-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AAlB0o9mfu9BpsZiAgoQmZOxxRfCnXUJ7bgFnJXV+BJv34fdD7K66v64Dq892dVR 5NnE26ZRRLLkcuC/87DR5Q== 0000930661-98-001790.txt : 19980817 0000930661-98-001790.hdr.sgml : 19980817 ACCESSION NUMBER: 0000930661-98-001790 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TURBOCHEF TECHNOLOGIES INC CENTRAL INDEX KEY: 0000916545 STANDARD INDUSTRIAL CLASSIFICATION: REFRIGERATION & SERVICE INDUSTRY MACHINERY [3580] IRS NUMBER: 481100390 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23478 FILM NUMBER: 98689114 BUSINESS ADDRESS: STREET 1: 10500 METRIC DRIVE SUITE 128 CITY: DALLAS STATE: TX ZIP: 75243 BUSINESS PHONE: 2122445553 MAIL ADDRESS: STREET 1: 10500 NETRIC DRIVE STREET 2: SUITE 128 CITY: DALLAS STATE: TX ZIP: 75243 FORMER COMPANY: FORMER CONFORMED NAME: TURBOCHEF INC DATE OF NAME CHANGE: 19940207 10-Q 1 FORM 10-Q (QE=6/30/98) ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________ Form 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Quarter ended June 30, 1998 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO ____________ COMMISSION FILE NUMBER 0-23478 _________________________ TurboChef Technologies, Inc. (Exact name of Registrant as specified in its Charter) DELAWARE 48-1100390 (State or other jurisdiction of (IRS employer incorporation or organization) identification number) 10500 METRIC DRIVE, SUITE 128 75243 DALLAS, TEXAS (Zip Code) (Address of principal executive offices) Registrant's telephone number: (214) 341-9471 _________________________ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the Registrant's classes of Common Stock, as of the latest practicable date. Number of Shares Outstanding Title of Each Class at August 10, 1998 ------------------- ------------------ Common Stock, $0.01 Par Value 14,653,976 _________________________ ================================================================================ TURBOCHEF TECHNOLOGIES, INC. TABLE OF CONTENTS Form 10-Q Item Page - -------------- ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets as of June 30, 1998 (unaudited) and December 31, 1997............................................ 3 Condensed Statements of Operations (unaudited) for the three and six months ended June 30, 1998 and 1997.................. 4 Condensed Statements of Cash Flows (unaudited) for the six months ended June 30, 1998 and 1997...................... 5 Notes to Condensed Financial Statements (unaudited).......... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings............................................ 15 Item 2. Changes in Securities........................................ 15 Item 3. Defaults Upon Senior Securities.............................. 15 Item 4. Submission of Matters to a Vote of Security Holders.......... 15 Item 5. Other Information............................................ 16 Item 6. Exhibits and Reports on Form 8-K............................. 16 2 PART 1 - ITEM 1 FINANCIAL STATEMENTS TURBOCHEF TECHNOLOGIES, INC. CONDENSED BALANCE SHEETS
June 30, December 31, -------- ------------ 1998 1997 ---- ---- Assets (Unaudited) Current assets: Cash and cash equivalents $ 176,735 1,396,641 Marketable securities available for sale, at fair value 8,970,303 7,277,395 Accounts receivable 1,210,117 644,569 Inventories 508,961 934,690 Prepaid expenses 41,392 104,160 ------------ ------------ Total current assets 10,907,508 10,357,455 ------------ ------------ Marketable securities available for sale, at fair value 7,254,323 5,482,064 Property and equipment: Leasehold improvements 116,313 110,062 Furniture and fixtures 388,281 344,507 Equipment 430,581 420,342 ------------ ------------ 935,175 874,911 Less accumulated depreciation and amortization (467,940) (383,948) ------------ ------------ Net property and equipment 467,235 490,963 ------------ ------------ Other assets 144,176 109,283 ------------ ------------ Total assets $ 18,773,242 16,439,765 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Accounts payable 428,685 401,013 Accrued expenses 342,876 352,928 Deferred revenue 66,536 21,705 Other liabilities 215,000 -- ------------ ------------ Total current liabilities 1,053,097 775,646 ------------ ------------ Deposits 4,977 -- Deferred rent 29,709 35,651 ------------ ------------ Total liabilities 1,087,783 811,297 ------------ ------------ Stockholders' equity: Common stock, $.01 par value. Authorized 50,000,000 shares. Issued 14,653,976 and 14,551,294 shares at June 30, 1998 and December 31, 1997, respectively 146,540 145,513 Additional paid-in capital 32,423,423 32,129,601 Accumulated deficit (18,942,217) (17,276,907) Net unrealized gain on marketable securities 4,508,665 964,148 Treasury stock - at cost 32,130 shares in 1998 and 17,382 shares in 1997 (450,952) (333,887) ------------ ------------ Total stockholders' equity 17,685,459 15,628,468 ------------ ------------ $ 18,773,242 $ 16,439,765 ============ ============
See accompanying notes to condensed financial statements. 3 TURBOCHEF TECHNOLOGIES, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended -------------------- -------------------- June 30, June 30, -------- -------- 1998 1997 1998 1997 ---- ---- ---- ---- Net sales $ 748,879 1,040,916 $ 1,702,883 1,727,856 Other revenues 900,000 4,177 1,650,000 10,414 ------------ ------------ ------------ ------------ Total revenues 1,648,879 1,045,093 3,352,883 1,738,270 Costs and expenses: Cost of goods sold 718,326 676,627 1,466,004 1,188,063 Research and development expenses 385,024 253,848 844,149 521,905 Selling, general and administrative expenses 1,410,531 1,157,929 2,700,450 2,142,463 ------------ ------------ ------------ ------------ Total costs and expenses 2,513,881 2,088,404 5,010,603 3,852,431 ------------ ------------ ------------ ------------ Operating loss (865,002) (1,043,311) (1,657,720) (2,114,161) ------------ ------------ ------------ ------------ Other income (expense): Interest income 28,646 79,419 65,569 186,268 Dividend income 47,016 -- 94,031 -- Equity in loss of joint venture (115,083) (14,709) (180,365) (14,709) Other 13,175 -- 13,175 -- ------------ ------------ ------------ ------------ (26,246) 64,710 (7,590) 171,559 ------------ ------------ ------------ ------------ Net loss $ (891,248) (978,601) $ (1,665,310) (1,942,602) ============ ============ ============ ============ Loss per common share - basic and diluted $ (0.06) (0.07) $ (0.11) (0.14) ============ ============ ============ ============ Weighted average number of common shares outstanding 14,578,173 13,876,233 14,568,658 13,856,124 ============ ============ ============ ============
See accompanying notes to condensed financial statements. 4 TURBOCHEF TECHNOLOGIES, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, ---------------------------- 1998 1997 ----------- ----------- Cash flows from operating activities: Net loss $(1,665,310) (1,942,602) Adjustments to reconcile net loss to net cash used in operating activities: Equity in net loss of joint venture 180,365 14,709 Depreciation and amortization 234,593 54,076 Provision for doubtful accounts 15,000 2,775 Amortization of director compensation 14,946 13,878 Increase in accounts receivable (705,548) (115,703) Decrease (increase) in inventories 281,729 (206,592) Decrease (increase) in prepaid expenses 47,823 (353,502) Decrease (increase) in other assets (1,859) 2,272 Increase (decrease) in accounts payable 27,674 (16,507) Decrease in accrued expenses (10,052) (213,007) Increase (decrease) in deferred revenue 44,831 (1,171) Increase (decrease) in deposits 4,977 (43,250) Increase in other liabilities 120,000 -- Decrease in deferred rent (5,942) -- ----------- ----------- Net cash used in operating activities (1,416,773) (2,804,624) ----------- ----------- Cash flows from investing activities: Purchase of marketable securities (1,715,980) (4,498,277) Proceeds from sales of marketable securities 1,795,331 7,309,431 Purchase of equipment (60,264) (170,753) Investment in TurboChef Europe -- (41,750) ----------- ----------- Net cash provided by investing activities 19,087 2,598,651 ----------- ----------- Cash flows from financing activities: Exercise of stock options 12,500 42,001 Exercise of stock warrants 165,280 125,060 ----------- ----------- Net cash provided by financing activities 177,780 167,061 ----------- ----------- Net decrease in cash and cash equivalents (1,219,906) (38,912) Cash and cash equivalents at beginning of period 1,396,641 477,166 ----------- ----------- Cash and cash equivalents at end of period $ 176,735 438,254 =========== ===========
See accompanying notes to condensed financial statements. 5 TURBOCHEF TECHNOLOGIES, INC. Notes to Condensed Financial Statements (Unaudited) June 30, 1998 General - ------- The financial statements of TurboChef Technologies, Inc. (the "Company") included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and have not been audited by independent public accountants. In the opinion of management, all adjustments (which consisted only of normal recurring accruals) necessary to present fairly the financial position and results of operations have been made. Pursuant to SEC rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from these statements unless significant changes have taken place since the end of the most recent fiscal year. The December 31, 1997 balance sheet was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. The Company believes that other disclosures contained herein, when read in conjunction with the financial statements and notes included in the Company's Annual Report for the fiscal year ended December 31, 1997 on Form 10-K, are adequate to make the information presented not misleading. It is suggested, therefore, that these statements be read in conjunction with the statements and notes included in the aforementioned Form 10-K. The results of operations for the three and six months ended June 30, 1998 are not necessarily indicative of the results to be expected for the full year. The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share (EPS), during the fourth quarter of 1997, and all previous references to per share amounts were retroactively restated. The Statement requires basic EPS to be computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in earnings of the entity. Adoption of this statement did not impact previously recorded net loss per common share for the three or six months ended June 30, 1997. Basic net loss per common share is based on 14,578,173 and 13,876,233 weighted average shares outstanding for the three months ended June 30, 1998 and 1997, respectively. For the six months ended June 30, 1998 and 1997 basic net loss per common share is based on 14,568,658 and 13,856,124 weighted average shares outstanding, respectively. For both the three month and six month periods ended June 30, 1998 and 1997, the Company did not have any incremental shares of potentially dilutive stock as their effect was antidilutive. 6 The Company adopted the provisions of Statement of Financial Accounting Standards No. 130, Comprehensive Income, on January 1, 1998. This statement requires the Company to report comprehensive income and its components with the same prominence as other financial statements in its December 31, 1998 financial statements. Comprehensive income describes the total of all components of comprehensive income, including net income and other comprehensive income. Other comprehensive income refers to all revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but excluded from net income. For the six month period ended June 30, 1998, comprehensive income was $2,843,355, of which ($1,665,310) was net loss and of which $4,508,665 was net unrealized gain on marketable securities. For the six month period ended June 30, 1997, there were no components of other comprehensive income. In July 1998, the Company executed a revolving credit agreement with its bank to support general corporate requirements, specifically, continued investment in technology development. This agreement, which expires July 1, 1999 is secured by 90,000 shares of Maytag common stock owned by the Company. The Company can borrow up to the lesser of $3,000,000 or 75% of the market value of the Maytag stock at market rates of interest. As of August 10, 1998, there are no outstanding borrowings under such revolving credit facility. 