Document:

ppi_s1a-ex1002.htm

Exhibit 10.2

 

 

	

	
500 LA TERRAZA BLVD

ESCONDIDO, CA 92025

07/01/2009 

PASSIONATE PET, INC

John J Dunn

18871 TELLER AVE

IRVINE, CA 92612

 

Dear John J Dunn:

 

This letter is to confirm that Wells Fargo Bank, National Association (also referred to as "Wells Fargo SBA Lending" and the "Bank"), subject to all the terms and conditions contained herein, has agreed to make available to PASSIONATE  PET, INC ("Borrower") the following described credit accommodation, so long as there has been no material adverse change in Borrower's financial condition as determined by the Bank.

 

	
Loan Amount: 

	
$507,300.00 Bank SBA 7A term loan with construction.

 

	
Purpose:

	
To finance leasehold improvements, equipment, fixtures, inventory and working capital for start up retail pet store in Irvine, CA

 

	
Interest Rate:

	
Adjustable Rate based on the Prime Rate as listed in the Wall Street Journal plus a spread of 2.75%. Based on the current Prime Rate and the spread, the current interest rate is 6.00%. The initial interest rate will be based upon the Prime Rate that was in effect on the first business day of the month in which the application was received by Small Business Administration. Thereafter, the interest rate will be adjusted on a monthly basis.

 

Note: The percentage over the Wall Street Journal Prime Rate as set forth above for each option is valid for 45 days from the date hereof. If the loan does not close within such 45 day period, Wells Fargo SBA Lending reserves the right to adjust such percentage.

 

	
Repayment:

	
Principal and interest shall be amortized over 108 months after a 12 month interest only period. If the loan were to close today, the monthly payments would be approximately $6,090.52.

 

The SBA requires that the Bank must adjust the payment amount monthly to amortize principal over the remaining term of the loan.

 

The SBA also requires that the Bank apply each installment payment first to pay interest accrued to the day the Bank receives the payment, then to bring principal current, then to pay any late fees, and will apply any remaining balance to reduce principal.

 

	Maturity Date: 	
108 months after a 12-month interest only period from the date of the loan documents.

 

	Packaging Fees:	
As a consideration for Wells Fargo SBA Lending making this conditional approval, a non-refundable packaging fee of $1,000 must be received.

 

	SBA Fees:	
Waived (Waiver of SBA fee is subject to reinstatement by the Small Business Administration)

 

	
PIRT Title 

Insurance Fees: 

	
 

Not to exceed $200 (This is a non-refundable fee)

 

  

  

  

 

 

	
Sources

and Uses:

	
 

The estimated sources and uses of the funds used for the Project would be as follows:

 

	 	 	 	 	 	 	 	 	 	 
	
SOURCES AND USES OF FUNDS

	 	 	 	 	 	 	 	 	 
	  	 	 	
 

7A

	 	 	
Borrower

	 	 	
Tot. Proj. Cost

	 
	
Leasehold improvements*

	 	$	--	 	 	$	50,000	 	 	$	50,000	 
	
LI soft costs (arch-eng-plans/permits/offsites)*

	 	$	--	 	 	 	5,000	 	 	 	5,000	 
	
Interim Interest*

	 	$	16,300	 	 	 	--	 	 	 	16,300	 
	
LI-contingency

	 	$	5,000	 	 	 	--	 	 	 	5,000	 
	
Equipment

	 	$	85,000	 	 	 	--	 	 	 	85,000	 
	
Fixtures

	 	$	171,000	 	 	 	--	 	 	$	171,000	 
	
Working Capital

	 	$	30,000	 	 	 	164,000	 	 	$	194,000	 
	
Inventory

	 	$	200,000	 	 	$	--	 	 	$	200,000	 
	
Packaging Fee

	 	$	--	 	 	 	1,000	 	 	 	1,000	 
	
Other misc fees*

	 	$	--	 	 	 	700	 	 	 	700	 
	
Total

	 	$	507,300	 	 	$	220,700	 	 	$	728,000	 
	
Percentage

	 	 	70%	 	 	 	30%	 	 	 	100%	 

 

	 	
*These figures are estimates and final costs could be higher than what is displayed in the table above. If final figures are higher, the additional costs will be borne by the borrower.

