Promissory Note - Kona Grill Kansas City Inc. and GE Capital Franchise Finance Corp.
PROMISSORY NOTE
Dated as of May 19, 2003
$993,544.00 Scottsdale, Arizona
KONA GRILL KANSAS CITY, INC., a Delaware corporation ("Borrower"), for
value received, hereby promises to pay to GE CAPITAL FRANCHISE FINANCE
CORPORATION, a Delaware corporation ("Lender"), whose address is 17207 North
Perimeter Drive, Scottsdale, Arizona 85255, or order, on or before June 1, 2010
(the "Maturity Date"), as herein provided, the principal sum of $993,544.00, and
to pay interest on the unpaid principal amount of this Note from the date hereof
to the Maturity Date at the fixed rate of 7.04 % per annum on the basis of a
360-day year of twelve 30-day months (the "Rate"), such principal and interest
to be paid in immediately available funds and in lawful money of the United
States. Initially capitalized terms which are not otherwise defined in this Note
shall have the meanings set forth in that certain Loan Agreement dated as of the
date of this Note between Borrower and Lender, as such agreement may be amended,
restated and/or supplemented from time to time (the "Loan Agreement").
Interest on the principal amount of this Note for the period commencing
with the date such principal amount is advanced by Lender through the last day
in the month in which this Note is dated shall be due and payable upon delivery
of this Note. Thereafter, principal and interest shall be payable in consecutive
monthly installments of $15,014.68 commencing on July 1, 2003, and continuing on
the first day of each month thereafter until the Maturity Date, at which time
the outstanding principal and unpaid accrued interest shall be due and payable.
Borrower may prepay this Note in full, but not in part (except as
otherwise set forth below), including all accrued but unpaid interest
hereunder and all sums advanced by Lender pursuant to the Loan Documents
and any Other Agreements, provided that (i) no Event of Default has
occurred under any of the Loan Documents or any Other Agreements, (ii) any
such prepayment shall only be made on a regularly scheduled payment date
upon not less than 30 days prior written notice from Borrower to Lender,
and (iii) except as otherwise set forth below, any such prepayment shall
be made together with payment of a prepayment premium equal to:
(i) 4% of the amount prepaid if the prepayment is made on or
following the date of this Note but prior to the first anniversary
of the date of this Note;
(ii) 3% of the amount prepaid if the prepayment is made on or
following the first anniversary of the date of this Note but prior
to the second anniversary of the date of this Note;
(iii) 2% of the amount prepaid if the prepayment is made on or
following the second anniversary of the date of this Note but prior
to the third anniversary of the date of this Note; and
(iv) 1% of the amount prepaid if the prepayment is made on or
following the third anniversary of the date of this Note but prior
to the fourth anniversary of the date of this Note.
If this Note is prepaid on or following the fourth anniversary of the date
of this Note, Borrower shall not be required to pay a prepayment premium. The
foregoing prepayment premium shall be due and payable if this Note is prepaid
prior to the fourth anniversary of this Note regardless of whether such
prepayment is the result of a voluntary prepayment by Borrower or as a result of
Lender declaring the unpaid principal balance of this Note, accrued interest and
all other sums due under this Note, the Mortgage, the other Loan Documents and
any Other Agreements, due and payable as contemplated below; provided, however,
the prohibition on a partial prepayment and the prepayment premium shall not be
applicable with respect to a prepayment of this Note in connection with an
application of condemnation proceeds as contemplated by the Mortgage or as
contemplated by the Loan Agreement as a result of a breach and subsequent cure
by Borrower of the Fixed Charge Coverage Ratio required by the Loan Agreement.
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In addition to prepayment premium set forth above, Borrower may be subject
to the payment of a prepayment fee (the "Prepayment Fee") equal to the amount of
any, required to offset the adverse impact to Lender of any decline in interest
rates. The Prepayment Fee is determined by (i) calculating the decrease
(expressed in basis points) in the current weekly average yield of four (4) year
U.S. Dollar Interest Rate Swaps (as published in Federal Reserve Statistical
Release H.15[519]) from the date on which the Rate is set until the Friday
immediately preceding the week in which the prepayment is made, (ii) dividing
the decrease calculated in (i) by 100; (iii) multiplying the result calculated
in (ii) by the applicable prepayment factor shown below; and (iv) multiplying
the product calculated in (iii) by the principal balance to be repaid.
Number of Months
Remaining Prepayment Factor
84-73 .033
72-61 .029
60-49 .024
48-37 .019
36-25 .014
24-13 .010
12 or less .005
If the Index is unchanged or has increased during such period, no
Prepayment Fee shall be due.
The foregoing prepayment fee and/or prepayment premium, as applicable,
shall be due and payable if this Note is prepaid regardless of whether such
prepayment is the result of a voluntary prepayment by Borrower or as a result of
Lender declaring the unpaid principal balance of this Note, accrued interest and
all other sums due under this Note, the Mortgage encumbering the Premises
corresponding to this Note, the other Loan Documents and any Other Agreements,
due and payable as contemplated below; provided, however, the prohibition on a
partial prepayment and the prepayment fee and/or prepayment premium, as
applicable, shall not be applicable with respect to a prepayment of this Note in
connection with an application of condemnation proceeds as contemplated by the
Mortgage encumbering the Premises corresponding to this Note.