7 ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS --------------------------------------------------------------------- OF OPERATIONS ------------- General From its inception in April 1991 until March 1994, the Company was engaged primarily in research and development, limited production operations and test marketing of its cooking systems. In March 1994, the Company introduced its first commercial product, the Model D-1 cooking system. In June 1995, the Company entered into its first major contract with Whitbread PLC ("Whitbread") and introduced an enhanced product, the Model D-2 cooking system. The Company concentrated its efforts on the Whitbread rollout throughout 1996. Upon the completion of the secondary public offering of Common Stock in June 1996 (the "June 1996 Offering"), the Company began development of a direct sales organization. By the end of the first quarter of 1997, the Company had substantially developed its U.S. direct sales and European sales infrastructure and marketing programs. Due to the revolutionary nature of the Company's technologies, coupled with the foodservice industry's general resistance to change, significant increases in sales have not yet materialized through these efforts. The Company believes its long-term success is dependent on its core competencies of developing new technologies and products for the foodservice industry. Consequently, the Company has sought to establish an alliance with a major firm with strengths in manufacturing, sales, marketing and distribution. An alliance of this nature was successfully established in September 1997, when the Company announced a strategic alliance with Maytag Corporation ("Maytag") to jointly develop new products revolving around the Company's technologies. The Company also announced in July 1998 that the Maytag alliance had been expanded to include the sales and marketing of commercial cooking products in North America. This alliance enables the Company to focus on its core competency of technology development. The Company has invested heavily in research, prototype development, establishment of manufacturing capacity, and sales and marketing personnel. As a result of these investments, and the heretofore limited revenues generated through sales of cooking systems, the Company has incurred substantial operating losses in each year of its operations (including net losses of $4,662,302, $2,941,413, and $1,585,268 for the years ended December 31, 1997, 1996 and 1995, respectively) resulting in an accumulated deficit of $18,942,217 as of June 30, 1998. The Company will continue to pursue business growth through implementation of the following strategies: (i) joint development and commercialization of residential and commercial products through the Maytag alliance, (ii) continued marketing to U.S., European and Japanese restaurants, hotels, convenience stores and other foodservice operators, and (iii) continued development of new hardware, software and food solutions for foodservice operators. The Company's future profitability will depend upon, among other things, the successful implementation of these initiatives. MAYTAG ALLIANCE On September 29, 1997, the Company announced a strategic alliance with Maytag Corporation (the "Maytag alliance"). The alliance is aimed at the development and commercialization of innovative products based on the Company's leading-edge technologies in heat transfer, thermodynamics and control 8 systems. The two companies believe that the combination of Maytag's expertise in manufacturing, marketing and distribution in residential and commercial appliance markets, and the Company's proprietary technologies and product development capabilities, can result in the successful commercialization of new products in the future. The alliance entailed a mutual purchase of each company's common stock valued at approximately $10 million and Maytag's payment to the Company for certain research and development activities related to targeted product initiatives. The initial alliance-related research project began in October 1997, and was originally for a term of six months. Maytag was contracted to pay $250K per month pursuant to the agreement to fund research and development activities related to the project. In March 1998, this project was extended for one year, and the monthly payment increased to $300K. In July 1998, the Company announced a commercial sales agreement with Maytag whereby Maytag will lead the Company's North American commercial sales and marketing initiatives. Furthermore, the commercial sales agreement establishes a profit sharing arrangement for the North American sales of commercial products employing the Company's technologies. With the addition of the commercial relationship, the research and development funding will be increased to $425K per month from August 1998 through January 1999. As of August 10, 1998, Maytag had paid the Company an aggregate of $3.1 million for alliance-related activities. RECENT DEVELOPMENTS The Company's latest purchase contract with Whitbread expired in May 1998 as did Whitbread's exclusive purchase rights in the UK. The Company and Whitbread are currently in discussion to continue cooking system purchases. Furthermore, a unit of Whitbread, Whitbread Pub Partnerships ("WPP") has contracted with the Company to commence a 30 store test of the Company's cooking system following their successful two store test over the last year. The cooking systems for the test will come from existing Whitbread inventory, and will not initially result in the sale of new units. However, a successful test in WPP could lead to sales in the future, although it is not possible at this time to indicate the timing or quantity of such sales as all WPP locations do not have the physical capacity to accommodate foodservice operations. WPP is comprised of approximately 1,700 pub operations located throughout the UK which are owned by Whitbread and managed by independent operators. It is estimated that 200-400 of the facilities could accommodate a Model D-2 cooking system. On June 26, 1998, the Company announced that it had consummated a purchase agreement with Kanematsu Corporation of Japan ("Kanematsu"). The initial minimum sale of the Company's cooking systems is valued at approximately $1 million. Purchases by Kanematsu are contingent upon, among other things, Japanese regulatory approval of the Company's cooking system. In July 1998, The Company executed a sales agreement with Best Western International, Inc. ("BWI") for the purchase of 100 ovens. The agreement is contingent upon a successful six unit test. BWI is an association of member hotels established to provide revenue generating opportunities and to leverage the purchasing power of its member hotels. BWI's membership includes approximately 3,700 locations worldwide. On June 30, 1998 the Company's European joint venture TurboChef Europe Limited ("TCE") was terminated. TCE was a joint venture between the Company and The Queally Group ("Queally"), one of Europe's largest food manufacturers. The objective of TCE had been to market the Company's products in conjunction with Queally's food products through the establishment of distribution agreements with 9 regional foodservice equipment distributors throughout Western Europe. As the inclusion of Queally's food manufacturing services in the joint venture did not generate the revenues the Company and Queally had anticipated, the two firms elected to terminate the joint venture as of June 30, 1998. Effective July 1, 1998, the Company commenced exclusive sales and marketing responsibilities for Western Europe. The former sales and support staff of the joint venture are now employees of the Company and a managing director has been hired to oversee European operations which are based in the London area. RESULTS OF OPERATIONS The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company's results of operations and financial condition. The discussion should be read in conjunction with the financial statements and notes thereto contained elsewhere in this report. RESULTS FOR THE QUARTER ENDED JUNE 30, 1998 COMPARED TO THE QUARTER ENDED JUNE 30, 1997 Revenues for the quarter ended June 30, 1998 were $1,649K, an increase of $604K, when compared to revenues of $1,045K for the quarter ended June 30, 1997. This increase is primarily attributable to revenues received pursuant to the Maytag alliance and revenues generated by an extended maintenance program for the Company's largest customer, offset by a decline in unit shipments. Cost of sales for the quarter ended June 30, 1998 was $718K, an increase of $42K when compared to $677K for cost of sales in the quarter ended June 30, 1997. This increase is attributable to a charge taken to establish a reserve for anticipated losses on an extended maintenance program, offset by a decline in unit shipments. Gross profit on total net sales for the quarter ended June 30, 1998 decreased $334K to $31K, when compared to gross profit on total net sales of $364K during the quarter ended June 30, 1997. Gross margin for the quarter ended June 30, 1998 was 4% of total net sales, compared to 35% of total net sales for the quarter ended June 30, 1997. Gross profit and gross margin were adversely affected by the aforementioned extended maintenance charge. Excluding extended maintenance charges, gross profit and gross margin for the quarter were $217K and 33% respectively. Gross margin on net oven sales decreased to 34% during the quarter ended June 30, 1998, compared to 36% for the quarter ended June 30, 1998 due to a higher average unit cost. Research and development expenses for the quarter ended June 30, 1998 increased $131K, to $385K, as compared to $254K for the quarter ended June 30, 1997. The increase is attributable to R&D activity relating primarily to Maytag alliance projects entailing staff additions and prototype and software development. Selling, general and administrative expenses for the quarter ended June 30, 1998 increased $253K, to $1,411K from comparable expenses of $1,158K for the quarter ended June 30, 1997. The increased expense is due to European business development expenses not incurred during the first quarter of 1997, the addition of executive management and other administrative personnel, and other administrative expenses including office expansion and executive recruiting expenses. 10 Interest income, net of interest expense for the quarter ended June 30, 1998, was $29K compared to $79K for the quarter ended June 30, 1997. The decrease in interest income is attributable to decreased cash levels. Second quarter results include a $114K charge relating to the termination of the Company's European joint venture TurboChef Europe Limited ("TCE"). The $114K charge establishes a reserve for the write-off of the net investment in TCE. For the three months ended June 30, 1998, losses relating to TCE were $115K. RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997 Revenues for the six months ended June 30, 1998 were $3,353K, an increase of $1,615K, when compared to revenues of $1,738K for the six months ended June 30, 1997. This increase is primarily attributable to revenues received pursuant to the Maytag alliance. Cost of sales for the six months ended June 30, 1998 was $1,466K, an increase of $278K when compared to $1,188K for cost of sales in the six months ended June 30, 1997. This increase is attributable to a charge taken to establish a reserve for anticipated losses on an extended maintenance program, offset by a decline in unit shipments. Gross profit on total net sales for the six months ended June 30, 1998 decreased $303K to $237K, when compared to gross profit on total net sales of $540K during the quarter ended June 30, 1997. Gross margin for the quarter ended June 30, 1998 was 14% of total net sales, compared to 31% of total net sales for the quarter ended June 30, 1997. Gross profit and gross margin were adversely affected by the aforementioned extended maintenance charge. Excluding extended maintenance charges, gross profit and gross margin for the quarter were $472K and 32% respectively. Gross margin on net oven sales of 35% for the six months ended June 30, 1998 was unchanged from 35% for the six months ended June 30, 1997. The effect of higher average selling prices was offset by an increased average unit cost. Research and development expenses for the six months ended June 30, 1998 increased $322K, to $844K, as compared to $522K for the six months ended June 30, 1997. The increase is attributable to R&D activity relating primarily to Maytag alliance projects entailing staff additions and prototype and software development. Selling, general and administrative expenses for the six months ended June 30, 1998 increased $558K, to $2,700K from comparable expenses of $2,142K for the six months ended June 30, 1997. The increased expense is due to European business development expenses not incurred during the first six months of 1997, the addition of executive management and other administrative personnel, and other administrative expenses including office expansion and executive recruiting expenses. Interest income, net of interest expense for the six months ended June 30, 1998, was $66K