	 	 
	
Borrower

Injection:

	
 

Borrower injection is currently $220,700, plus any additional closing costs and fees. These funds must be injected prior to loan closing by Wells Fargo SBA Lending. The source of the Borrower's injection must be dearly identified and documented. Injection from borrowed funds are subject to additional review and must be fully disclosed to avoid closing delays.

	 	 	 
	
Collateral:

	●	
First security interest in all Inventory, Chattel Paper, Accounts, Equipment, and General Intangibles owned by PASSIONATE PET, INC ("OC").

	 	 	 
	 	●	
Assignment of Life Insurance Policy in the amount of $512,300.00 on the life of John J Dunn.

	 	 	 
	 	●	
Third Deed of Trust/Mortgage owned by John J Dunn on the property located at 2 ST GILES CT, LADERA RANCH, CA 92694 subject only to a lien(s) in favor of Countywide and Bank of America in the aggregate amount of $635,257.00. Evidence of title and priority of lien will be based upon Pirt title policy acceptable to Bank.

	 	 	 
	 	●	
Third party pledge from Christine Dunn secured by Third Deed of Trust/Mortgage his/her legal/equitable interest in the real property located at 2 ST GILES CT, LADERA RANCH, CA 92694.

	 	 	 
	Continuing

Guarantees:

	
 

John J Dunn

	 	 	 
	Appraisal

Report:

	
 

An appraisal report on the real property located at 2 ST GILES CT. LADERA RANCH. CA is a condition of loan approval. The appraisal report must be addressed to a Financial Lending Institution and must be received, reviewed and approved by Wells Fargo SBA Lending prior to closing.  

 

Note: This appraisal cannot be over 3. If loan closing is not completed within the 3 months from date of the appraisal an update will be required at borrowers cost.

	 	 	 
	Appraisal Fee:	$500 (This is a non-refundable fee).

 

 

  

2

  

 

 

	
Fee Authorization:

	
Please initial here ___________ if you would like us to deduct the PIRT policy fee, appraisal fee and packaging fee from your Welts Fargo checking account #_____________________________. Otherwise, please enclose a check for said fees made payable to Wells Fargo Bank.

	 	 
	
Automated Clearing 

House (ACH) 

Debit:

	
 

 

Your payment of $6,090.52 will be transferred monthly from your Wells Fargo Business Banking checking account # _____________________________, unless you provide us with other instructions.

	 	 
	
Lease Agreement:

	
Borrower to provide an executed lease for the business facility for at least the term of the loan including any renewals (120 months).

	 	 
	
Flood Insurance:

	
If the collateral for this loan is or will be located in an area designated by the Director of the Federal Emergency Management Agency as a Special Flood hazard area Zone, a Flood Insurance Policy, in a form and substance satisfactory to the Bank, will be required prior to disbursement of the loan and at Borrower's cost.

	 	 
	
Life Insurance:

	
Borrower to provide Assignment of Life Insurance Policy in the amount of $512,300.00 on the life of John J Dunn. An Assignment and Supplemental Questionnaire will need to be approved by the Life Insurance Company prior to closing. Please route insurance company name, policy number and a copy of the policy to the Bank at your earliest convenience. Three copies each of the Assignment and Questionnaire Form will be forwarded to you for your execution. Please note that the Assignment needs to be signed in the presence of a notary. SEND THESE EXECUTED DOCUMENTS BACK TO THE BANK. DO NOT SEND DIRECTLY TO INSURANCE COMPANY OR AGENT. The Bank should not be named as beneficiary.

	 	 
	
Insurance Upon 

Completion of 

Construction:

	
 

 

Borrower to provide Bank Hazard Insurance Policy in the amount of the replacement cost of the Collateral listed above with a Mortgagee, Loss Payable, and Lender's Loss Payable Endorsement (438BFU/satisfactory to the Bank) prior to final disbursement of the loan.

	 	 
	
Disbursements:

	
Loan will be disbursed in accordance with the SBA Authorization and Loan Agreement. The SBA has restrictions on the use of loan proceeds. Please contact your Loan Closing Officer to determine whether your expenditures before and after loan closing will be eligible for reimbursement. Borrower may be required to provide copies of invoices and/or cancelled checks prior to first and each following disbursement. The SBA requires an executed Settlement Sheet at the time of first disbursement of loan funds.

