**Exhibit 10.50**

**REVOLVING LOAN AGREEMENT**

THIS REVOLVING LOANAGREEMENT (**"Agreement"**) is made as of this 5th day of October,2001, by and between **FRESH CHOICE, INC., a** Delaware corporation(**"Borrower"**),and **MID–PENINSULABANK,** a California Banking Corporation (**"Lender"**).

                1.             DEFINITIONS OF TERMS USED IN THIS AGREEMENT.

                                1.1           Advance.  A disbursement under the Loan to Borrowerpursuant to the terms hereof.

                                1.2           Borrower's Interest Rate.  The rate of interest to be paid to Lender inrespect to the Loan as set forth in the Note.

                                1.3           Debt.  All of Borrower's liabilities, determined inaccordance with generally accepted accounting principles consistently appliedas reported on its most recent balance sheet, exclusive of Subordinated Debt.

                                1.4           Default Interest.  That rate of interest specified in the Notewhich shall be in effect in the event of default hereunder or under the Note.

                                1.5           Environmental Indemnity.  The unsecured environmental indemnityagreement executed in favor of Lender of even date herewith.

                                1.6           Governmental Authority.  The authority of the United States, theState of California, any political subdivision thereof, any city and anygovernmental or quasi-governmental agency, department, commission, board,bureau or instrumentality of any of them, or any court, administrativetribunal, or public utility.

                                1.7           Governmental Requirements.  Any present or future law, ordinance, order,rule or regulation of a Governmental Authority applicable to Borrower or itsbusiness operations.

                                1.8           Loan.  The amount evidenced by the Note, i.e.,presently in the maximum amount of Two Million and No/100ths Dollars($2,000,000.00).

                                1.9           Loan Documents.  The Note, Pledge Agreement, this Agreementand any and all other documents evidencing or securing the Loan.

                                1.10         Loan Fee.  The loan fee to be paid to Lender inconsideration for Lender agreeing to make the Loan and entering into thisAgreement, which fee shall not be subject to reduction or be refundable underany circumstances, and which fee is the sum of Eight Thousand Five Hundred andNo/100ths Dollars ($8,500.00), payable upon Recordation.

 

                                1.11         Maturity Date.  The date upon which the indebtednessevidenced by the Note shall be due and payable in full, being the date ofOctober 5, 2002.

                                1.12         Note.  The Promissory Note of even date herewith executed by Borrower asmaker and payable to Lender or order, in the principal amount of the Loan, asthe same may be renewed, replaced, extended or modified, evidencing Advances ofa revolving nature which will be made, repaid and remade from time to time.

 

                                1.13         Permitted Indebtedness.  The words “Permitted Indebtedness” mean: (a)trade debt incurred in the ordinary course of business; (b) indebtedness toLender in connection with this Agreement; (c) indebtedness existing on theclosing date and disclosed to Lender; (d) indebtedness that is subordinated toLender pursuant to an agreement in form and substance acceptable to Lender; (e)indebtedness secured by Permitted Liens; (f) any extensions, renewal orrefinancing of indebtedness permitted under this Agreement; (g) accrueddividends on the preferred stock of Borrower; (h) interest rate and currencyhedging agreements; (i) guarantees of any subsidiary’s trade debt incurred inthe ordinary course of such subsidiary’s business; (j) guaranties of leaseobligations incurred in the ordinary course of business; and (k) indebtednessconsisting of deferred revenues in accordance with generally acceptableaccounting principals consistently applied.

 

                                1.14         Permitted Investments.  The words “Permitted Investments” mean: (a)investments existing on the date hereof and which are disclosed in writing byBorrower to Lender; (b) investments consisting of (i) travel advances andemployee relocation loans and other employee loans and advances in the ordinarycourse of business, and (ii) loans to employees, officers or directors relatingto the purchase of equity securities of Borrower or its subsidiaries pursuantto employee stock purchase plan agreements approved by Borrower’s Board of Directors;(c) investments (including debt obligations) received in connection with thebankruptcy or reorganization of customers or suppliers and in settlement ofdelinquent obligations of, and other disputes with, customers or suppliersarising in the ordinary course of Borrower’s business; (d) investmentsconsisting of notes receivable of, or prepaid royalties and other creditextensions, to customers and suppliers who are not affiliates, in the ordinarycourse of business, provided that this paragraph shall not apply to investmentsof Borrower in any subsidiary; (e) other investments aggregating not in excessof $1,000,000 in any given year; and (f) marketable direct obligations issuedor unconditionally guarantied by the United States or its agency or any Statematuring within one year from its purchase; (ii) commercial paper maturing nomore than one year after its creation and having the highest rating from anational rating agency; and (iii) certificates of deposit maturing no more thanone year after issue.