Upon execution of this Note, Borrower shall authorize Lender to establish
arrangements whereby all payments of principal and interest hereunder are
transferred by Automated Clearing House Debit initiated by Lender directly from
an account at a U.S. bank in the name of Borrower to such account as Lender may
designate or as Lender may otherwise designate. Each payment of principal and
interest hereunder shall be applied first toward any past due payments under
this Note (including payment of all Costs (as herein defined)), then to accrued
interest, and the balance, after the payment of such accrued interest, if any,
shall be applied to the unpaid principal balance of this Note; provided,
however, each payment hereunder after an Event of Default has occurred shall be
applied as Lender in its sole discretion may determine.
This Note is secured by the Mortgage and the other Loan Documents. Upon
the occurrence of an Event of Default, Lender may declare the entire unpaid
principal balance of this Note, accrued interest, if any, and all other sums due
under this Note and any Loan Documents or Other Agreements due and payable at
once without notice to Borrower. All past-due principal and/or interest shall
bear interest from the due date to the date of actual payment at the lesser of
the highest rate for which the undersigned may legally contract or the rate of
14% per annum (the "Default Rate"), and such Default Rate shall continue to
apply following a judgment in favor of Lender under this Note. If Borrower fails
to make any payment or installment due under this Note within five days of its
due date, Borrower shall pay to Lender, in addition to any other sum due Lender
under this Note or any other Loan Document, a late charge equal to 5% of such
past-due payment or installment (the "Late Charge"), which Late Charge is a
reasonable estimate of the loss that may be sustained by Lender due to the
failure of Borrower to make timely payments. All payments of principal and
interest due hereunder shall be made (i) without deduction of any present and
future taxes, levies, imposts, deductions, charges or withholdings, which
amounts shall be paid by Borrower, and (ii) without any other right of
abatement, reduction, setoff, defense, counterclaim, interruption, deferment or
recoupment for any reason whatsoever. Borrower will pay the amounts necessary
such that the gross amount of the principal and interest received by Lender is
not less than that required by this Note.
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No delay or omission on the part of Lender in exercising any remedy, right
or option under this Note shall operate as a waiver of such remedy, right or
option. In any event, a waiver on any one occasion shall not be construed as a
waiver or bar to any such remedy, right or option on a future occasion. Borrower
hereby waives presentment, demand for payment, notice of dishonor, notice of
protest, and protest, notice of intent to accelerate, notice of acceleration and
all other notices or demands in connection with delivery, acceptance,
performance, default or endorsement of this Note. All notices, consents,
approvals or other instruments required or permitted to be given by either party
pursuant to this Note shall be given in accordance with the notice provisions in
the Loan Agreement. Should any indebtedness represented by this Note be
collected at law or in equity, or in bankruptcy or other proceedings, or should
this Note be placed in the hands of attorneys for collection after default,
Borrower shall pay, in addition to the principal and interest due and payable
hereon, all costs of collecting or attempting to collect this Note (the
"Costs"), including reasonable attorneys' fees and expenses of Lender (including
those fees and expenses incurred in connection with any appeal) and court costs
whether or not a judicial action is commenced by Lender. This Note may not be
amended or modified except by a written agreement duly executed by the party
against whom enforcement of this Note is sought. In the event that any one or
more of the provisions contained in this Note shall be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Note, and this
Note shall be construed as if such provision had never been contained herein or
therein. Time is of the essence in the performance of each and every obligation
under this Note.
Notwithstanding anything to the contrary contained in any of the Loan
Documents, the obligations of Borrower to Lender under this Note and any other
Loan Documents are subject to the limitation that payments of interest and late
charges to Lender shall not be required to the extent that receipt of any such
payment by Lender would be contrary to provisions of applicable law limiting the
maximum rate of interest that may be charged or collected by Lender. The portion
of any such payment received by Lender that is in excess of the maximum interest
permitted by such provisions of law shall be credited to the principal balance
of this Note or if such excess portion exceeds the outstanding principal balance
of this Note, then such excess portion shall be refunded to Borrower. All
interest paid or agreed to be paid to Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and/or spread throughout the
full term of this Note (including, without limitation, the period of any renewal
or extension thereof) so that interest for such full term shall not exceed the
maximum amount permitted by applicable law.
This obligation shall bind Borrower and its successors and assigns, and
the benefits hereof shall inure to Lender and its successors and assigns.
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IN WITNESS WHEREOF, Borrower has executed and delivered this Note
effective as of the date first set forth above.
BORROWER:
KONA GRILL KANSAS CITY, INC.,
a Delaware corporation
By /s/ Jason Merritt
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Printed Name Jason Merritt
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Its Vice President
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