 

	  	
Prior to disbursement of construction funds, borrower must have spent not less than the amount indicated as Equity Injection in this letter. Loan proceeds for construction will be disbursed by the Bank to borrower/contractors/vendors, as designated by borrower, based on submitted invoices. A maximum of one disbursements per month will be allowed during the construction period. Additional instructions on how to request disbursements will be provided at the time of loan closing.

 

	  	
Loan proceeds used for equipment, furniture, and/or inventory purchases will be paid directly to the vendors based on submitted invoices or to the borrower based on paid invoices.

 

	  	
Loan proceeds used for working capital purposes will be disbursed directly to the borrower's business checking account based on submitted invoices or supporting documentation as required. Disbursements will be limited to two (2) per month, not to exceed $10,000.00, upon loan closing. Please note the minimum draw is $5,000.

	 	 
	
Retention:

	
The Bank retains 10% of all disbursement requests for construction loans until the project is complete.

 

 

  

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Project

	 	  
	
Completion:

	Completion is evidenced by the following:
	 	 	 
	  	●  	
A final inspection has been performed by Bank or its agent, which reflects project completion of 100%.

	 	 	 
	  	●  	
A "Permanent Certificate of Occupancy" has been issued and a copy has been provided to the Bank.

	 	 	 
	  	●  	
A °Notice of Completion" has been recorded within 10 days of project completion and a copy has been provided to the Bank, where applicable.

	 	 	 
	
Change Order:

	All change orders must be approved by Bank and its agent prior to commencement of their construction.
	 	 	 
	
Financial 

Reporting:

	
 

Annual business statements and tax returns.

	  	Annual personal statements and tax returns.
	  	 	  
	
Tax Return 

Verification:

	
 

Borrower to sign and date the IRS Form 4506T, Request for Copy or Transcript of Tax Form. This form authorizes Bank to verify Borrower's tax returns (IRS 1040 for sole proprietorships, 1120 or 1120s for corporations, or 1065 for partnerships) with those filed with the IRS.

 

	  	If there is a discrepancy between reported income on copies of tax returns submitted to Bank with the loan application and amount reported to IRS, or if there is no record of a return filed with IRS, Bank may share borrower's financial information with any government agency. Government agencies which may receive borrower financial information may include, but not be limited to the Small Business Administration (SBA), Internal Revenue Service (IRS), and/or other offices of the Department of Justice. By signing this commitment letter, borrower acknowledges and consents to the above.
	  	 	  
	
Sharing of Financial Information:

	
 

Borrower's signature below authorizes Bank to share Borrower's financial information, condition, and performance with other creditors, including the Small Business Administration and its agents. In addition, Borrower is aware that the Bank shares information about the Borrower with Bank affiliates. If the Borrower is an individual the Borrower may opt out of such information sharing with Bank Affiliates and other outside companies in accordance with the procedures set forth in the Wells Fargo Privacy Policy for Business Individuals that will be provided to you with your closing documents. Should you require a copy of this Privacy Policy before your loan closes, please make your request in writing and you will be provided with a brochure that explains the policy and provides directions for opting out of information sharing.

	 	 	  
	

Power of Attorney

For UCC filings:

	
 

Borrower appoints Bank its true attorney in fact to (i) prepare, execute, file, record, or deliver financing statements, continuation statements, termination statements, statements of assignment, applications for registration, or like papers to perfect, preserve, or release Bank's interests in the Collateral; (ii) cause any Collateral to be transferred to Bank's name or the name of Bank's nominee; and (iii) do all things - and execute all documents in the name of Borrower or otherwise as Bank deems necessary, proper, or convenient in order to preserve, perfect, or enforce its rights in the Collateral.

	 	 	  
	

No Material

Adverse Change:

	
 

This conditional approval is made in reliance on the continuation of the present management, ownership and financial condition and status of the Borrower and guarantor(s) and other facts and circumstances known by the Lender as of the date hereof. Accordingly, should any actual or threatened adverse change, financial or otherwise, affect the Borrower, any guarantor, or any collateral pledged as security, Lender shall have the right to modify the terms of this conditional approval, or withdraw its conditional approval, in which case it shall have no further obligation to Borrower to make any loan, or otherwise. The determination of adverse change shall be made in the sole and absolute discretion of Lender. Additionally, if Borrower or any guarantor is considered to be in default by Lender or any of Lender's affiliates under any agreement or other obligation now or hereafter in effect, Lender shall be under no obligation to extend any credit to Borrower.