compared to $186K for the six months ended June 30, 1997. The decrease in interest income is attributable to decreased cash levels. Results for the six months ended June 30, 1998 include a $114K charge relating to the termination of the Company's European joint venture, TCE. The $114K charge establishes a reserve for the 11 write-off of the net investment in TCE. For the six months ended June 30, 1998, losses relating to TCE were $180K. LIQUIDITY AND CAPITAL RESOURCES The Company's capital requirements in connection with its product and technology development and marketing efforts have been and will continue to be significant. In addition, capital is required to operate and expand the Company's operations. From its inception until June 1996, the Company was substantially dependent on loans and capital contributions from its principal stockholders, private placements of its securities and the proceeds from the initial public offering of common stock in April 1994 (the "April 1994 IPO"). In June 1996 the Company consummated the June 1996 Offering, an underwritten public offering of 800,000 shares of Common Stock which resulted in aggregate proceeds of approximately $10,301K, net of the underwriter's discount and other offering costs of $1,699K. Since October 1997, the Company's capital requirements have been met in part by Maytag, which in accordance with the alliance has paid to the Company an aggregate of $3.1 million ($250K per month from October 1997 through March 1998, $300K from April through July 1998, and $425K in August 1998) as of August 10, 1998 for research and development relating to their interests. In March 1998, the initial project was extended for one year, and Maytag increased the monthly payment from $250K to $300K per month for the term of the extension. In July 1998, a commercial sales agreement was announced, and the monthly payment increased to $425K for six months. The Maytag alliance called for the mutual purchase of each company's stock with a value of approximately $10 million. Maytag purchased 564,668 shares of the Company's common stock, and the Company purchased 293,846 shares of Maytag common stock. According to the terms of the strategic alliance agreement, the Maytag stock owned by the Company is subject to a general restriction placed on selling, pledging, transferring or assigning such securities for a period of two years from the date of the agreement. However, in accordance with the agreement, the Company gained the right to sell, pledge, transfer or assign up to 50% of the shares on March 31, 1998. As of August 10, 1998, the Maytag stock owned by the Company had a market value of approximately $12.6 million. In July 1998, the Company executed a revolving credit agreement with its bank to support general corporate requirements, specifically, continued investment in technology development. This agreement, which expires July 1, 1999 is secured by 90,000 shares of Maytag common stock owned by the Company. The Company can borrow up to 75% of the market value of the Maytag stock at market rates of interest. As of August 10, 1998, there are no outstanding borrowings under such revolving credit facility. At June 30, 1998, the Company had working capital of $9,854K as compared to working capital of $9,582K at December 31, 1997. The $272K working capital increase from December 31, 1997 resulted primarily from the appreciation of the current portion (50%) of the investment in Maytag common stock, offset by the net operating loss of $1,665K. For the six months ended June 30, 1998, accounts receivable turnover decreased to 4.1 from 5.9 during the six months ended June 30, 1997. The decrease is primarily due to outstanding accounts receivable from TCE. Cash used in operating activities was $1,417K for the six months ended June 30, 1998 as compared to cash used in operating activities of $2,805K for the six months ended June 30, 1997. The decrease is primarily the result of a $277K decrease in operating losses, an increase in non-cash expenses of $359K, a 12 decrease in inventories of $282K, decreased prepaid expenses of $48K and increased accounts payable, deferred revenue and other liabilities of $28K, $45K and $120K respectively. These amounts are offset by a $706K increase in accounts receivable. Cash provided by investing activities for the six months ended June 30, 1998 was $19K as a result of sales of marketable securities in the amount of $1,795K offset by purchases of marketble securities of $1,716K and equipment purchases of $60K. Cash provided by financing activities was $178K for the six months ended June 30, 1998, which represents the net proceeds from exercises of stock options and warrants. At June 30, 1998, the Company had cash and cash equivalents of $177K, compared to cash and cash equivalents of $1,397K at December 31, 1997. YEAR 2000 ISSUES The Year 2000 issue, which is common to most businesses, concerns the inability of information systems, primarily computer software programs, to properly recognize and process date-sensitive information as the year 2000 approaches. All critical software and related technologies used by the Company are year-2000 compliant. Thus, management believes that there will be no significant costs required to address the Year 2000 issue and such issue will not materially impact its financial condition nor adversely impact business operations. AUTHORITATIVE PRONOUNCEMENTS The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information, which is not expected to significantly change the Company's current disclosures. FORWARD LOOKING STATEMENTS The Company is continuing to utilize the proceeds from the June 1996 Offering, in addition to payments received from the Maytag alliance projects, to intensify its product development activities with the goal of developing innovative and commercially viable products, and support its marketing efforts to expand its commercial cooking system customer base. The Company anticipates, based on its currently proposed plans and assumptions relating to its operations (including assumptions regarding the progress of its research and development efforts and the realization of projected cooking system deliveries) that its current cash and cash equivalent balances, anticipated revenues from operations, payments received pursuant to the Maytag alliance, and the recently established revolving credit facility, will be sufficient to fund its operations and satisfy its contemplated capital requirements for at least the next 24 months. In the event that the Company's plans change, or its assumptions change or prove to be incorrect, or cash balances, anticipated revenues and amounts available under the revolving credit facility otherwise prove to be insufficient, the Company would be required to revise its plan of operations (which revision would include a significant reduction in operating costs) and/or seek additional financing prior to the end of such period). The Company has no other current arrangements with respect to, or sources of, additional financing. There can thus be no assurance that additional financing will be available to the Company, if and when needed, on commercially reasonable terms, or at all. The Company has used a substantial portion of the proceeds of the June 1996 Offering and payments received from Maytag in an effort to expand its current level of operations and grow the 13 Company's business. However, the Company's future performance will be subject to a number of business factors, including those beyond the Company's control, such as economic downturns and evolving industry needs and preferences, as well as to the level of the Company's competition and the ability of the Company to successfully market its products and effectively monitor and control its costs. The Company believes that increases in revenues sufficient to offset its expenses and result in its profitability could be derived from its currently proposed plans within the next 18 months, if such plans are successfully completed. These plans include: (i) successfully develop and market new products through the Maytag alliance, (ii) further develop U.S. product sales through the Maytag commercial sales agreement, (iii) utilize the awareness created by the Whitbread relationship and the early successes of TCE to extend the Company's marketing and sales efforts into other countries within the European Union, (iv) introduce additional new products, and (v) reduce the Company's manufacturing costs. However, there can be no assurance that the Company will be able to successfully implement any of the foregoing plans, that either its revenues will increase or its rate of revenue growth will continue or that it will ever be able to achieve profitable operations. As of June 30, 1998, the amount of backlog orders believed to be firm was approximately $0.8 million, as compared to approximately $2.0 million as of December 31, 1997. This backlog includes the remaining minimum order quantity of cooking systems contemplated in the Kanematsu purchase agreement, which are contingent upon Japanese regulatory approval of the oven. This backlog does not include any sales to BWI, which are contingent upon successful completion of field operations tests and certain payback criteria. This report and other reports and statements filed by the Company from time to time with the Securities and Exchange Commission (collectively, "SEC Filings") contain or may contain certain forward looking statements and information that are based on the beliefs of the Company's management as well as estimates and assumptions made by, and information currently available to, the Company's management. When used in SEC Filings, the words "anticipate", "believe", "estimate", "expect", "future", "intend", "plan", and similar expressions, as they relate to the Company or the Company's management, identify forward looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions relating to the Company's operations and results of operations, competitive factors and pricing pressures, shifts in market demand, the performance and needs of the segments of the foodservice industry served by the Company, the costs of product development and other risks and uncertainties, in addition to any uncertainties specifically identified in the text surrounding such statements, uncertainties with respect to changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including the Company's stockholders, customers, suppliers, business partners, and competitors, legislative, regulatory, judicial and other governmental authorities and officials. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may vary significantly from those anticipated, believed, estimated, expected, intended or planned. 14 PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS None Item 2. CHANGES IN SECURITIES. None Item 3. DEFAULTS UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On June 30, 1998, the Annual Meeting of Stockholders of the Company was held in Dallas, Texas. At the Annual Meeting, the Company's stockholders elected four (4) individuals to serve as the Company's Board of Directors until the next Annual Meeting of the Stockholders and until their successors are elected and duly qualified. The table presented below indicates the number of votes cast in favor of the election of such persons as directors, the number of votes cast against, and the number of votes withheld. There were no broker non- votes cast at the Annual Meeting.
Name of Director Number of Votes For Number of Votes Against Withheld Votes - -------------------- ------------------- ----------------------- -------------- Marion H. Antonini 12,155,542 120,624 -0- Jeffery B. Bogatin 11,636,527 639,639 -0- Philip R. McKee 12,158,042 118,124 -0- Donald J. Gogel 12,158,392 117,774 -0-
