item 10 financing
Financing arrangements are
generally your responsibility, although we assist you with the development of
your business plan, your store development budget, and your loan request which
is submitted to third party lenders. Franchisees of Petland may be eligible for
expedited SBA loan processing through SBA''s Franchise Registry Program. See www.franchiseregistry.com.
In our sole discretion, we may
provide financing for a portion of your initial investment. On occasion, if we
sell to you an existing Petland store, in our sole discretion, we may finance a
portion of the purchase price of the store. If you elect to finance these
obligations with us, and we agree to do so, you must sign a promissory note
with Petland, Inc. in the form of Exhibit F attached to this Disclosure
Document. The currently applicable annual interest rate charged on these
obligations is the Wall Street Journal prime rate plus 4 basis points (Section
1.2 of the Note). The current term of financing is from 1 to 10 years. The
interest rate and other terms of the form note are subject to our periodic
adjustment. The note contains certain material terms of which you should be
aware. These include the following: (1) You have the right to prepay the note
without penalty. (2) If you do not pay on time, we have the right to declare
the entire amount of the loan due by accelerating the note, and to bring legal
proceedings to collect the note. If this happens, you are liable for our costs
incurred in collecting the note, including our attorney''s fees and court costs.
(3) If you default in payment of the note, this is also a default under the
Franchise Agreement and other agreements, and we may terminate the Franchise
Agreement. (4) The note contains what is known as a cognovit provision, which
allows us, upon a default by you, to have an attorney appear before a judge in Ohio and consent to the court granting a judgment against you for the full amount that you owe,
without advance notice to you or the opportunity for a hearing. We must,
however, notify you of this after the court grants judgment. (5) Upon default
in the payment of the obligations under the note, the interest rate charged on
the note will increase to the default interest rate specified in the note,
which is the lesser of 18% per year or the maximum rate permissible under state
law. (6) The note contains provisions by which you waive certain rights,
including presentment for payment, notice of dishonor, protest, notice of protest,
and claims that you may have against us. (7) If the franchisee is a
corporation, partnership, or limited liability company, your shareholders,
partners or members must also execute or guarantee the note.
Petland
receives no consideration for placing the financing with any particular lender.
We require adequate security
for the financing which may include your grant to us of a security interest in
your personal property other than that used at your store, as well as personal
guaranties. The Security Agreement is attached to this Disclosure Document as
Exhibit G.
Although Petland has never
done so, we have the right to sell or assign the note to a third party without
your consent. The note is silent on this subject. This type of sale or
assignment may cause you to lose all of your defenses against the lender as a
result.
Petland does not receive
direct or indirect payments for the placement of financing of franchisee
obligations with any lender, but reserves its right to do so in the future.
Petland
may, but is not required to, guarantee your obligations to third parties.