 

 

  

4

  

 

	 	Prior to commencement of any construction or any disbursement, Wells Fargo SBA Lending must have received and/or approved the following items:
	 	 	 
	 	●	
Completion of all SBA requirements and SBA approval

	 	●	
Signed and completed loan documents acceptable to the Bank

	 	●	
Completion of all items on the Loan Closing Checklist to be provided by your Wells Fargo Loan Closing Officer.

	 	●	
Bank's commitment to extend credit under this agreement is further subject to execution of a Guaranty in form and substance acceptable to Bank. Acceptability of such guarantors shall be in Bank's sole discretion, and may consider any factor, including but not limited to credit delinquencies, collection accounts, foreclosures, bankruptcies, lawsuits, judgments and liens,

	 	●	
Acceptable documentation of the required SBA equity injection and Borrower contribution at loan closing of (refer to sources & uses chart).

	 	●	
AUTOPAY - Borrower is required as a condition of approval to set up auto-pay for loan payments

	 	●	
Evidence of Business License.

	 	●	
IRS Tax return verifications on John Dunn for years 2006/2007/2008

	 	●	
Minimum appraised value of the secondary collateral real estate of $875,000 located at 2 Giles Ct., Ladera Ranch, CA 92694

	 	●	
Site visit by BOO prior to loan closing

	 	●	

Written verification of Source of SBA Equity Injection

 

The funds provided by Bank for this transaction are not available to the Borrower at terms and rates equal to those set forth herein without SBA's participation. With standard Bank loan products, Bank would not be able to fund the entire project loan.

 

This credit accommodation is made available subject to the terms, conditions and provisions of comprehensive loan documents to be executed by Borrower all in form and substance satisfactory to Wells Fargo Bank. These documents must be executed within 2 months from date that this letter is signed and accepted by the Borrower.

 

Bank reserves the right to terminate this commitment at any time prior to Bank's receipt of acceptance by the Borrower. This commitment is personal to the Borrower and may not be transferred or assigned without prior written consent of the Bank. Your acknowledgment of this letter and payment of $1,700 to Wells Fargo Bank, N.A. (to be used towards the payment of the loan packaging fee, PIRT policy fee, and appraisal fees) shall constitute acceptance of the foregoing terms and conditions.

 

Unless accepted or terminated, this commitment will expire in 7 days.

 

The bank reserves the right to "pre-close" your loan by signing documents up to three business days prior to funding.

 

Changes to the borrower or any terms of this commitment must be approved in writing by the Bank and may result in delays in closing andlor funding of your loan.

 

Sincerely,

 

David Kalitowski 

WFSBA Loan Officer

 

 

  

5

  

 

 

Accepted By: 

 

PASSIONATE PET, INC

 

 

Name: John J Dunn 

Title: President

 

 

Date:

 

 

Guarantor Acknowledgment: 

 

John J Dunn, Individual

 

 

Name: John J Dunn

 

 

Date:

 

 

3rd Party Pledgor Acknowledgment: 

 

Christine Dunn, an Individual

 

 

Name: Christine Dunn

 

 

Date:

 

 

 

 

 6ppi_s1a-ex1003.htm

Exhibit 10.3

   

PROMISSORY NOTE

    

	$40,000.00	May 15, 2009

    

               FOR VALUE RECEIVED, Passionate Pet, Inc., a California corporation (the "Maker"), with its primary offices located at 18871 Teller Ave. Irvine, CA 92612, promises to pay to the order of  John Dunn, located at Irvine California (the "Payee"), upon the terms set forth below, the principal sum of Forty Thousand Dollars ($40,000.00) (“Principal Sum”) together with interest at an annual rate of 8% on the unpaid Principal Sum outstanding (“Principal and Interest  Sum”) (this secured promissory note, the “Note”).

1.   Principal    Maker shall be required to pay the Payee an amount in cash, wire transfer or check equal to the Principal and Interest Sum at maturity March 15, 2011 (the “Maturity Date”).