In addition to the election of the Company's Board of Directors, the stockholders approved the following proposals at the Annual Meeting: 1. A proposal to amend the First Article of the Company's Restated Articles of Incorporation to change the Company's corporate name to TurboChef Technologies, Inc. An aggregate of 12,232,774 shares were voted for this proposal, 14,592 shares were voted against this proposal, and 28,800 shares abstained; 2. A proposal to amend the Company's 1994 Stock Option Plan, as amended, to increase the number of shares of Common Stock authorized for issuance from 3,150,000 to 3,650,000 shares. An aggregate of 12,109,550 shares were voted for this proposal, 137,316 shares were voted against this proposal and 29,300 shares abstained; and 3. A proposal to ratify the appointment of KPMG Peat Marwick LLP as the Company's independent public accountants for the 1998 fiscal year. An aggregate of 12,237,774 shares were voted for this proposal, 8,100 shares were voted against this proposal and 30,342 shares abstained. 15 Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS Exhibit Number Description -------------- ----------- 10.30 Commercial Cooking Appliance Project Agreement dated as of July 29, 1998 by and between TurboChef Technologies, Inc. and Maytag Corporation.(1) 10.31 Revolving Credit Agreement between Chase Bank of Texas NA and TurboChef Technologies, Inc. dated July 1, 1998. (1) Filed herewith in redacted form pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended (the "Act"). Filed separately in unredacted form subject to a request for confidential treatment pursuant to Rule 24b-2 under the Act. (b) REPORTS ON FORM 8-K A report on Form 8-K dated July 1, 1998 was filed with the Securities and Exchange Commission on July 2, 1998. This Form 8-K reported that the Company's corporate name had been changed to TurboChef Technologies, Inc. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TURBOCHEF TECHNOLOGIES, INC. By:/s/ Dennis J. Jameson ------------------------ Dennis J. Jameson Executive Vice President, Chief Financial Officer (Principal Financial Officer) Dated August 14, 1998 17 EX-10.30 2 COMMERCIAL COOKING APPLIANCE AGREEMENT EXHIBIT 10.30 COMMERCIAL COOKING APPLIANCE AGREEMENT DATED AS OF JULY 29, 1998 BY AND BETWEEN TURBOCHEF TECHNOLOGIES, INC. AND MAYTAG CORPORATION. (REDACTED) Strategic Alliance Agreement TurboChef/Maytag Schedule No. 3 COMMERCIAL COOKING APPLIANCE PROJECT AGREEMENT ---------------------------------------------- This Commercial Cooking Appliance Project Agreement (the "CCAP," or the "Agreement") is made, entered into and effective this 29th day of JULY, 1998, by and between MAYTAG CORPORATION, a Delaware corporation ("Maytag") and TURBOCHEF TECHNOLOGIES, INC., (formerly TURBOCHEF, INC.) a Delaware corporation ("TurboChef"). WITNESSETH: ---------- WHEREAS, Maytag and TurboChef have entered into that certain Strategic Alliance Agreement dated September 26th, 1997 (the "Alliance Agreement"), pursuant to which the parties agreed to work together in the development and commercialization of highly innovative products based on leading edge technologies with respect to heat transfer, thermodynamics and controls; and WHEREAS, in the Alliance Agreement, the parties expressed their intention that their projects may involve several phases, and the parties now desire to commence this project with respect to commercial cooking appliances and related technologies and software ("commercial cooking systems"), and WHEREAS, the parties now desire to set forth their understanding as to the manner in which the commercial cooking appliance project (the "Project") shall be implemented. NOW, THEREFORE, in consideration of the premises and of the undertakings of the parties herein contained, the sufficiency whereof being acknowledged by each of them, the parties agree as follows: ARTICLE I FRAMEWORK FOR PROJECT 1.1 Purpose. It is the purpose of the parties: ------- (a) During a first phase to develop a XXXXXXXX cooking system XXXX XXXX XXXXXX XXXX XXX XXXXXXXXX XXX XXXXXXX XXX XXXXXX XXXXXXX XXXXXX XXX XXXXX XXXX XXXXXXX XXXXXXXX XXXXXXXX XXXXXXX XXXXXXXX XXXXXXXXXXX XXXXXXX XXXXXX XXXXXXXXXXXXX XXXXXX XXXXX XXX (b) To transfer marketing, sales and distribution responsibilities for commercial cooking systems presently handled by TurboChef to Maytag as set out in Section 1.3. 1.2 Product Development Framework. Maytag and TurboChef shall each establish a ----------------------------- team comprised of qualified persons to participate in the Project on behalf of such party. Each team will be managed by a project leader appointed by the respective party. The project leaders shall be responsible for, among other things, insuring that their respective team members devote sufficient time to the Project such that the assigned tasks can be accomplished in a timely manner. During the first phase of this Agreement, the two project leaders shall communicate with each other on a regular basis with respect to the Project and shall meet in person not less than once per month to evaluate the progress of the Project and to establish Project milestones. 1.3 Sales and Marketing Transition Framework. In addition to the product ---------------------------------------- development efforts, the parties will undertake a separate and reasonably concurrent effort to transfer marketing, sales and distribution responsibilities for commercial cooking systems from TurboChef to Maytag using the following framework: (a) Personnel During the first phase of this Agreement, the TurboChef --------- sales and marketing organization shall be comprised of the current TurboChef sales and marketing staff outlined in Exhibit A attached and as may be revised by TurboChef from time to time and a business development executive (the "Maytag Executive") provided by Maytag. (b) Organization ------------ (i) The Maytag Executive will be and will continue to be an employee of Maytag and will report directly to Maytag's Vice President Administration. The Maytag Executive will also interface directly with the Chief Financial Officer of TurboChef or other TurboChef designee for financial control and planning purposes. (ii) The Maytag Executive will participate in regularly scheduled operating reviews with a steering committee comprised of Maytag's Vice President Administration, Blodgett's President, Blodgett's Vice President Sales and Marketing, TurboChefs Chief Executive Officer, TurboChefs Chief Technology Officer and TurboChefs Executive Vice President and CFO (the "Steering Committee"). (iii) The TurboChef sales and marketing organization will report directly to the Maytag Executive. (c) Product. During the first phase of this Agreement, the TurboChef sales ------- and marketing staff will continue selling the D-2 cooking system and related technologies and software. XXXXX XX XXX XXXXXXXX XXXXXXX XXX XXXXXXX XXXXXXXXXXXX XXX XXXXXXXX XXXX XXX XXXXXXXX XXXXX XXXXXXXXXX XXXXXX XXX XXXXXXXXXXXX XXXXXXXXXXXXXXXX XXXX XXXX XXXXXXXXXXX XXXX XXXXXXXXX XX XXXXXX XX XXX XXX XX XXX XXXXX XXXXX XX XXXX XXXXXXXXX 2 (d) Profit Sharing. During the first phase of this Agreement, Maytag and -------------- TurboChef shall share XXXXXXX in the profits generated by sales of the D-2 cooking system and related technologies and software throughout North America and to customers outside of North America which are North American based. The profits to be shared will be determined based on the formula set out in Exhibit B. (e) Maytag Executive. The Maytag Executive will be compensated and have ---------------- benefits provided by Maytag. Out of pocket expenses incurred by the Maytag Executive such as travel and lodging will be paid by Maytag. However, all other costs and expenses included in cost of sales and sales and marketing expenses, such as salaries, wages, benefits and travel and lodging of all remaining sales and marketing personnel, trade shows under the TurboChef name, training, rents and utilities will be paid by TurboChef. 1.4 Costs. Except as provided in Sections 1.3(e) and 3.1, each party shall be ----- solely responsible for the costs and expenses incurred by such party in participating in the Project, including, without limitation, personnel costs and out-of-pocket costs such as travel and lodging expenses. ARTICLE II DUTIES OF THE PARTIES --------- ----------- 2.1 Maytag Duties, First Phase. During the first phase of this Agreement, -------------------------- Maytag shall perform the following duties in connection with the Project: (a) Provide the Maytag Executive, who will: (i) Lead TurboChef's sales and marketing organization, (ii) Strive to understand TurboChef's sales and marketing accomplishments to date and current plans for the future, (iii) Meet with key executives of TurboChef and existing and targeted accounts, (iv) Initiate development of channel specific needs assessments and potential hardware, software and service solutions, (v) At the direction of the Steering Committee, develop detailed sales and marketing strategies and tactics to be employed during the term of this agreement, (vi) Work with the Steering Committee to develop the sales and marketing organization, (vii) Provide input to the development process; 3 (b) Provide industrial design expertise in connection with the development of XXXXXXXX prototypes including the development of prototype parts where agreeable by both parties; (c) Provide manufacturing engineering expertise in connection with XXXXXXXX designs to a production ready state; (d) Prepare a business plan with respect to the XXXXXXXX cooking system and related technologies and software, a draft of said business plan to be submitted to the Steering Committee within four (4) months after the Maytag Executive reports to work at TurboChef and a final draft of said business plan to be submitted to the Steering Committee within six (6) months after the Maytag Executive reports to work at TurboChef. (e) Maintain a project team comprised of qualified persons, as determined by Maytag, with the particular expertise required to perform the tasks contemplated by subparagraphs (a) - (d) hereinabove, make reasonable best efforts to make resources available to meet the objectives of the Agreement and the milestones established by the project leaders. 2.2 TurboChef Duties, First Phase. During the first phase of this Agreement, ----------------------------- TurboChef shall perform the following duties in connection with the Project: (a) Disclose all relevant knowledge and know-how with regard to TurboChef's sales and marketing processes, practices and efforts to date, including, but not limited to, customer needs, relations and programs; pricing; and competitive advantages/disadvantages. (b) Provide Maytag with access to all relevant proprietary data with respect to TurboChef's cooking technologies, including, without limitation, copies of all current drawings, specifications and patents utilized by TurboChef in designing and manufacturing its commercial cooking systems; (c) XXXXXX XXX XXXXXXXXX XXX XX XXXX XXXXXXXXXXXX XX X XXXXXXXX XXXXXXXXXX XXXXXXX XXXXXX XXXXX XXXXXXXX XXXXXXXXXXX XXXXXXXXXXX XXXXXXX XXXXXXXXXXXXX (d) Provide the TurboChef sales and marketing staff per Section 1.3 at its expense and provide product engineering expertise XX XXXXXXX XXX XXXXXXXX XXXXXXXXXX XXXXXXX XXXXXX XX X XXXXXXXXXX XXXXX XXXXX XXXXXXXXXX XXXXXXXXXXXX XX XXX XXXXXXXXXX XXXXXX XX XXXXXXXXXX XX XXXXXXXX XXXXX XXXXXXXXXXXX XXX (e) Maintain a project team comprised of qualified persons, as determined by TurboChef, with the particular expertise required to perform the tasks contemplated by subparagraphs (a) - (d) hereinabove, make reasonable best efforts to make resources available to meet the objectives of the Agreement and the milestones established by the project leaders. 4 2.3 Maytag Duties, Continuing. After the end of the first phase of this ------------------------- Agreement, Maytag shall complete any uncompleted first phase duties and perform the following continuing duties in connection with the Project: (a) Actively market and sell commercial cooking systems using TurboChef technology throughout North America and elsewhere as permitted; (b) Provide input into the technology development process. 