Event of Default, Landlord, in
addition to any other rights or remedies it may have, at its option, may enter
the Premises or any part thereof, either with or without process of law, and
expel, remove or put out Tenant or any other persons who may be thereon,
together with all personal property found therein; and Landlord may terminate
this Lease, or it may from time to time, without terminating this Lease and as
agent of Tenant, re-let the Premises or any part thereof for such term or terms
(which may be for a term less than or extending beyond the term hereof), and at
such rental or rentals and upon such other terms and conditions as Landlord in
its sole discretion may deem advisable, with the right to repair, renovate,
remodel, redecorate, alter and change the Premises, Tenant remaining liable for
any deficiency computed as hereinafter set forth. In the case of any default,
re-entry and/or dispossession by summary
75
<PAGE>
proceedings or otherwise, all Rent and Additional Rent shall become due
thereupon and be paid up to the time of such re-entry or dispossession, together
with such expenses as Landlord may incur in connection with such default for
attorneys fees, advertising expenses, brokerage fees and/or putting the Premises
in good order or preparing the same for re-rental.
10.2.3 If an Event of Default has occurred,
Landlord shall have the right to have a receiver appointed to collect rent and
conduct Tenant's business. Neither the filing of a petition for appointment of a
receiver nor the appointment itself shall constitute an election by Landlord to
terminate this Lease.
10.2.4 Tenant, for itself, and on behalf of any and
all persons claiming through or under it, including creditors of all kinds, does
hereby waive and surrender all right and privilege which they or any of them
might have under or by reason of any present or future law, to redeem the
Premises or to have a continuance of this Lease for the term hereof, as it may
have been extended, after having been dispossessed or ejected therefrom by
process of law or under the terms of this Lease or after the termination of this
Lease as herein provided.
10.2.5 At the option of Landlord, rents received by
the Landlord from such re-letting shall be applied first to the payment of any
indebtedness from Tenant to Landlord other than Rent and Additional Rent due
hereunder; second, to the payment of any costs and expenses of such re-letting
and including, but not limited to, attorneys fees, advertising fees and
brokerage fees, and to the payment of any alteration and changes in the
Premises; third, to the payment of Rent and Additional Rent due and to become
due hereunder, and, if after so applying said rents there is any deficiency in
the Rent or Additional Rent to be paid by Tenant under this Lease, Tenant shall
pay any deficiency to Landlord monthly on the dates specified herein and any
payment made or suits brought to collect the amount of the deficiency for any
month shall not prejudice in any way the right of Landlord to collect the
deficiency for any subsequent month. The failure or refusal of Landlord to
re-let the Premises or any part or parts thereof shall not release or affect
Tenant's liability hereunder, nor shall Landlord be liable for failure to
re-let. No such re-entry or taking possession, of the Premises shall be
construed as an election on Landlord's part to terminate this Lease unless a
written notice of such intention be given to Tenant.
10.3 LANDLORD'S RIGHT TO CURE DEFAULTS. Landlord may cure,
after notice of default is served, any default by Tenant under this Lease; and
whenever Landlord so elects, all costs and expenses incurred by Landlord in
curing a default, including, without limitation, reasonable attorneys' fees,
together with interest on the amount of costs and expenses so incurred at the
rate provided in Section 2.6 hereof, shall be paid by Tenant to Landlord on
demand, and shall be recoverable as Additional Rent.
10.4 WAIVER OF DEFAULT. No consent or waiver, express or
implied, by Landlord or Tenant to or of any breach of any covenant, condition or
duty of the other shall be construed as a consent or waiver to or of any other
breach of the same or any other covenant, condition or duty of Tenant, unless in
writing signed by the party against whom waiver is sought.
76
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10.5 HOLDOVER BY TENANT. In the event Tenant remains in
possession of any portion of the Premises after the expiration of the Term as to
such portion but with the written permission of Landlord, Tenant shall be deemed
to be occupying such portion of the Premises as a tenant from month to month, at
a monthly rental equal to twice the monthly installment of Fixed Rent payable
during the last month of the Term, subject to all the other conditions,
provisions and obligations of this Lease insofar as the same are applicable to a
month-to-month tenancy. Tenant shall not and hereby waives the right to
interpose any counterclaim or counterclaims in a summary proceeding or other
action by Landlord based on holdover.
11. SIGNAGE Any signage installed by Tenant shall be subject to
Landlord's prior written consent, which Landlord may withhold in its sole
discretion. All such signage shall be installed and maintained at Tenant's sole
expense, and on or before the expiration of the Term of this Lease, such signage
shall be removed by Tenant at its sole expense. Tenant shall repair any damage
caused to the Building by such removal. All such signage shall comply with all
applicable laws and codes.