2.   Events of Default.

(a) "Event of Default", wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

(i) any default in the payment of the principal or interest of this Note, as and when the same shall become due and payable;

(ii) Maker shall fail to observe or perform any obligation or shall breach any term or provision of this Note;

(iii) Maker shall commence, or there shall be commenced against Maker, a case under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or Maker commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to Maker, or there is commenced against Maker, any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 60 days; or Maker is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or Maker suffers any appointment of any custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 60 days; or Maker, makes a general assignment for the benefit of creditors; or Maker, shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or Maker shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or Maker shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by Maker for the purpose of effecting any of the foregoing; or

(b) If any Event of Default occurs, the full principal amount of this Note, shall become, at the Payee's election, immediately due and payable in cash, with interest accruing at 1.5% per month on any unpaid obligation.  The Payee need not provide and Maker hereby waives any presentment, demand, protest or other notice of any kind, and the Payee may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by Payee at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

   

  

  

  

   

3.   No Waiver of Payee's Rights. All payments of principal shall be made without setoff, deduction or counterclaim. No delay or failure on the part of the Payee in exercising any of its options, powers or rights, nor any partial or single exercise of its options, powers or rights shall constitute a waiver thereof or of any other option, power or right, and no waiver on the part of the Payee of any of its options, powers or rights shall constitute a waiver of any other option, power or right. Maker hereby waives presentment of payment, protest, and all notices or demands in connection with the delivery, acceptance, performance, default or endorsement of this Note. Acceptance by the Payee of less than the full amount due and payable hereunder shall in no way limit the right of the Payee to require full payment of all sums due and payable hereunder in accordance with the terms hereof.

4.   Modifications. No term or provision contained herein may be modified, amended or waived except by written agreement or consent signed by the party to be bound thereby.

5.   Cumulative Rights and Remedies; Usury. The rights and remedies of Payee expressed herein are cumulative and not exclusive of any rights and remedies otherwise available under this Note, the Security Agreement, the Guarantee or applicable law (including at equity). The election of Payee to avail itself of any one or more remedies shall not be a bar to any other available remedies, which Maker agrees Payee may take from time to time. If it shall be found that any interest due hereunder arising from an Event of Default shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall be reduced to the maximum permitted rate of interest under such law.

6.   Collection Expenses. If Payee shall commence an action or proceeding to enforce this Note, then Maker shall reimburse Payee for its costs of collection and reasonable attorneys fees incurred with the investigation, preparation and prosecution of such action or proceeding.

7.   Severability.  If any provision of this Note is declared by a court of competent jurisdiction to be in any way invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

8.   Successors and Assigns. This Note shall be binding upon Maker and its successors and shall inure to the benefit of the Payee and its successors and assigns. The term "Payee" as used herein, shall also include any endorsee, assignee or other holder of this Note.

9.   Lost or Stolen Promissory Note. If this Note is lost, stolen, mutilated or otherwise destroyed, Maker shall execute and deliver to the Payee a new promissory note containing the same terms, and in the same form, as this Note. In such event, Maker may require the Payee to deliver to Maker an affidavit of lost instrument and customary indemnity in respect thereof as a condition to the delivery of any such new promissory note. Any costs incurred pursuant to this paragraph shall be the responsibility of the Payee.

10.   Due Authorization. This Note has been duly authorized, executed and delivered by Maker and is the legal obligation of Maker, enforceable against Maker in accordance with its terms.  The shares of the Maker’s common stock if issued to Payee, when issued will be validly issued, fully paid and non-assessable.

11.   Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each of Maker and Payee agree that all legal proceedings concerning the interpretations, enforcement and defense of this Note shall be commenced in the Courts of the State of California, the courts of the United States of America for the State of California, and appellate courts from any thereof  (the "California Courts"). Each of Maker and Payee hereby irrevocably submit to the exclusive jurisdiction of the California Courts for the adjudication of any dispute hereunder (including with respect to the enforcement of this Note), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each of Maker and Payee hereby irrevocably waive personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to the other at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each of Maker and Payee hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby.

    

  

2

  

  

Maker may prepay this Note in whole or in part at any time, and from time to time, without being required to pay any penalty or premium for such privilege. The undersigned signs this Note as a maker and not as a surety or guarantor or in any other capacity.

 

      

	Dated:    5-15, 2009                                       	Payee Accepted By: /s/ John Dunn                                       
	 	 
	 	 
	Dated:    5-15, 2009                                       	
Maker By: /s/ John Dunn                                                         

           John Dunn as President of Passionate Pet, Inc.

 

 

 

 

3

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