2.4 TurboChef Duties, Continuing. After the end of the first phase of this ---------------------------- Agreement, TurboChef shall complete any uncompleted first phase duties and perform the following continuing duties in connection with the Project: (a) Actively support current commercial cooking technologies; (b) Provide support to Maytag's marketing and selling efforts. ARTICLE III PROJECT INVESTMENTS 3.1 Maytag Research and Development Fee. In addition to performing the duties ----------------------------------- described in Section 2.1 hereof, Maytag hereby agrees to pay to TurboChef a research and development fee in the aggregate amount of Seven Hundred and Fifty Thousand Dollars ($750,000.00), to be applied to the research and development costs associated with the Project. Maytag shall pay such amount in six (6) equal monthly installments of One Hundred and Twenty-Five Thousand Dollars ($125,000.00) each. The initial installment shall be due on the first day of the month immediately following the date of this Agreement and each subsequent installment shall be due no later than the first (1st) day of each month thereafter until a total of six (6) installments have been paid. 3.2 In consideration for Maytag's agreement to pay the research fee set forth in Section 3.1 above, TurboChef hereby grants to Maytag, effective at the end of the first phase, certain rights to market, distribute and sell commercial cooking systems which utilize TurboChef proprietary cooking technologies. These rights are defined as follows: (a) The exclusive right throughout North America subject to the terms of existing distribution agreements set forth in Exhibit C, and (b) Rights outside of North America as follows: (i) If Maytag enters into a sales agreement with a North American based company, which agreement calls for sale of TurboChef products to said company or any division, subsidiary or franchisee of said company outside of North 5 America, Maytag has the exclusive right to sell to such company within the territories called for in such sales agreement, subject to the terms of any existing distribution agreements set forth in Exhibit C and in the United Kingdom where TurboChef is acting as the exclusive distributor. (ii) If Maytag establishes a relationship with a North American based company, Maytag has the nonexclusive right to sell TurboChef products outside of North America to any division, subsidiary or franchisee of such North American based company subject to the terms and conditions of any sales/distribution agreement set forth in Exhibit C. (c) This Agreement does not prohibit TurboChef from entering into sales/distribution agreements for territories outside of North America after the effective date of this Agreement, however, such agreements must be subject to Maytag's rights established by this Agreement. (d) Profit Sharing. After the end of the first phase of this Agreement, Maytag and TurboChef shall share XXXXXXX in the operating income, less cost of capital, generated from the sales of TurboChef cooking systems and related technologies and software throughout North America and outside of North America as provided in Section 3.2(b). Maytag agrees to create a distinct profit center within Maytag to capture the appropriate revenues and costs for this endeavor. The income to be shared will be determined based on the formula set out in Exhibit D. 3.3 It is the intention of the parties to negotiate the extension of Maytag's exclusive rights to market, distribute and sell commercial cooking systems which utilize TurboChef's proprietary cooking technologies throughout the World. As a condition to TurboChef considering the extension of such rights by country, Maytag shall be required to demonstrate its international marketing and distribution strategies and capabilities by geographic area (Europe, the Middle East and Africa, the Near East, the Far East and Latin America), in a manner satisfactory to TurboChef. ARTICLE IV TERM AND TERMINATION -------------------- 4.1. The first phase of this Agreement shall commence when the Maytag Executive reports to work at TurboChef and end on the date when XXXXXX XXXXXX XXXXXXX XXX XXXXXXXX XXXXXXX XXXXXXX but in no event less than seven (7) months nor more than thirteen (13) months after the effective date of this Agreement. 4.2 At the end of the first phase or any time thereafter TurboChef may terminate this Agreement by giving Maytag written notice of termination, whereupon this Agreement shall terminate and within forth-five (45) days thereafter each party shall provide an accounting to the other for any previously unaccounted-for revenues realized and costs and expenses incurred under 6 this Agreement prior to termination. Upon such termination all rights granted to Maytag under Section 3.2 to market, distribute and sell commercial cooking systems which utilize TurboChef proprietary cooking technologies shall survive indefinitely, and those rights that were exclusive shall become non-exclusive, but not prior to two years after the end of phase one. (a) If TurboChef gives written notice of termination to Maytag within ten (10) days following the end of the first phase, and further, in addition to giving such notice of termination to Maytag, TurboChef delivers to Maytag a promissory note payable to Maytag for a principal amount equal to the research fee set forth in Section 3.1 above, said promissory note to bear interest at four percentage points above one-year LIBOR as announced by the British Bankers Association and reported in Bloomberg Financial Market Commodities News on its day of issue and to become due and payable in principal and interest one year from its date of issue, then all rights granted to Maytag under Section 3.2 to market, distribute and sell commercial cooking systems which utilize TurboChef proprietary cooking technologies shall terminate; and apart from the accounting referred to above, neither party shall have any further obligation to the other with respect to the Commercial Cooking Project. xxx xx xxx xxxxx xxxx xxxxxx xxxxx xxx xx xx xxxxxxxx xxxxxxxxxxx xxxxxxxxxx xxxxxx xxx xxxxxxxx xxxxxx xxxxxxxxx xxx xxx xx xxxxx xxxx xxxxxxxxxxxxxxx xxx xxxxxxxxx xxxxxx xxxxxxx xx xxxxxx xx xxxxxxx xxx xxxxxx xxxxxxxxx xxx xxxxx xxxxxxxxxxxx xxxxxx xx xx xx xxxxxxxx xxxxxxxxxxx xx xxxxxxx xxxxxxxxxx xxx xxxx xxxxxxxxxx xxxxxxx xxxxxxx xxxxx xxxxxxx xxxxxxxxx xxxxxxxxxxx xxxxxxx xxxxxxxxxxxx xxx xxx xxxxxxx xx xxxx xxxxxxxx xxxxxxx xxx xx xxx xxxxx xxxx xxxxxx xxxxx xxx xxxxxxxxxx xxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxx xxxxxxxxx xxxx xxxxxxxxx xx xxxxxx xxxxxx xxxxxxx xxxxxx xx xxxxxxxxxxxx xxxxxxxxx xxxx xxxxxxxxx xxxxx xxxxxxxxx xxx xxxxxx xxxxxxxxxx xxxx xxxx xxxxxxxxxx xxxx xxxxx xxxxx xxxxxxx xx xxxxxxxxxx xx xxx xxxxx xxx xxx xxxxxxxxxx xxxxxxxxxxxxxxx xxxxxxxx xxxxxxxx xxx xxxxx xxx xxxxxxxx xxxxxxxx xxxxx xxxx xxxxxxxxx xxxxx xx xxxxxxxxxxxx xxxx xxxx xxxxxxxxxxx xxx xxxxxx xxxxxxx xx xxxxxx xxxxx xxxxxxx xxx xx xxxxxxx xxxxxxxxxx xxx xxxx xxxxxxxxxx xxxxxxx xxxxxxx xxxxx xxxxxxx xxxxxxxxx xxxxxxxxxxx xxxxxxx xxxxxxxxxxxx xxxxx xxxxxxxxxx xxx xxxxx xxxx xxx xxxxxxxxxx xxxxxxxx xx xxxxxx xxxxxxx xxxxx xxxxx xxxx xxx xxxxxxx xxxxxxxxxx xx xxx xxxxx xxxx xxxxxxx xx xxx xxxxxxxxxx xxxxxxx xxxxxxxx 4.5 At the end of the first phase or any time thereafter Maytag may terminate this Agreement by giving TurboChef written notice of termination, whereupon this Agreement shall terminate and within forth-five (45) days thereafter each party shall provide an accounting to the other for any previously unaccounted-for revenues realized and costs and expenses incurred under this Agreement prior to termination. Upon such termination, all rights granted to Maytag under Section 3.2 to market, distribute and sell commercial cooking systems which utilize TurboChef proprietary cooking technologies shall terminate; and apart from the accounting referred to above, neither party shall have any further obligation to the other with respect to the Commercial Cooking Project. 7 ARTICLE V EXCLUSIVE DEALING ----------------- Except as set forth in this Agreement, during the term of this Agreement, neither party, nor any of their respective affiliates, whether alone or in conjunction with any other person, shall in any manner, without the written consent of the other party, directly or indirectly participate in, propose or in any other way support, or agree to participate in, propose or support further development and/or commercialization of a commercial cooking system for sale in North America utilizing TurboChef's technologies or similar high speed cooking technologies. This excludes any work with Gama Consultants (U.K.), provided the work does not include TurboChef Technologies without the consent of TurboChef. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day first above written. TURBOCHEF: TURBOCHEF TECHNOLOGIES, INC. /s/ PHILIP R. MCKEE --------------------------------- Name: Philip R. McKee Title: Chief Technology Officer MAYTAG; MAYTAG CORPORATION /s/ CHARLES M. PETERS --------------------------------- Name: Charles M. Peters Title: V.P. Administration 8 Exhibit A TurboChef Sales and Marketing Organization ------------------------------ MAYTAG CORPORATION BUSINESS DEVELOPMENT EXECUTIVE (OPEN) ------------------------------ | ------------------------------------------------------ | | | - --------------- ------------------ ---------------- Ralph Bellinger Steve Boothe Desmond Hague VP System Sales VP System Sales VP of Operations (Primarily hotels) - --------------- ------------------ ---------------- | ---------------------- | | ---------------------- -------------- Al Harvey Pete Ashcraft Director of Operations Executive Chef ---------------------- -------------- | | --------------------- |-- Ron Massaro | Manager of Operations | --------------------- | | --------------------- -- Glen Tasman Operations Specialist --------------------- 9 EXHIBIT B XXXXX 10 EXHIBIT C EXISTING DISTRIBUTOR AGREEMENTS
PARTY (CITY/COUNTRY) TERRITORY PRODUCT TERM EXCLUSIVITY ------------------- --------- ------- ---- ----------- - ----------------------------------------------------------------------------------------------------------------------------------- Martin Olsson Handels Sweden and Norway D2, D2 Max, & Can be terminated at any time. Exclusivity in Sweden & Norway has Aktiebolag AG assoc. software expired due to not achieve sales Arsta, Sweden targets. Gentlemen's agreement not to introduce new distributor in area at this time. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Plastos Iceland D2, D2 Max, & Can be terminated at any time. None contracted. Gentlemen's Reykjavik, Iceland assoc. software Commiment to review agreement not to introduce new relationship at 12/31/98. distributor in area through review period. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Scal France D2, D2 Max, & Can be terminated at any time. None contracted. Gentlemen's Courtabouef, France assoc. software Commitment to review agreement not to introduce new relationshp at 12/31/98. distributor in area through review period. TurboChef is allowed to develop existing direct contacts with Pizza Pal. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Import Hispania Spain and Spanish D2, D2 Max, & Can be terminated at any time. None contracted. Gentlemen's Vitoria, Spain Islands assoc. software Commitment to review agreement not to introduce new (Canaries/Majorca) relationship at 12/31/98 distributor in area through review period. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Masser Hammond Ireland D2, D2 Max, & Can be terminated at any time. None contracted. Gentlemen's Dublin, Ireland assoc. software Commitment to review agreement not to introduce new relationship at 12/31/98 distributor in area through review period. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Specialty Food Kansas, Western D2, D2 Max, & Can be terminated at any time. None contracted. Gentlemen's Equipment Missouri, Northwest assoc. software agreement not to introduce new Kansas City, Kansas Arkansas, distributor in area at this time. United States Northeast Oklahoma - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Kanematsu Japan D2, D2 Max, & Up to November 4, 1999 Japan Tokyo, Japan assoc. software - ------------------------------------------------------------------------------------------------------------------------------------
11 XXXXXXX X XXXXXX XXXXXXX XXXXXXX
XXXXXX XXXXXXXXX XXXXXXXXXXXXXX XXXXXXXX XXXXXXXXXXX ---------------- ----------------------- ----------- - ------------------------------------------------------------------------------------------------------------------------------------ XXXXX XXXXX XXXXX XXXXXXXX XXXX XXXXX XX XXXXXXXXX XXXX XX XXXXXXXX XXXXXXXX XX XXX XXXXX XXXXXX XXXXXXX XXXXXXX X XXXXXXX XXXXXXXXXXXX XXX XXXXXXXX - ------------------------------------------------------------------------------------------------------------------------------------ XXXXXXXXXXX XX XXXXX XXXXXXX XXXXXXXX XXXXXXX XXXXXXXXXXX XXXXXX XXXXXXXXXXX XXXXXXXXXXX XXXX XX XXXXXXXX XXXXXXXX XXXXX XXXXXXXX XXXXXXX XXXXXXXXXX XX XXX XXXXX XXXXXX XXXXXXXXXXXX XXXXXXXXXXX XXXX XX XXXXXX XXXXXXX XXXX XX XXXXXXXXX XX XXXXX - ------------------------------------------------------------------------------------------------------------------------------------ XXX XXXXX XXXXX XXXXX XXXX XXXXXXXXXXX XX XXXXX - ------------------------------------------------------------------------------------------------------------------------------------ XXXXXXXX XXXX XXXXXX XXXXXXXX XXXX XX XXXXXXXX XXXXXX XXXX XXXXXXXX XXXXXX XXXXXXXX XXXXXXXXXXXX XXX XXXX XXXXXXXX XXXX XX XXXXXXXX XX XXXXX XXXXXXXXX XXXXX XX XXXXXX XXXX XX XXXX XXXXXXXXX XXX XXX XXXX XXXXXX XXXXX XXXXX XXXXXXX XXXXXX XXXX XXXXXXX XXXXXX XXXXX XXXXXXXXXXXX XXX XXXX XXXXXXXX XXXX XX XXXXX XXXXX XXXXXXXXX XXXXX XX XXXXXX XXXX XX XXXX XXXXXXXXX XXX XXX XXXX XXXXXXX XXXXXXXX XXX XXXXX XXXXXX XX XXXXXXX XXXXXXXX XXXX XX XXXXXXXXX XXXXXX XXXXXXXXXXX XXXXXXXXX XXXXXXXXX XX XXXXXXXXXX XXXXXXXX XXXXX XX XXX XXXXX XXXXXXX XXX XXXXXX XXXXXXXXXXXXX XXXXXX XX XXXXX XXXXXXX XXXXXXXX XX XXXXXX XXXXXX XXXXXXXX XXXXXXXXXX XXXXXXXXXX XXXXX XXXXXXXXX XXX XXX XXXXXXXX XXXXX XX XXXXXXXXXXX XXXXXXXXXX XXXXXX XXX XXX XXXXXXXXXX XXXXXXX XXXXXXXX XXXXXXXXX - ------------------------------------------------------------------------------------------------------------------------------------ XXXXXXXXXXXXX XXXXXXXXX XXX XXXXXXXXXX XXXXXXX XXXXXXXX XXXX XXX XX XXXXXXXXXXXX XX XXXX XXXXXXX XXXX XXX XXXXXX XX XXXXXX XXXX XX XXXXXX XXXXXXXXX XXXXXX XXXXXXXXX XX XXXXXXXXX XXXXXX XX XXXXXXXXX XXXXXXXXX XXXXX XXX XXXXXXX XXXXXXXX XXXXXX XXXXX XXXXXXXXX XXX XX XXX XXXXXXXX XXXXXXXXX XXXXXXXX XXXXX XXXXXXXX XX XXXXXXXXX XX XXXXXXXX XX XXXXX XXXXXXXX XXXXXXXX XXX XXXXXXXX XXXXXXXXX - ------------------------------------------------------------------------------------------------------------------------------------ XXXXXXXXXXX XXXXXXX XXX XX XXX XXX XXXXXXX XXXXXXX XXXXXXXX XXXXXXXXXXX XXXX XXX XXXXX XXXXXXXXXX XX XXXXX XXX XXXXX XXXXXXXXXXX XXXXXX XXXXX XXX XXXXX XXXXX XXXXXXXXXXX - ---------------------------------------------------------------------------------------------------------------------------------- XXXXXXX XXXXXXXXXXXXXX XXXX XX XXXXXXX XXXXXXXX XX XXXXXXX XXXXXXXX XXXXXXX XXXX XXX XXXX XXXXX XX XXXXXXXXX XXXXXXX XXXX XXXXXXXXXX - ------------------------------------------------------------------------------------------------------------------------------------ XXXXXXXX XXXXX XXXX XX XXXXXXX XXXXXXXX XXXXX XXXXXXX XXXX XXXXXXX XXXXXXXX XXXXXXXX XXXX XXX XXXX XXXXX XX XXXXXXXX XXXXXX XXXXXXXX XXXXXXXXXXXXXXX XXXXXXXXXXX XXXXXXX XXXXXXXXXXXXX XXXXXXXX XXXXXXX XX XXXXXX XXXXXXXX XXXXXXXXXXXXXX - ----------------------------------------------------------------------------------------------------------------------------------- XXXXXXX XXXXXXXXX XXXXX XXXXXXXXXX XXXX XXXXXXXX XXXXXX XXX XXXXXXX XXXXXXXX XXXXXXX XXXXXXXXX XXXX XXX XXXX XXXXXXXX XXXXXX XXXXXXX XX XX XXXXXX XX XXXXX XX XXXXXXXXXXX XXXXXXX XXXXXXXX XXXX - -----------------------------------------------------------------------------------------------------------------------------------