12. PARKING Tenant shall be entitled to use the loading dock area on
the Building Parcel for parking Tenant's vehicles at no additional cost to
Tenant. Such parking shall be subject to such reasonable rules and regulations
as Landlord may issue from time to time. At Tenant's request, Landlord shall use
reasonable efforts to obtain for Tenant off-site parking spaces near the
Premises, on a month to month basis, at the rate charged by the owner of such
parking facilities.
13. MISCELLANEOUS PROVISIONS
13.1 NOTICES. Any notice or demand from Landlord to Tenant or
from Tenant to Landlord shall be in writing and shall be deemed duly served if
mailed by registered or certified mail, return receipt requested, addressed, if
to Tenant, at the address of Tenant set forth herein, or to such other address
as Tenant shall have last designated by notice in writing to Landlord, and if to
Landlord, at the address of Landlord set forth herein or such other address as
Landlord shall have last designated by notice in writing to Tenant. Notice shall
be deemed served when mailed.
13.2 BROKERAGE. Tim O'Keefe of Colliers International
("Landlord's Broker") represented Landlord and R. Hans Kemp of The Staubach
Company ("Tenant's Broker") represented Tenant in connection with this Lease.
Landlord shall pay any commission owing to Landlord's Broker, and Landlord's
Broker shall pay any commission owing to Tenant's Broker, in connection with
this Lease. Tenant and Landlord warrant that they have had no dealings with any
broker or agent in connection with this Lease other than the Landlord's Broker
and Tenant's Broker, and each covenants to pay, hold harmless and indemnify the
other from and against any and all cost, expense or liability for any
compensation, commissions and charges claimed by any other broker or agent with
respect to this Lease or the negotiation thereof with whom they had dealings.
13.3 ESTOPPEL CERTIFICATES. Each of the parties agrees that it
will, at any time and from time to time, within 10 business days following
written notice by the other party hereto specifying that it is given pursuant to
this Section, execute, acknowledge and deliver to the party
77
<PAGE>
who gave such notice a statement in writing certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating the
modifications), and the dates to which the Rent and any other payments due
hereunder from Tenant have been paid in advance, if any, and stating whether or
not to the best of knowledge of the signer of such certificate the other party
is in default in performance of any covenant, agreement or condition contained
in this Lease, and, if so, specifying each such default of which the signer may
have knowledge.
13.4 APPLICABLE LAW AND CONSTRUCTION. The laws of the State of
Washington shall govern the validity, performance and enforcement of this Lease.
The invalidity or unenforceability of any provision of this Lease shall not
affect or impair any other provision.
13.5 RELATIONSHIP OF THE PARTIES. Nothing contained herein
shall be deemed or construed by the parties hereto, or by any third party, as
creating the relationship of principal and agent or partnership or joint venture
between the parties hereto.
13.6 BINDING EFFECT OF LEASE. The covenants, agreements and
obligations herein contained, except as herein otherwise specifically provided
shall extend to, bind and inure to the benefit of the parties hereto and their
respective personal representatives, heirs, successors and permitted assigns.
13.7 NO ORAL CHANGES. Neither this Lease nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
13.8 ENTIRE AGREEMENT. This Lease is the final and complete
expression of Landlord and Tenant relating in any manner to the leasing, use and
occupancy of the Premises, to Tenant's use of the Building and other matters set
forth in this Lease. No prior agreement or understanding pertaining to the same
shall be valid or of any force or effect.
78
<PAGE>
Landlord and Tenant have executed this Lease as of the day and year set
forth at the beginning of this Lease.
LANDLORD: R2H2 LLC, a Washington limited liability company
By: /s/ Scott Redman
Its:
-------------------------
TENANT: URBAN JUICE & SODA COMPANY, a
Wyoming corporation
By: /s/ Jennifer Cue
Its: Chief Financial Officer
79
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS OF URBAN JUICE & SODA COMPANY LTD AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 389,198
<SECURITIES> 0
<RECEIVABLES> 2,271,934
<ALLOWANCES> 270,657
<INVENTORY> 1,855,463
<CURRENT-ASSETS> 4,516,357
<PP&E> 1,129,296
<DEPRECIATION> 584,091
<TOTAL-ASSETS> 5,172,020
<CURRENT-LIABILITIES> 3,128,242
<BONDS> 79,254
0
0
<COMMON> 10,486,249
<OTHER-SE> 482,740
<TOTAL-LIABILITY-AND-EQUITY> 5,172,920
<SALES> 3,197,962
<TOTAL-REVENUES> 3,197,962
<CGS> 2,008,485
<TOTAL-COSTS> 3,545,791
<OTHER-EXPENSES> (7,937)<F1>
<LOSS-PROVISION> 15,336
<INTEREST-EXPENSE> 13,034
<INCOME-PRETAX> (339,892)
<INCOME-TAX> 0
<INCOME-CONTINUING> (339,892)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (339,892)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
<FN>
<F1>other income (expense) includes 8,555 of interest income and other
income, net
</FN>
</TABLE>