 

                                1.15         Permitted Liens.  The words “Permitted Liens” mean: (a) liensand security interests securing indebtedness owed by Borrower to Lender; (b)involuntary liens which, individually or in the aggregate, would not have amaterial adverse effect on the value of Lender’s security interests in anycollateral granted by Borrower to Lender; (c) liens for taxes or othergovernmental or regulatory assessments which are not delinquent, or which arecontested in good faith; (d) liens on any property held or acquired byBorrower: (i) securing indebtedness incurred or assumed for the purpose offinancing all or any part of the cost of acquiring such property or (ii)existing on such property when acquired; provided, that, with respect to (i)above, any such lien attaches solely to the property acquired with suchindebtedness and the proceeds thereof, and that the principal amount of suchindebtedness does not exceed one hundred percent (100%) of the cost of suchproperty (which cost shall include shipping, tax and installation chargesfinanced by the Person holding the lien); and further provided, thatwith respect to (ii) above, any such Lien is confined to the equipment andproceeds of the equipment; (e) bankers’ liens, rights of setoff and similarliens incurred on deposits made in the ordinary course of business; (f)materialmen’s, mechanics’, repairmen’s, employees’, landlords’ or other likeliens arising in the ordinary course of business and which are not delinquentfor more than 45 days or are being contested in good faith by appropriateproceedings; (g) any judgment, attachment or similar lien, unless the judgmentit secures has not been discharged or execution thereof effectively stayed andbonded against pending appeal within 30 days of the entry thereof; (h) lienswhich have been approved by Lender in writing, (i) liens incurred or depositsmade in the ordinary course of Borrower’s business; (j) easements,reservations, rights-of-way, minor defects or irregularities in title and othersimilar charges or encumbrances affecting real property and not interfering inany material respect with the ordinary conduct of Borrower’s business; (k)liens, deposits or pledges to secure the performance of bids, tenders,contracts (other than contracts for the payment of money), public or statutoryobligations, surety, stay, appeal, indemnity, performance or other similarbonds or other similar obligations arising in the ordinary course of business;(l) liens on insurance proceeds in favor of insurance companies granted solelyas security for financed premiums; (m) liens that are not prior to Lender’ssecurity interests that constitute customary rights of offset; (n) liensagainst any equity interest in any subsidiary of Borrower in favor of a personor persons providing debt financing to such subsidiary; (o) liens incurred inconnection with the extension, renewal or refinancing of the indebtednesssecured by liens of the type described above; and (p) liens that aresubordinated to Lender pursuant to a security agreement reasonably satisfactoryto Lender.

 

                                1.16         Tangible Net Worth.  The words "Tangible Net Worth"mean Borrower's Total Shareholders’ Equity, less all intangible assets (i.e.goodwill, trademarks, patents, copyrights, organizational expenses, and similarintangible items, but including leaseholds and leasehold improvements) plusSubordinated Debt.

 

                                1.17         Subordinated Debt.  The words “Subordinated Debt” meanindebtedness and other liabilities of Borrower, which have been subordinated bywritten agreement to indebtedness owed by Borrower pursuant to a subordinationagreement in form and substance acceptable to Lender.

 

                                1.18         Total Capital Expenditures.  The words “Total Capital Expenditures” meanan amount equal to Borrower’s capital expenditures as disclosed by Borrower inits Consolidated Statements of Cash Flows schedule to its financial statementsas approved by Lender pursuant to Paragraph 4.1 hereof.

 

                                1.19         Total Shareholders’ Equity.  The words “Total Shareholders’ Equity” meanthe total shareholders’ equity as set forth in Borrower’s financial statementsas approved by Lender pursuant to Paragraph 4.1 hereof.

 

                2.             LOAN.

Loan.  Borrower hasrequested and Lender has agreed to provide to Borrower a revolving line ofcredit in the maximum amount of Two Million and No/100ths Dollars($2,000,000.00).  From time to timeduring the term of the Loan, at such times as no Event of Default exists,Lender shall make Advances to Borrower for any business purpose, in the form ofdeposits to Borrower's account or such other account as selected by Borrower,but, subject to Paragraph 2.5 below, in no event shall the sum of all Advancesoutstanding at any time exceed Two Million and No/100ths Dollars($2,000,000.00). A further condition precedent to Lender's obligation to makeAdvances shall be that Borrower shall have paid to Lender all fees, charges,and other expenses which are then due and payable as specified in thisAgreement or any other Loan Document.