12 XXXXXXX X XXXXXX XXXXXXX XXXXXXX
XXXXXX XXXXXXXXX XXXXXXXXXXXXXX XXXXXXXX XXXXXXXXXXX ---------------- ----------------------- ----------- - ----------------------------------------------------------------------------------------------------------------------------------- XXXXXXXX X XXXXXXXXXXX XXXXXXXX XXX XXXXXXXX XXXXXXX XXXXXX XXXXXXX XXXXXXXXX XXXXXXXX XXXX XXXXXX XXXXX XXXX XXX XX XXXXXXXX XX XXXXXXX XXXXXXXXX XXXXXXXXXXXX XXXXXXX - ----------------------------------------------------------------------------------------------------------------------------------- XXXXX XXXXXX XXX XXXXX XXXX XXXX XX XXXXX - ----------------------------------------------------------------------------------------------------------------------------------- XXXXX X XXXXXXXXX XXXXXXXXXXXX XXXXXXXXXX XXXXXXXXXXXX XXXXXXXX XXXXXXXXX XXXXXXXX XXXX XXXXXXX XXX XXXXXXXX XXXXXXX XXXXX XX XXXXX XXX XXXXXXXXX XXXXXXXXX - ----------------------------------------------------------------------------------------------------------------------------------- XXXXXXX X XXXXXXXXXXXXXX XXXXXXXX XXX XXXXXXX XXX XXXXXXX XXXXX XX XXXXXXXX XXXXXXX XX XXXXXX XXXXXXX XXX XXXXXX XXXXXXXXXXXXXX XXXXXXXXX XXX XXXXXXXXX XXXXXXXXXXXXXX XXXXXXXX - ----------------------------------------------------------------------------------------------------------------------------------- XXXXXXXXX XXXXXX XXXXX XXXXXX XXXX XXXXXXXX XXXXXXX X XXXXXXXXXXXXXX XXXXXXXX - ----------------------------------------------------------------------------------------------------------------------------------- XXXX XX XXXXXXX XXXXXXXXX XXXXX XXXXXXXXXX XXXX XXXXXXXXXXX XX XXXXX XXXXXX XXXXX XX XXXX XX XXXXXXX XXXXXXXXXX XXXXXXXX XXXXXXXXXXX XXXXXXXX XXXXX XXXXXXXXX XXX XXXXXX XXX XXXXXXXXXXX XXX XXXXXX XXXXXXXXX XXXXX XXX XXXXXXXXX - ----------------------------------------------------------------------------------------------------------------------------------- XXXXXXXXX XXXXXXX XXXX XXXXXXXXX XXXXXX XXXX XXXX XX XXXXXXX XXXX XX XXXXXXX XXXXXX XXXXXXX XX XXXXX XXXXX XXX XXXXXXXXXXX XXXXXX XXX XXXXXX
13 EX-10.31 3 REVOLVING CREDIT AGREEMENT EXHIBIT 10.31 REVOLVING CREDIT AGREEMENT BETWEEN CHASE BANK OF TEXAS NA AND TURBOCHEF TECHNOLOGIES, INC. DATED JULY 1, 1998. CREDIT AGREEMENT (BORROWING BASE) THIS CREDIT AGREEMENT (as amended, restated and supplemented from time to time, this "AGREEMENT") by and between TURBOCHEF TECHNOLOGIES, INC. ("BORROWER") and --------- -------- CHASE BANK OF TEXAS, NATIONAL ASSOCIATION ("BANK") is dated as of July 1, 1998 ---- (the "EFFECTIVE DATE"). -------------- 1. THE LOANS. --------- REVOLVING CREDIT NOTE 1.1 Subject to the terms and conditions hereof, Bank agrees to make loans ("LOAN" or "LOANS") to Borrower from time to time before ---- ----- the Termination Date, not to exceed at any one time outstanding the lesser of the Borrowing Base or $3,000,000.00 (the "COMMITMENT"). Borrower has the right ---------- to borrow, repay and reborrow. The Loans may only be used for finance short term working capital needs. Chapter 346 of the Texas Finance Code (which governs certain revolving loan accounts) will not apply to this Agreement, the Note or any Loan. The Loans will be evidenced by, and will bear interest and be payable as provided in, the promissory note of Borrower dated the Effective Date (together with any and all renewals, extensions, modifications and replacements thereof and substitutions therefor, the "NOTE"). "TERMINATION DATE" means the ---- ---------------- earlier of: (a) July 1, 1999; or (b) the date specified by Bank pursuant to Section 6.1 hereof. - ----------- BORROWING BASE 1.2 The "BORROWING BASE" will be the amount shown as the -------------- BORROWING BASE on the most recent Borrowing Base Report, subject to verification by Bank and determination by Bank at any time and calculated using the eligibility criteria, borrowing base factors, dollar ceilings for various components and any deductions specified in the attached EXHIBIT A incorporated --------- herein by reference. REQUIRED PAYMENT 1.3 If the unpaid amount of the Loans at any time exceeds the Borrowing Base then in effect, Borrower must make a payment on the Note in an amount sufficient to reduce the unpaid principal balance of the Note to an amount no greater than the Borrowing Base. Such payment shall be accompanied by any prepayment charge required by the Note and shall be due concurrently with the Borrowing Base Report. In lieu of such mandatory prepayment, Borrower may pledge additional Maytag Corporation common stock in an amount sufficient to bring Borrower back into compliance with the Borrowing Base requirements set forth herein. Such mandatory prepayment or pledge of additional Maytag stock must be made by Borrower within five (5) business days of notice to Borrower, which notice may be given either orally or in writing by Bank, unless the mandatory prepayment or pledge of additional Maytag stock is necessary to comply (in Bank's sole discretion and determination) with Regulation U or any other legal requirement affecting the Loan in which case the mandatory prepayment or additional stock pledge is effective immediately. COMMITMENT FEE 1.4 Borrower will pay a commitment fee (computed on the basis of the actual number of days elapsed in a year comprised of 360 days) of .25% per annum on the daily average difference between the Commitment and the principal balance of the Note, from the date hereof to the Termination Date. The Commitment fee is due and payable calendar quarterly, in arrears. PAST DUE AMOUNTS 1.5 Each amount due to Bank in connection with the Loan Documents will bear interest from its due date until paid at the Highest Lawful Rate unless the applicable Loan Document provides otherwise. 2. CONDITIONS PRECEDENT. ---------- --------- ALL LOANS 2.1 Bank is not obligated to make any Loan unless: (a) Bank has received the following, duly executed and in Proper Form: (1) a Request for Loan, substantially in the form of Exhibit B, not later than one (1) Business --------- Day before the date (which shall also be a Business Day) of the proposed Loan; provided however, Bank may accept and act upon verbal advance requests received from Borrower's representative reasonably believed by Bank to be authorized to make such requests; (2) a Borrowing Base Report within the time required by this Agreement; (3) the Collateral, free and clear of all restrictions; limitations, legends or any other agreement that might serve to limit or restrict Bank's ability to sell such stock in the event of an Event of Default, at least five ---- days prior to the first Request for Loan; and (4) such other documents as Bank - ---- reasonably may require; (b) no Event of Default exists; and (c) the making of the Loan is not prohibited by, or subjects Bank to any penalty or onerous condition under any Legal Requirement. FIRST LOAN 2.2 In addition to the matters described in the preceding section, Bank will not be obligated to make the first Loan unless Bank has received all of the Loan Documents specified on Annex I in Proper Form. ------- 3. REPRESENTATIONS AND WARRANTIES. To induce Bank to enter into this Agreement ------------------------------ and to make the Loans, Borrower represents and warrants as of the Effective Date and the date of each request for a Loan that each of the following statements is and shall remain true and correct throughout the term of this Agreement: ORGANIZATION AND STATUS 3.1 Borrower and each Subsidiary of Borrower is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; has all power and authority to conduct its business as presently conducted, and is duly qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it makes such qualification desirable. Borrower has no Subsidiary other than those listed on Annex II and each Subsidiary is owned by Borrower in the -------- percentage set forth on Annex II. If Borrower is subject to the Texas Revised -------- Partnership Act ("TRPA"), Borrower agrees that Bank is not required to comply ---- with Section 3.05(d) of TRPA and agrees that Bank may proceed directly against one or more partners or their property without first seeking satisfaction from partnership property. FINANCIAL STATEMENTS 3.2 All financial statements delivered to Bank are complete and correct and fairly present, in accordance with generally accepted accounting principles, consistently applied ("GAAP"), the financial condition and the ---- results of operations of Borrower and each Subsidiary of Borrower as at the dates and for the periods indicated. No material adverse change has occurred in the assets, liabilities, financial condition, business or affairs of Borrower or any Subsidiary of Borrower since the dates of such financial statements. Neither Borrower nor any Subsidiary of Borrower is subject to any instrument or agreement materially and adversely affecting its financial condition, business or affairs. ENFORCEABILITY 3.3 The Loan Documents are legal, valid and binding obligations of the Parties enforceable in accordance with their respective terms, except as may be limited by bankruptcy, insolvency and other similar laws affecting creditors' rights generally. The execution, delivery and performance of the Loan Documents have all been duly authorized by all necessary action; are within the power and authority of the Parties; do not and will not violate any Legal Requirement, the Organizational Documents of the Parties or any agreement or instrument binding or affecting the Parties or any of their respective Property. COMPLIANCE 3.4 Borrower and each Subsidiary of Borrower has filed all applicable tax returns and paid all taxes shown thereon to be due, except those for which extensions have been obtained and those which are being contested in good faith and for which adequate reserves have been established. Borrower and each Subsidiary of Borrower is in compliance with all applicable Legal Requirements and manages and operates (and will continue to manage and operate) its business in accordance with good industry practices. Neither Borrower nor any Subsidiary of Borrower is in default in the payment of any other indebtedness or under any agreement to which it is a party. The Parties have obtained all consents of and registered with all Governmental Authorities or other Persons required to execute, deliver and perform the Loan Documents. LITIGATION 3.5 Except as previously disclosed to Bank in writing, there is no litigation or administrative proceeding pending or, to the knowledge of Borrower, threatened against, nor any outstanding judgment, order or decree affecting Borrower or any Subsidiary of Borrower before or by any Governmental Authority. TITLE AND RIGHTS 3.6 Borrower and each Subsidiary of Borrower has good and marketable title to its Property, free and clear of any Lien except for Liens permitted by this Agreement and the other Loan Documents. Except as otherwise expressly stated in the Loan Documents or permitted