Item 10. FINANCING
We offer limited financing to qualified franchisees who
are currently in the IT services business, generally in amounts up to $32,000
for the purpose of financing your initial franchise fee. If financing is
offered, we will require that it be for no more than 80% of the Initial Fee,
and that you pay at least 20% down on the total Initial Fee or a minimum of
$8,000, whichever is greater. You do not have to obtain financing from us, nor
do we have any obligation to extend financing to any individual franchisee. We
reserve the right to approve or deny any requests for the extension of credit
in our absolute discretion. Additionally, by making credit available to you, we
assume no obligation to make any additional credit available to you under the
specific type of credit arrangement we approved, or under any other type of
credit arrangement, nor do we guarantee your note, lease or any obligation.
If you qualify for a loan, you will sign a Promissory
Note (see Exhibit G).
Eligibility Requirements. To apply for a loan, you must
submit an application to our Vice President of Franchise Development, together
with financial statements (for each borrower, if there is more than one
borrower).
To be eligible for a loan, you must:
-Be in an established IT
service business with a minimum of $10,000 on average per month of services
(excluding hardware and software licensing) revenue over your last 12 months in
business; and
-Have a satisfactory credit
rating (your application is permission for us to request credit information from
organizations such as D&B and TRW);
Repayment Period. Principal shall be payable in
equal monthly installments over a 3-year period, together with interest
payments based on a variable interest rate (see below).
Prepayment. You may repay any loan in whole
or in part at any time, without penalty. If you make a prepayment, it must
include accrued interest to the date of the prepayment.
Interest Rate. The interest rate for a Loan is
a variable rate equal to the Prime Rate plus 2 percentage points, or another
rate agreed upon by both parties to the loan. "Prime Rate" means the
prime rate of interest as reported in the Wall Street Journal on the first day of each month
in which an installment is due, with the initial rate determined as of the date
of the Loan. Each monthly Installment under the Note will include interest from
the due date of the preceding installment, calculated on the principal balance
that remains unpaid after application of the preceding installment. We do not
currently charge up-front points or loan origination fees, although we reserve
the right to do so in the future.
As of January 2, 2008, the
Prime Rate was 7.25%; therefore, the initial interest rate for a loan funded on
that date would have been 9.25%. Assuming the 9.25% rate, and that you borrowed
$32,000 on that date and agreed to repay the loan in 12 monthly installments,
the "Annual Percentage" for the loan (as defined under the Consumer
Credit Protection Act) would be 9.25%.
Your Potential Liability on
Default. Under
the Note, if you fail to pay any installment within 30 days after its due date,
we may declare the entire indebtedness to be due and payable immediately. After
the default, the interest rate on the unpaid principal balance will increase to
18% per annum (not to exceed the maximum legal rate).
If you fail to make a payment or commit any other
default under the Promissory Note, we may exercise any rights and remedies
available to us under the terms of the Promissory Note or applicable law. A
default under the Promissory Note may also be a material default under the
terms of the Franchise Agreement and may lead to termination of the Franchise
Agreement. Breaches of the Promissory Note include any un-cured default by you
under the Franchise Agreement, or the sale, transfer, termination or
non-renewal of any Franchise Agreement you have with us.
If we employ an attorney to collect a loan, you must
pay all of our costs of collection, including reasonable attorneys'' fees for
pre-trial, trial and appellate proceedings, if any. You must pay all of our
reasonable out-of-pocket expenses to enforce your obligations, whether or not
we employ an attorney for that purpose.
Sale or Assignment of Promissory
Note. We
presently do not sell or assign franchisee loans to others, nor have we done so
in the past. We reserve the right to change this policy in the future, but we
have no present plans to do so.
As described above, we receive
interest income from you if you obtain financing from us. We do not arrange
financing from other sources, and we do not receive payments from other lenders
as a result of any financing extended by them to you. We do not guarantee any
obligations you may make to others.
We may change or discontinue
our financing program at any time. In isolated cases, we may also offer
financing arrangements outside of our regular programs. The terms and
conditions of financing in these isolated situations will depend on the
circumstances of each case. You should not assume we would be willing to offer
any special financing to you.