 

                                2.1           Deleted Intentionally.

                                2.2           Advances.  The date and amount of each Advance made byLender and of each repayment of principal thereon received by Lender shall berecorded by Lender in its records.  Theaggregate unpaid principal amount so recorded by Lender shall constitute primafacie evidence of the principal amount owing and unpaid on the Note, provided,however, that the failure by Lender to properly record any such amount shallnot limit or otherwise affect the obligations of the Borrower under thisAgreement or the Note to repay the principal amount of the Loan together withall interest accrued or accruing thereon.

                                2.3           Written and Telephone NoticeAuthorizations.  Unless and untilBorrower delivers to Lender written notice to the contrary, Borrower shallrequest Advances either in writing or by facsimile (510-351-8828) or bytelephone (510-346-7338).  If requestedby Lender, within three (3) days after a telephonic or facsimileauthorization, Borrower shall deliver to Lender a written confirmation of suchtelephonic authorization.  Borrowerunderstands that it shall be fully responsible for any and all Advancesoutstanding under the Note which are made in reliance on telephone calls, andthat Borrower's failure to send a written confirmation will not negate theprevious telephonic request.

                                2.4           Loan.  Lender and Borrower agree that Lender shallmake the Loan to Borrower and Borrower shall accept the Loan upon the terms,conditions, covenants, representations and warranties contained herein.  All Advances disbursed hereunder shall beevidenced by the Note and all Advances shall bear interest from the date of theAdvance until paid at the rate of Borrower's Interest or Default Interest, ifapplicable.  Borrower shall be deemed tohave reaffirmed each and every representation and warranty contained herein asof the date each Advance is made.

                                2.5           Letters of Credit.  On March 15, 2001, at Borrower’s request,Lender issued an irrevocable letter of credit in the amount of $650,000.00 infavor of United States Fire Insurance Company (the **“$650,000.00 Letter of Credit”**).During the term of the Loan, Lender may issue additional letters of credit atthe request of Borrower on terms satisfactory to Lender (the $650,000.00 Letterof Credit and such other letters of credit are hereinafter collectivelyreferred to as the **“Letters of Credit”**).  Borrower understands and agrees that at notime shall the outstanding balance of Advances under the Loan exceed an amountequal to $2,000,000.00 less the sum of the amounts of all Letters of Creditwhich are outstanding from time to time during the Loan, and Lender shall haveno obligation to make an Advance if, by doing so, the outstanding balance ofAdvances would exceed the amount so determined.

 

Example No. 1. On the date hereof, the $650,000.00 Letter of Credit isoutstanding.  Therefore, the maximumamount available for Advances as of the date hereof is $1,350,000.00.

Example No. 2. The $650,000.00 Letter of Credit is cancelled. The maximum amountavailable for Advances is increased to $2,000,000.00.

Example No. 3.   No Letters of Credit are outstanding and outstanding Advancestotal $1,000,000.00.  Borrower requestsa new Letter of Credit in the amount of $600,000.00 and Lender issues suchLetter of Credit. The amount available for new Advances is $400,000.00.

Example No. 4.   The outstanding amount ofLetters of Credit total $800,000.00 and outstanding Advances total$700,000.00.  Borrower requests a newLetter of Credit in the amount of $600,000.00. Lender will not grant the new Letter of Credit because it exceeds theamount available for new Advances ($600,000.00).  

                3.             REPRESENTATIONS AND WARRANTIESOF BORROWER.  Borrower representsand warrants, as of the date hereof and the date of each Advance, that:

                                3.1           Financial Statements.  The financial statements heretofore deliveredto Lender are true and correct in all respects, fairly present the respectivefinancial conditions of the subjects thereof as of their respective dates; nomaterially adverse change has occurred in the financial conditions reflectedtherein since their respective dates and no additional borrowings have beenmade by Borrower since the date thereof other than the borrowing contemplatedhereby or approved by Lender.

                                3.2           Litigation.  There are no actions, suits or proceedingspending or, to the knowledge of Borrower, threatened against or affecting it,or any of its property, at law or in equity, or before or by any GovernmentalAuthority that individually or in the aggregate could, reasonably be construedto have a material adverse effect on Borrower.

                                3.3           No Breach.  The consummation of the transaction herebycontemplated and performance of this Agreement and the Note will not result inany breach of, or constitute a default under any mortgage, deed of trust,lease, bank loan or security agreement, corporate charter, by laws or otherinstrument to which the Borrower is a party or by which it is bound, whichbreach or default could, reasonably be construed to have a material adverseeffect on Borrower.

                                3.4           No Default.  There is no Event of Default on the part ofBorrower under this Agreement or the Note and no event has occurred which withnotice or the passage of time or either would constitute an Event of Defaultunder any term or provision thereof.