by this Agreement, the Liens of the Loan Documents will constitute valid and perfected first and prior Liens on the Property described therein, subject to no other Liens whatsoever. Borrower and each Subsidiary of Borrower possesses all permits, licenses, patents, trademarks and copyrights required to conduct its business. All easements, rights-of-way and other rights necessary to maintain and operate Borrower's Property have been obtained and are in full force and effect. Page 1 of 6 Pages Credit Agreement (With Borrowing Base) July 1, 1998 TurboChef Technologies, Inc. REGULATION U; BUSINESS PURPOSE 3.7 None of the proceeds of any Loan will be used to purchase or carry, directly or indirectly, any margin stock or for any other purpose which would make this credit a "purpose credit" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System. Bank expressly reserves the right to change the loan advance rate and collateral-to- loan percentage upon notice to Borrower in order to comply with the requirements of Regulation U. All Loans will be used for business, commercial, investment or other similar purpose and not primarily for personal, family, or household use or primarily for agricultural purposes as such terms are used in Chapter One of the Texas Credit Code or any successor statute. ENVIRONMENT 3.8 Borrower and each Subsidiary of Borrower have complied with applicable Legal Requirements in each instance in which any of them have generated, handled, used, stored or disposed of any hazardous or toxic waste or substance, on or off its premises (whether or not owned by any of them). Neither Borrower nor any Subsidiary of Borrower has any material contingent liability for non-compliance with environmental or hazardous waste laws. Neither Borrower nor any Subsidiary of Borrower has received any notice that it or any of its Property or operations does not comply with, or that any Governmental Authority is investigating its compliance with, any environmental or hazardous waste laws. INVESTMENT COMPANY ACT/PUBLIC UTILITY HOLDING COMPANY ACT 3.9 Neither Borrower nor any Subsidiary of Borrower is an "investment company" within the meaning of the Investment Company Act of 1940 or a "holding company" or an "affiliate" of a "holding company" or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. STATEMENTS BY OTHERS 3.10 All statements made by or on behalf of Borrower, any Subsidiary of Borrower or any other of the Parties in connection with any Loan Document constitute the joint and several representations and warranties of Borrower hereunder. 4. AFFIRMATIVE COVENANTS. Borrower agrees to do, and if necessary cause to be --------------------- done, and cause its Subsidiaries to do, each of the following: CORPORATE FUNDAMENTALS 4.1 (a) Pay when due all taxes and governmental charges of every kind upon it or against its income, profits or Property, unless and only to the extent that the same shall be contested in good faith and adequate reserves have been established therefor; (b) Renew and keep in full force and effect all of its licenses, permits and franchises; (c) Do all things necessary to preserve its corporate existence and its qualifications and rights in all jurisdictions where such qualification is necessary or desirable; (d) Comply with all applicable Legal Requirements; and (e) Protect, maintain and keep in good repair its Property and make all replacements and additions to its Property as may be reasonably necessary to conduct its business properly and efficiently. INSURANCE 4.2 Maintain insurance with such reputable financially sound insurers, on such of its Property and personnel, in such amounts and against such risks as is customary with similar Persons or as may be reasonably required by Bank, and furnish Bank satisfactory evidence thereof promptly upon request. These insurance provisions are cumulative of the insurance provisions of the other Loan Documents. Bank must be named as a beneficiary, loss payee or additional insured of such insurance as its interest may appear and Borrower must provide Bank with copies of the policies of insurance and a certificate of the insurer that the insurance required by this section may not be canceled, reduced or affected in any manner without 30 days' prior written notice to Bank. FINANCIAL INFORMATION/BORROWING BASE REPORT 4.3 Furnish to Bank in Proper Form (i) the financial statements prepared in conformity with GAAP on consolidated and consolidating bases and the other information described in, and within the times required by, Exhibit C, Reporting Requirements, Financial Covenants and --------- Compliance Certificate attached hereto and incorporated herein by reference; (ii) the Borrowing Base Report substantially in the form of, and within the time required by, Exhibit A along with the other information required by Exhibit A to --------- --------- be submitted; (iii) within the time required by Exhibit C, Exhibit C signed and --------- --------- certified by the chief financial officer or president of Borrower; (iv) promptly after such request is submitted to the appropriate Governmental Authority, any request for waiver of funding standards or extension of amortization periods with respect to any employee benefit plan; (v) copies of special audits, studies, reports and analyses prepared for the management of Borrower by outside parties and (vi) such other information relating to the financial condition and affairs of the Borrower and guarantors and their Subsidiaries as Bank may request from time to time in its discretion. MATTERS REQUIRING NOTICE 4.4 Notify Bank immediately, upon acquiring knowledge of (a) the institution or threatened institution of any lawsuit or administrative proceeding which, if adversely determined, might adversely affect Borrower; (b) any material adverse change in the assets, liabilities, financial condition, business or affairs of Borrower; (c) any Event of Default; or (d) any reportable event or any prohibited transaction in connection with any employee benefit plan. INSPECTION 4.5 Permit Bank and its affiliates to inspect and photograph its Property, to examine and copy its files, books and records, and to discuss its affairs with its officers and accountants, at such times and intervals and to such extent as Bank reasonably desires. ASSURANCES 4.6 Promptly execute and deliver any and all further agreements, documents, instruments, and other writings that Bank may request to cure any defect in the execution and delivery of any Loan Document or more fully to describe particular aspects of the agreements set forth or intended to be set forth in the Loan Documents. CERTAIN CHANGES 4.7 Notify Bank at least 30 days prior to the date that any of the Parties changes its name or the location of its chief executive office or principal place of business or the place where it keeps its books and records or the location of any of the Collateral. EXHIBIT C 4.8 Comply with each of the other affirmative covenants set forth in Exhibit C. - --------- COLLATERAL MAINTENANCE AGREEMENT 4.9 The Collateral Value shall at all times be at least the Minimum, as defined in Section 8. If the Collateral to Loan Percentage is ever less than the Minimum, then within ten (10) days of such event: (i) Borrower will make a payment on the Note; and/or (ii) Borrower will deliver to Bank as Marketable Collateral additional cash and/or marketable investment securities acceptable to Bank; or Borrower will do any combination of(i) and (ii); so that the Collateral Value is at least the Minimum. Bank will not be obligated to make any advance under the Note when the Collateral to Loan Percentage is less than the Minimum. If the Collateral to Loan Percentage continues to be less than the Minimum after the elapse of the 10 day period described in the preceding paragraph, a default and Event of Default shall exist with respect to the Note and Security Agreement. Bank will have the right at any time thereafter, and without the necessity of accelerating the Note, to sell all or any portion of the Marketable Collateral and apply the proceeds as Bank elects to some or all of the Obligations; which right is in addition to all other rights in the Loan Documents. 5. NEGATIVE COVENANTS. The Borrower will not, and no Subsidiary of Borrower ------------------ will: INDEBTEDNESS 5.1 Create, incur, or permit to exist, or assume or guarantee, directly or indirectly, or become or remain liable with respect to, any funded Indebtedness (defined as:(i) any borrowed money obligation from any lender other than Bank, and (ii) capital lease obligations), contingent or otherwise without prior written consent of Bank and unless subordinate to Bank, unless there is a permitted amount set forth in Exhibit C, except: (a) Indebtedness to --------- ------ Bank, or secured by Liens permitted by this Agreement, or otherwise approved in writing by Bank, and renewals and extensions (but not increases) thereof; and (b) current accounts payable and unsecured current liabilities, not the result of borrowing, to vendors, suppliers and Persons providing services, for expenditures for goods and services normally required by it in the ordinary course of business and on ordinary trade terms. LIENS 5.2 Create or permit to exist any Lien upon any of its Property now owned or hereafter acquired, or acquire any Property upon any conditional sale or other title retention device or arrangement or any purchase money security agreement; or in any manner directly or indirectly sell, assign, pledge or otherwise transfer any of its accounts or other Property, except: (a) Liens, not ------ for borrowed money, arising in the ordinary course of business; (b) Liens for taxes not delinquent or being contested in good faith by appropriate proceedings; (c) Liens in effect on the date hereof and disclosed to Bank in Page 2 of 6 Pages Credit Agreement (With Borrowing Base) July 1, 1998 TurboChef Technologies, Inc. writing, so long as neither the indebtedness secured thereby nor the Property covered thereby increases; and (d) Liens in favor of Bank, or otherwise approved in writing by Bank. Notwithstanding anything to the contrary herein, Borrower will not, and no Subsidiary of Borrower will permit any Lien on any inventory that secures the Loans unless Bank shall provide Borrower with Bank's prior written consent. FINANCIAL AND OTHER COVENANTS 5.3 Fail to comply with the required financial covenants and other covenants described, and calculated as set forth, in Exhibit ------- C. Unless otherwise provided on Exhibit C all such amounts and ratios will be - - calculated: (a) on the basis of GAAP; and (b) on a consolidated basis. Compliance with the requirements of Exhibit C will be determined as of the dates --------- of the financial statements to be provided to Bank. CORPORATE CHANGES 5.4 In any single transaction or series of transactions, directly or indirectly: (a) liquidate or dissolve; (b) be a party to any merger or consolidation; (c) sell or dispose of any interest in any of its Subsidiaries, or permit any of its Subsidiaries to issue any additional equity other than to Borrower; (d) sell, convey or lease all or any substantial part of its assets, except for sale of inventory in the ordinary course of business; (e) ------ permit any change in ownership of Borrower; or make any acquisition, without prior written consent of Bank. RESTRICTED PAYMENTS 5.5 Unless otherwise permitted on Exhibit C or with prior --------- written consent of Bank, at any time: (a) redeem, retire or otherwise acquire, directly or indirectly, any shares of its capital stock or other equity interest (except for any employee stock option program); (b) declare or pay any dividend ------ (except stock dividends and dividends paid to Borrower); or (c) make any other - ------- distribution or contribution of any Property or cash or obligation to owners of an equity interest or to a Subsidiary in their capacity as such. NATURE OF BUSINESS; MANAGEMENT 5.6 Without prior written consent of Bank, change the nature of its business or enter into any business which is substantially different from the business in which it is presently engaged, or permit any material change in its management. AFFILIATE TRANSACTIONS 5.7 Enter into any transaction or agreement with any Affiliate except upon terms substantially similar to those obtainable from wholly unrelated sources. SUBSIDIARIES 5.8 Form, create or acquire any Subsidiary. LOANS AND INVESTMENTS 5.9 Unless otherwise provided on Exhibit C make any --------- advance, loan, extension of credit, or capital contribution to or investment in, or purchase, any stock, bonds, notes, debentures, or other securities of, any Person, except: (a) readily marketable direct obligations of the United States of America or any agency thereof with maturities of one year or less from the date of acquisition; (b) fully insured certificates of deposit with maturities of one year or less from the date of acquisition issued by any commercial bank operating in the United States of America having capital and surplus in excess of $50,000,000.00; and (c) commercial paper of a domestic issuer if at the time of purchase such paper is rated in one of the two highest rating categories of Standard and Poor's Corporation or Moody's Investors Service. 