ITEM 10 FINANCING
As described below, qualified
franchisees may have an opportunity to obtain partial financing of the initial
franchise fee and other expenses incurred in connection with the establishment
and operation of the FOD Store. These financing arrangements are offered by
L&A Development, LLC ("L&A"), a third-party lender based in Little Rock , Arkansas. If you need financing, you may choose to deal with L&A or you
may choose to borrow from other financing sources. We do not guarantee your
financing with L&A.
We have reached an agreement
with L&A to set up the program that is described under this Item 10. We do
not receive payment from L&A (we have actually paid a set-up fee to L&A
to establish the program with them). We have also agreed to certain recourse
terms under which we will make up certain limited payments to L&A in
certain cases where there is a franchisee default before a buyer can be found
for the assets or the other collateral taken by L&A.
The financing terms described
here are based on information that L&A has provided about their program. We
do not control and cannot predict whether L&A will make changes to its
financing program.
If you request financing and
L&A approves your application, you will enter into a loan agreement with
L&A (the "Loan
Agreement"). A copy of L&A''s current form of Loan Agreement is attached to this
Disclosure Document as Exhibit F. You will also be required under the Loan
Agreement to sign a promissory note (Exhibit A to the Loan Agreement), a
security agreement (Exhibit B to the Loan Agreement), a personal guarantee
(Exhibit C to the Loan Agreement), a mortgage (Exhibit D to the Loan Agreement)
and to enter into resolutions approving the loan transaction (Exhibit E to the
Loan Agreement).
L&A will permit you to use
the Loan Agreement to finance the initial franchise fee, site acquisition costs
for the FOD Store, construction or remodeling costs, equipment and fixture
costs, costs for opening or ongoing inventory and supplies. Financing under the
Loan Agreement is only available for an initial loan amount and may not be
obtained on an ongoing basis, such as revolving credit.
There is no pre-set
maximum amount of financing available for any individual FOD Store. The amount
that can be financed is up to L&A.
Interest rates vary based on
the cost of funds, credit quality, financing amount, and other considerations.
The annual percentage rate displayed in the chart above was effective as of the
date of this Disclosure Document and is subject to change by L&A at any
time without notice.
You will be required to enter
into a security agreement (Exhibit B to the Loan Agreement) with L&A, under
which L&A will take a secured creditor interest in your tangible and
intangible personal property to secure your obligation to comply with the Loan
Agreement.
In addition to the franchisee
entity, the shareholders of the franchisee must personally guarantee to L&A
the franchisee''s obligations under the Loan Agreement (Exhibit C to the Loan
Agreement).
If you are in default under
the promissory note (Exhibit A to the Loan Agreement), your obligation to pay
the note will be accelerated and all amounts due will become immediately due;
you will also be responsible to L&A for the costs of collection (including,
for example, legal fees).
Under the terms of the promissory note, you must agree
to certain terms and waive certain rights (such as presentment, demand for
payment, notice of dishonor, notice of protest, protest, and all other notices
or demands in connection with the delivery, acceptance or performance of, or
default under, the note) that may bar you from asserting certain defenses.
L&A has not in the past
sold franchisee financing arrangements, and has informed us that it does not
intend to sell or assign the Loan Agreement, but it reserves the right to do so
in the future on terms to be determined at that time. If L&A assigns the
Loan Agreement or any related documents to a third party, the assignee may
assume all of the rights and obligations of L&A under the Loan Agreement,
and you may lose all of your defenses against L&A.
We do not receive direct or
indirect payments for placement of financing under the Loan Agreement.
You should carefully review
all of the terms of the Loan Agreement, its schedules, and the attached
agreements with an attorney and your accountant to make sure that you
understand all of those documents'' provisions and implications before you sign
the agreements.