 

                                3.5           Accuracy.  All documents, reports, instruments, papers,information and forms of evidence delivered to Lender by Borrower with respectto the Loan are accurate and correct, are complete insofar as completeness maybe necessary to give Lender true and accurate knowledge of the subject matterthereof, and do not contain any misrepresentations or omissions.  Lender may rely on such documents, reports,instruments, papers, information and forms of evidence without investigation orinquiry; it being understood that any forecasts or projections provided to Lenderare not predictions of future events or assurances or guaranties that any eventwill necessarily occur.

                                3.6           No Liens.  Except for Permitted Liens, Borrower has notgranted a security interest in any of its properties.

                                3.7           Organization.  Borrower is a corporation which is dulyorganized, validly existing and in good standing under the laws of Californiaand is validly existing and in good standing in all states in which Borrower isdoing business.  Borrower has the fullpower and authority to own its properties and to transact the businesses inwhich it is presently engaged or presently proposes to engage.

                                3.8           Authorization.  The execution, delivery and performance ofthis Agreement and the Note have been duly authorized by all necessary action byBorrower, do not require the consent or approval of any other person,regulatory authority or governmental body and do not conflict with, result in aviolation of any law, governmental regulation, court decree or order applicableto Borrower the violation of which could, reasonably be construed to have amaterial adverse effect on Borrower.

                                3.9           Taxes.  To the best of Borrower's knowledge, all taxreturns and reports of Borrower that are or were required to be filed, havebeen filed, and all taxes, assessments and other governmental charges have beenpaid in full, except those presently being or to be contested by Borrower ingood faith in the ordinary course of business and for which adequate reserveshave been provided.

                                3.10         Binding Effect.  This Agreement, the Note, the PledgeAgreement and any and all other documents securing or evidencing the Loan arebinding upon Borrower as well as upon Borrower's successors, representativesand assigns, and are legally enforceable in accordance with their respectiveterms.

                                3.11         Employee Benefit Plans.  Each employee benefit plan as to whichBorrower may have any liability complies in all material respects with allapplicable requirements of law and regulations, and (a) no Reportable Event orProhibited Transaction (as defined in ERISA) has occurred with respect to anysuch plan, (b) Borrower has not withdrawn from any such plan or initiated stepsto do so, (c) no steps have been taken to terminate any such plan, and (d)there are no unfunded liabilities other than those previously disclosed toLender in writing.

                                3.12         Survival of Representations andWarranties.  Borrower understandsand agrees that Lender, without independent investigation, is relying upon theabove representations and warranties in extending Loans to Borrower. Borrowerfurther agrees that the foregoing representations and warranties shall becontinuing in nature and shall remain in full force and effect until such timeas Borrower's indebtedness shall be paid in full, or until this Agreement shallbe terminated in the manner provided above, whichever is the later to occur.

 

                                3.13**        **Insurance.  Maintain or cause to be maintained, publicliability insurance, and such other insurance as Lender may reasonably requirein this Agreement and in the Pledge Agreement of even date herewith of Borrowerin favor of Lender with respect to the Collateral described in the PledgeAgreement, in form, amounts, coverages and with insurance companies as arereasonably and customary for businesses such as Borrower’s.  Borrower upon request of Lender, willdeliver to Lender from time to time the policies or certificates of insurancein form satisfactory to Lender, including stipulations that coverages will notbe canceled or diminished without at least thirty (30) days' prior writtennotice to Lender.  Each insurance policyalso shall include an endorsement providing that coverage in favor of Lenderwill not be impaired in any way by any act, omission or default of Borrower orany other person.  In connection withall policies covering the Collateral, Borrower will provide Lender with suchloss payable or other endorsements as Lender may require.

                                3.14         Insurance Reports.  Furnish to Lender, upon request of Lender,reports on each existing insurance policy showing such information as Lendermay reasonably request, including without limitation the following: (a) thename of the insurer; (b) the risks insured; (c) the amount of the policy; (d)the properties insured; (e) the then current property values on the basis ofwhich insurance has been obtained, and the manner of determining those values;and (f) the expiration date of the policy.

                                3.15         Compliance Certificate.    Unless waived in writing by Lender,provide Lender at least quarterly (within fifty (50) days after the end of eachquarter) and at the time of each disbursement of Loan proceeds, if requested byLender at such disbursement, with a certificate executed by Borrower's chieffinancial officer, or other officer or person acceptable to Lender, certifyingthat no Event of Default or other event which with notice or the passage oftime or either would constitute an Event of Default exists under thisAgreement.

                4.             BORROWER'S COVENANTS.  Borrower covenants and agrees until the fulland final payment of the Loan, unless Lender waives compliance in writing, thatit will:

                                4.1           Financial Information.  Furnish Lender with, as soon as available,but in no event later than one hundred (100) days after the end of each fiscalyear, Borrower's balance sheet and income statement for the year ended, auditedby a certified public accountant satisfactory to Lender, and containing anunqualified opinion of the accountant and, as soon as available, but in noevent later than fifty (50) days after the end of each fiscal quarter, Borrower'sbalance sheet and profit and loss statement for the period ended, prepared andcertified as correct to the best knowledge and belief by Borrower's chieffinancial officer or other officer or person acceptable to Lender.  All financial reports required to beprovided under this Agreement shall be prepared in accordance with generallyaccepted accounting principles, applied on a consistent basis, and certified byBorrower as being true and correct.  Inaddition, Borrower agrees to provide Lender with copies of all filingssubmitted to the Securities and Exchange Commission within twenty (20) days offiling.

 

                                4.2           Financial Records.    Maintain its books and records inaccordance with generally accepted accounting principles, applied on aconsistent basis, and permit Lender to examine and audit Borrower's books andrecords at all reasonable times upon advance written notice; provided however,such examinations and audits shall not unreasonably interfere with Borrower'soperations, shall be at Lender’s sole expense, and shall occur no morefrequently than twice per year, unless an Event of Default has occurred and iscontinuing.

                                4.3           Taxes.  Pay and discharge when due all assessments,taxes, governmental charges, and related levies and liens, of every kind andnature, imposed upon Borrower or its properties, income, or profits, prior tothe date on which penalties would attach, and all lawful claims that, ifunpaid, might become a lien, other than a Permitted Lien, upon any ofBorrower's properties, income, or profits. Provided however, Borrower will not be required to pay and discharge anysuch assessment, tax, charge, levy, lien or claim so long as (a) the legalityof the same shall be contested in good faith by appropriate proceedings, and(b) Borrower shall have established on its books adequate reserves with respectto such contested assessment, tax, charge, levy, lien, or claim in accordancewith generally accepted accounting practices. Borrower, upon demand of Lender, will furnish to Lender evidence ofpayment of the assessments, taxes, charges, levies, liens and claims and willauthorize the appropriate governmental official to deliver to Lender at anytime a written statement of any assessments, taxes, charges, levies, liens andclaims against Borrower's properties, income, or profits.

                                4.4           Payment of Costs.  Pay all costs and expenses required tosatisfy the conditions of this Agreement. Without limitation of the generality of the foregoing, Borrowerwill pay:

                                                4.4.1        all taxes and recording expenses,including stamp taxes, if any; and

                                                4.4.2        the reasonable fees of Lender's counselin connection with the negotiation and preparation of this Agreement and theother Loan Documents, Lender’s Loan Fee, appraisal fee, and any and all othercosts incurred by Lender in connection with the Loan.

                                4.5           No Conveyance or Encumbrance.  Except for Permitted Liens and PermittedInvestments, not to sell, convey, transfer, dispose of or further encumber anyof the Collateral or any part thereof or any interest therein outside of theordinary course of business or enter into a lease covering all or any portionthereof or an undivided interest therein, either voluntarily, involuntarily orotherwise, or enter into an agreement so to do without the prior written consentof Lender being first had and obtained; provided however, Borrower may, in itsdiscretion, cease operations at up to three restaurants during any twelve monthperiod without the consent of Lender, and Borrower may transfer, move ordispose of any Collateral related to such restaurants, in accordance withreasonable business practices, without the consent of Lender.

 

                                4.6           Furnishing Notices.  Promptly furnish Lender with copies, ornotify Lender in writing, of the following:

                                                4.6.1         any communication, whether written ororal, that Borrower may receive from any governmental, judicial or legalauthority, giving notice of any claim or assertion that all or any ofBorrower’s property fails in any respect to comply with any GovernmentalRequirements, or of any dispute which may exist between Borrower and anygovernmental, judicial or legal authority that may reasonably be construed toadversely affect Borrower of any of its property;

                                                4.6.2        any material adverse change inBorrower's financial condition or operations or in the physical condition ofany of its property;

                                                4.6.3        any filings (with true copies thereof)with any Governmental Authority regarding or pursuant to any law related tohazardous materials;

                                                4.6.4        all claims made or threatened by any thirdparty against Borrower relating to any loss or injury resulting from anyhazardous materials which claims may, reasonably be construed to have amaterial adverse effect on Borrower or any of its property;

                                                4.6.5        any proposed or contemplated material changein the organization or management of Borrower (that could reasonably beexpected to result in a violation of Section 4.11 hereof) or in the nature ofits business.

                                4.7           Net Worth Ratio.  At all times, maintain a ratio of Debt toTangible Net Worth of not less than 0.60 to 1.00.

                                4.8           Other Ratio.  Maintain a ratio, as of the end of eachfiscal quarter of Borrower, as measured on a rolling four fiscal quarter basis,of (x) the sum of Borrower's annual earning before interest, taxes,depreciation and amortization expenses (but excluding any non-cash income) lessdividends and distributions paid to shareholders of Borrower, to (y) the amountof current portion of long-term obligations as reflected on Borrower’s mostrecent balance sheet date plus the amount of the interest expense for thepreceding four fiscal quarters, of 2.00 to 1.00.  Except as provided above, all computations made to determinecompliance with the requirements contained in this paragraph shall be made inaccordance with generally accepted accounting principles, applied on aconsistent basis, and certified by Borrower as being true and correct.

                                4.9           Capital Expenditures.  Not to make Total Capital Expenditures inexcess of $7,800,000.00 during the fiscal year ending December 31, 2001.

                                4.10         Total Shareholder Equity.  Maintain at all times a Tangible Net Worth in excess of$20,000,000.00.

                                4.11         Management.  Maintain executive and management personnelwith substantially the same qualifications and experience as the presentexecutive and management personnel; conduct its business affairs in areasonable and prudent manner and in compliance with all applicable federal,state and municipal laws, ordinances, rules, and regulations respecting itsproperties, charters, businesses and operations, including without limitation,compliance with the Americans With Disabilities Act and with all minimumfunding standards and other requirements of ERISA and other laws applicable toBorrower's employee benefits plans.

 

                                4.12         Continuity of Operations.  Not engage in any business activitiessubstantially different than those in which Borrower is presently engaged,cease operations, liquidate, merge or consolidate with another company, sellall or substantially all of its assets, change its name, pay any dividends onBorrower’s stock (other than dividends payable in its stock) or purchase orretire any of Borrower’s outstanding shares or alter or amend Borrower’scapital structure other than stock repurchased under employee or consultantstock repurchase agreements.

                                4.13         Out of Debt.  Borrower agrees to maintain the outstandingprincipal balance of the Loan at a zero balance for at least one (1) period ofthirty (30) consecutive days during the term of the Loan.

                                4.14**        **Recovery of AdditionalCosts.    If the imposition of orany change in any law, rule, regulation or guideline, or the interpretation orapplication of any thereof by any court or administrative or governmentalauthority (including any request or policy not having the force of law) shallimpose, modify or make applicable any taxes (except federal, state or localincome or franchise taxes imposed on Lender), reserve requirements, capitaladequacy requirements or other obligations which would (A) increase the cost toLender for extending or maintaining the credit facilities to which this LoanAgreement relates, or (B) reduce the amounts payable to Lender under this LoanAgreement or the other Loan Documents.

                5.             DEFAULT.  At the option of Lender, the following shallconstitute events of default hereunder (including, if Borrower consists of morethan one person, the occurrence of any of such events with respect to any oneor more of said persons) (“Event of Default”):

                                5.1           Other than Borrower's failure to makeany payment due under the Note when due, any default in the performance of anycovenant, condition or agreement set forth herein, the Note or other documentsevidencing or securing the Loan, including the Pledge Agreement of even dateherewith**. **If any default, other than adefault arising from Borrower's failure to make any payment due under the Notewhen due, is curable, it may be cured (and no Event of Default will haveoccurred) if Borrower after receiving written notice from Lender demanding cureof such default: (1) cures the default within fifteen (15) days; or (2) if thecure requires more than fifteen (15) days, immediately initiate steps whichLender deems in Lender's reasonable discretion to be sufficient to cure thedefault and thereafter continue and complete all reasonable and necessary stepssufficient to produce compliance as soon as reasonably practical.

 

                                5.2           Borrower voluntarily suspends thetransaction of business or there is an attachment, execution or other judicialseizure of any portion of Borrower's assets and such seizure is not dischargedwithin ten (10) days.

                                5.3           Borrower becomes insolvent or unableto pay its debts as they mature or makes an assignment for the benefit ofcreditors.

                                5.4           Borrower files or there is filedagainst Borrower a petition to have Borrower adjudicated a bankrupt or apetition of reorganization or arrangement under any law relating to bankruptcyunless, in the case of a petition filed against Borrower, the same is stayed ordismissed within sixty (60) days.

                                5.5           Borrower applies for or consents tothe appointment of a receiver, trustee or conservator for any portion ofBorrower's property or such appointment is made without Borrower's consent andis not stayed or vacated within sixty (60) days.

                                5.6           Any representation by Borrower toLender concerning Borrower's financial condition or credit standing or anyrepresentation or warranty contained herein proves to be materially false ormisleading.

                                5.7           The failure of Borrower to make anypayment within five (5) days of the date when due under the terms of the Note.

                                5.8           An event of default occurs thatresults in the acceleration of indebtedness of more than $250,000.00 under anyloan, extension of credit or security agreement in favor of any other creditorthat may, in Lender’s judgment, materially adversely affect Borrower’s abilityto repay the Loan or to perform its obligations under this Agreement; provided,however, that the Event of Default under this paragraph shall be automaticallycured for purposes of this Agreement upon the cure or waiver of the event ofdefault under such other agreement.

                6.             REMEDIES.  If any of the Events of Default set forth inParagraph 5 occur, then Lender, in addition to its other rights hereunder,may at its option, without prior demand or notice, but only after theexpiration of any applicable cure periods and unless and until such default orEvent of Default has been waived:

                                6.1            Declare the Note and all Advancesthereunder immediately due and payable.

                                6.2            Proceed as authorized by law tosatisfy the indebtedness of Borrower to Lender and in that regard, Lender shallbe entitled to all of the rights, privileges and benefits contained in theother Loan Documents.

                                6.3           Cease making Advances under the Loan

 

                7.             GENERAL CONDITIONS.

                                7.1           No Waiver.  No delay or omission of Lender in exercisingany right or power arising from any default by Borrower shall be construed as awaiver of such default or as an acquiescence therein, nor shall any single orpartial exercise thereof preclude any further exercise thereof.  Lender may, at its option, waive any of theconditions herein and any such waiver shall not be deemed a waiver of Lender'srights hereunder but shall be deemed to have been made in pursuance of thisAgreement and not in modification thereof. No waiver of any Event of Default shall be construed to be a waiver ofor acquiescence in or consent to any preceding or subsequent event of default.

                                7.2            No Third Party Benefits. This Agreement is made for the sole benefit of Borrower and Lender,their successors and assigns and no other person or persons shall have anyrights or remedies under or by reason of this Agreement nor shall Lender oweany duty whatsoever to any claimant to exercise any right or power of Lenderhereunder or arising from any default by Borrower.

                                7.3            Notice.  All notices or demands of any kind whicheither party may be required or desire to serve upon the other under the termsof this Agreement shall be in writing and shall be given by personal delivery,national overnight courier, or by certified or registered United States mail,postage prepaid.  Notices addressed toLender shall be sent to Lender at 420 Cowper Street, Palo Alto, California94301, and notices addressed to Borrower shall be sent to the address set forthbelow its signature.  Notices shall beeffective upon receipt or when proper delivery is refused.  In case of service by mail, notices shall bedeemed complete at the expiration of the second day after the date of mailing.Either party may change its address for purposes of notice by giving notice ofsuch change of address to the other party in accordance with the provisions ofthis paragraph.

                                7.4           Entire Agreement.  This Agreement, the other documentsevidencing or securing the Loan constitute the entire understanding between theparties regarding the matters mentioned in or incidental to thisAgreement.  The Loan Documents supersedeall oral negotiations and prior writings concerning the subject matter of theLoan Documents.  This Agreement may notbe modified, amended or terminated except by a written agreement signed by eachof the parties hereto.

                                7.5           Documentation.  In addition to the instruments and documentsmentioned or referred to herein, Borrower will, at its own cost and expense,supply Lender with such other instruments, documents, information and data asmay, in Lender's opinion, be reasonably necessary for the purposes hereof, allof which shall be in form and content acceptable to Lender.

                                7.6           Borrower Information.  Subject to the confidentially provisions ofParagraph 7.12 hereof, Borrower agrees that Lender may provide any financial orother information, data or material in Lender's possession relating toBorrower, the Loan, this Agreement or Borrower’s property, to Lender's parent,affiliate, subsidiary, participants or service providers, without furthernotice to Borrower.

                                7.7           Not Assignable.  Neither this Agreement nor any right ofBorrower to receive any sums, proceeds or disbursements hereunder, or under theNote may be assigned, pledged, hypothecated, anticipated or otherwiseencumbered by Borrower without the prior written consent of Lender.  Subject to the foregoing restrictions, thisAgreement shall inure to the benefit of Lender, its successors and assigns andbind Borrower, its heirs, executors, administrators, successors and assigns.

 

                                7.8           Time is of the Essence.  Time is hereby declared to be of the essenceof this Agreement and of every part hereof.

                                7.9           Governing Law.  This Agreement (and any and all disputesbetween the parties arising directly or indirectly from the transaction or fromthe lending relationship contemplated hereunder) shall be governed by andconstrued in accordance with the laws of the State of California.

                                7.10         Collection Costs.  Borrower shall pay promptly to Lender withoutdemand, with interest thereon from date of expenditure at the Default Interestrate, reasonable attorneys' fees and all costs and other expenses paid orincurred by Lender in enforcing or exercising its rights or remedies createdby, connected with or provided in this Agreement.

                                7.11         Survival.  The representations, warranties andcovenants herein shall survive the disbursement of the Loan and shall remain inforce and effect until the Loan is paid in full.

                                7.12         Confidentiality.  Except as provided in Section 7.14, Lenderwill hold in confidence any confidential information it receives from theBorrower pursuant to the terms hereof, except for disclosure:  (a) to legal counsel and accountantsfor Lender or any assignee; (b) to other professional advisors to Lenderor any assignee; (c) to regulatory officials having jurisdiction overLender or any assignee; (d) as required by law or legal process or inconnection with any legal proceeding to which Lender (or any assignee) and theBorrower are adverse parties; and (e) in connection with a disposition orproposed disposition in any or all of Lender's rights and benefitshereunder.  For purposes of thissection, "confidential information" shall mean any informationrespecting the Borrower other than:  (i) informationwhich is or becomes generally available to the public other than as a result ofa disclosure by Lender or any assignee in violation of this section;(ii) information which becomes available to Lender or any assignee fromany other source (other than the Borrower) which is not known by Lender or suchassignee to be bound by a confidentiality agreement with or other contractual,legal or fiduciary obligations of confidentiality to the Borrower with respectto the information made available; and (iii) information known by Lenderor any assignee on a non-confidential basis prior to its disclosure to Lenderor the assignee by the Borrower.

 

                                7.13         Attorneys' Fees; Expenses.  Borrower agrees to pay upon demand all ofLender's costs and expenses, including Lender's reasonable attorneys' fees andLender's legal expenses, incurred in connection with the enforcement of theLoan Documents. Lender may hire or pay someone else to help enforce the LoanDocuments, and Borrower shall pay the costs and expenses of such enforcement.Costs and expenses include Lender's reasonable attorneys' fees and legalexpenses whether or not there is a lawsuit, including attorneys' fees and legalexpenses for bankruptcy proceedings (including efforts to modify or vacate anyautomatic stay or injunction), appeals, and any anticipated post-judgmentcollection services. Borrower also shall pay all court costs and suchadditional fees as may be directed by the court.

 

                                7.14         Consent to Loan Participation.  Borrower agrees and consents to Lender'ssale or transfer, whether now or later, of one or more participation interestsin the Loan to one or more purchasers, whether related or unrelated to Lender,provided that none of such purchasers are competitors of Borrower. Lender mayprovide, without any limitation whatsoever, to any one or more purchasers, orpotential purchasers, any information or knowledge Lender may have aboutBorrower or about any other matter relating to the Loan, provided that suchpurchaser has executed a confidentiality agreement in the form proscribed inSection 7.12 hereof.  Borroweradditionally waives any and all notices of sale of participation interests, aswell as all notices of any repurchase of such participation interests;provided, however, Borrower shall have no obligation to such purchaser orrepurchaser until it has received at least twenty (20) days written notice ofsuch purchase or repurchase. Borrower further waives all rights of offset orcounterclaim that it may have now or later against any purchaser of such aparticipation interest with respect to Borrower’s claims against Lender andunconditionally agrees that such purchaser may enforce Borrower's obligationunder the Loan irrespective of the failure or insolvency of any holder of anyinterest in the Loan. Borrower further agrees that the purchaser of any suchparticipation interests may enforce its interests irrespective of any personalclaims or defenses that Borrower may have against Lender.

 

                                7.15         Modification of Agreement.** **This Agreement may besupplemented, amended or modified only by the mutual agreement of theparties.  No supplement, amendment ormodification of this Agreement shall be binding unless it is in writing andsigned by both Bank and Borrower.

 

IN WITNESS WHEREOF, the parties have executed thisAgreement the day and year first above written.
| **LENDER:**

**MID-PENINSULA BANK**,   a California Banking Corporation

By:  /S/ Jonas H. Stafford

Jonas H. Stafford

Its:  Senior  Vice-President

  | **BORROWER:**

**FRESH  CHOICE, INC.,** a

Delaware corporation

 

By:  /S/  David E. Pertl  

Its:  Senior  Vice President and CFO

 

 

Address:

485 Cochrane Circle

Morgan Hill, CA 95037

  |
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