6. EVENTS OF DEFAULT AND REMEDIES. ------------------------------ EVENTS OF DEFAULT 6.1 Each of the following is an "EVENT OF DEFAULT": ---------------- (a) Any Obligor fails to pay any principal of or interest on the Note or any other obligation under any Loan Document as and when due; or (b) Any Obligor or any Subsidiary of Borrower fails to pay at maturity, or within any applicable period of grace, any principal of or interest on any other borrowed money obligation or fails to observe or perform any term, covenant or agreement contained in any agreement or obligation by which it is bound; or (c) Any representation or warranty made in connection with any Loan Document was incorrect, false or misleading when made; or (d) Any Obligor violates any covenant contained in any Loan Document; or (e) An event of default occurs under any other Loan Document; or (f) Final judgment for the payment of money is rendered against Obligor or any Subsidiary of Borrower and remains undischarged for a period of 30 days during which execution is not effectively stayed; or (g) The sale, encumbrance or abandonment (except as otherwise expressly permitted by this Agreement) of any of the Collateral or the making of any levy, seizure, garnishment, sequestration or attachment thereof or thereon; or the loss, theft, substantial damage, or destruction of any material portion of such Property; or (h) Any order is entered in any proceeding against Borrower or any Subsidiary of Borrower decreeing the dissolution, liquidation or split-up thereof, and such order shall remain in effect for 30 days; or (i) Any Obligor or any subsidiary of Borrower makes a general assignment for the benefit of creditors or shall petition or apply to any tribunal for the appointment of a trustee, custodian, receiver or liquidator of all or any substantial part of its business, estate or assets or shall commence any proceeding under any bankruptcy, insolvency, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect; or any such petition or application shall be filed or any such proceeding shall be commenced against any Obligor or any subsidiary of Borrower and the Obligor or such subsidiary by any act or omission shall indicate approval thereof, consent thereto or acquiescence therein, or an order shall be entered appointing a trustee, custodian, receiver or liquidator of all or any substantial part of the assets of any Obligor or any subsidiary of Borrower or granting relief to any Obligor or any subsidiary of Borrower or approving the petition in any such proceeding, and such order shall remain in effect for more than 30 days; or any Obligor or any subsidiary of Borrower shall fail generally to pay its debts as they become due or suffer any writ of attachment or execution or any similar process to be issued or levied against it or any substantial part of its property which is not released, stayed, bonded or vacated within 30 days after its issue or levy; or (j) Any Obligor or any Subsidiary of Borrower conceals or removes any part of its Property, with intent to hinder, delay or defraud any of its creditors, makes or permits a transfer of any of its Property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or makes any transfer of its Property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or (k) A material adverse change occurs in the assets, liabilities, financial condition, business or affairs of any Obligor or any Subsidiary of Borrower; or (l) Any individual Obligor dies or any Obligor that is not an individual dissolves. IF ANY EVENT OF DEFAULT OCCURS, then Bank may do any or all of the following: (1) declare the Obligations to be immediately due and payable without notice of acceleration or of intention to accelerate, presentment and demand or protest, all of which are hereby expressly waived; (2) without notice to any Obligor, terminate the Commitment and accelerate the Termination Date; (3) set off, in any order, against the indebtedness of Borrower under the Loan Documents any debt owing by Bank to Borrower (whether such debt is owed individually or jointly), including, but not limited to, any deposit account, which right is hereby granted by Borrower to Bank; and (4) exercise any and all other rights pursuant to the Loan Documents, at law, in equity or otherwise. REMEDIES CUMULATIVE 6.2 No remedy, right or power of Bank is exclusive of any other remedy, right or power now or hereafter existing by contract, at law, in equity, or otherwise, and all remedies, rights and powers are cumulative. 7. MISCELLANEOUS. ------------- NO WAIVER 7.1 No waiver of any default or Event of Default will be a waiver of any other default or Event of Default. No failure to exercise or delay in exercising any right or power under any Loan Document will be a waiver thereof, nor shall any single or partial exercise of any such right or power preclude any further or other exercise thereof or the exercise of any other right or power. The making of any Loan during either the existence of any default or Event of Default, or subsequent to the occurrence of an Event of Default will not be a waiver of any such default or Event of Default. No amendment, modification or waiver of any Loan Document will be effective unless the same is in writing and signed by the Person against whom such amendment, modification or waiver is sought to be enforced. No notice to or demand on any Person shall entitle any Person to any other or further notice or demand in similar or other circumstances. NOTICES 7.2 All notices required under the Loan Documents shall be in writing and either delivered against receipt therefor, or mailed by registered or certified mail, return receipt requested, in each case addressed to the address shown on the signature page hereof or to such other address as a party may designate. Except for the notices required by Section 2.1, which shall be given ----------- only upon actual receipt by Bank, notices shall be deemed to have been given (whether actually received or not) when delivered (or, if mailed, on the next Business Day). Page 3 of 6 Pages Credit Agreement (With Borrowing Base) July 1, 1998 TurboChef Technologies, Inc. GOVERNING LAW/ARBITRATION 7.3 (a) UNLESS OTHERWISE SPECIFIED THEREIN, EACH LOAN DOCUMENT IS GOVERNED BY TEXAS LAWS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. To the maximum extent permitted by law, any controversy or claim arising out of or relating to the Loans or any Loan Document, including but not limited to any claim based on or arising from an alleged tort or an alleged breach of any agreement contained in any of the Loan Documents, shall, at the request of any party to the Loan or Loan Documents (either before or after the commencement of judicial proceedings), be settled by mandatory and binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the "AAA Rules") and pursuant to Title 9 of the United ---------- States Code, or if Title 9 does not apply, the Texas General Arbitration Act. In any arbitration proceeding: (i) all statutes of limitations which would otherwise be applicable shall apply; and (ii) the proceeding shall be conducted in the city in which the office of Bank originating the Loans is located, by a single arbitrator if the amount in controversy is $1 million or less, or by a panel of three arbitrators if the amount in controversy (including but not limited to all charges, principal, interest fees and expenses) is over $1 million. Arbitrators are empowered to resolve any controversy by summary rulings substantially similar to summary judgments and motions to dismiss. Arbitrators may order discovery conducted in accordance with the Federal Rules of Civil Procedures. All arbitrators will be selected by the process of appointment from a panel, pursuant to the AAA Rules. Any award rendered in the arbitration proceeding will be final and binding, and judgment upon any such award may be entered in any court having jurisdiction. (b) If any party to the Loan or Loan Documents files a proceeding in any court to resolve any controversy or claim, such action will not constitute a waiver of the right of such party or a bar to the right of any other party to seek arbitration under the provisions of this Section or that of any other claim or controversy, and the court shall, upon motion of any party to the proceeding, direct that the controversy or claim be arbitrated in accordance with this Section. (c) No provision of, or the exercise of any rights under, this Section shall limit or impair the right of any party to the Loan Documents before, during or after any arbitration proceeding to: (i) exercise self-help remedies including but not limited to setoff or repossession; (ii) foreclose any lien on or security interest in any Collateral; or (iii) obtain relief from a court of competent jurisdiction to prevent the dissipation, damage, destruction, transfer, hypothecation, pledging or concealment of assets or Collateral including, but not limited to attachments, garnishments, sequestrations, appointments of receivers, injunctions or other relief to preserve the status quo. (d) To the maximum extent permitted by applicable law and the AAA Rules, neither Bank nor any Obligor or any Affiliate, officer, director, employee, attorney, or agent of either shall have any liability with respect to, and Bank and each Obligor waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental and consequential damages suffered or incurred by such Person in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents. Each of Bank and each Obligor waives, releases, and agrees not to sue each other or any of their Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents. Nothing contained herein, however, shall be construed as a waiver of any Obligor's or the Bank's right to compel arbitration of disputes pursuant to subparagraphs (a) and (b), above. (e) Nothing herein shall be considered a waiver of the right or protections afforded Bank by 12 U.S.C. 91, Texas Banking Code Art. 342-609 or any similar statute. (f) Each party agrees that any other party may proceed against any other liable Person, jointly or severally, or against one or more of them, less than all, without impairing rights against any other liable Persons. A party shall not be required to join the principal Obligor or any other liable Persons (e.g., sureties or guarantors) in any proceeding against any Person. A party may release or settle with one or more liable Persons as the party deems fit without releasing or impairing right to proceed against any Persons not so released. SURVIVAL; PARTIES BOUND; TERM OF AGREEMENT 7.4 All representations, warranties, covenants and agreements made by or on behalf of Borrower in connection with the Loan Documents will survive the execution and delivery of the Loan Documents; will not be affected by any investigation made by any Person, and will bind Borrower and the successors, trustees, receivers and assigns of Borrower and will benefit the successors and assigns of the Bank; provided that Bank's -------- agreement to make Loans to Borrower will not inure to the benefit of any successor or assign of Borrower. Except as otherwise provided herein, the term of this Agreement will be until the later of the final maturity of the Note and the full and final payment of all Obligations and all amounts due under the Loan Documents. DOCUMENTARY MATTERS 7.5 This Agreement may be executed in several identical counterparts, on separate counterparts; each counterpart will constitute an original instrument, and all separate counterparts will constitute but one and the same instrument. The headings and captions in the Loan Documents have been included solely for convenience and should not be considered in construing the Loan Documents. If any provision of any Loan Document is invalid, illegal or unenforceable in any respect under any applicable law, the remaining provisions will remain effective. The Loans and all other obligations and indebtedness of Borrower to Bank are entitled to the benefit of the Loan Documents. EXPENSES 7.6 Any provision to the contrary notwithstanding, and whether or not the transactions contemplated by this Agreement are consummated, Borrower agrees to pay on demand all out-of-pocket expenses (including, without limitation, the fees and expenses of counsel for Bank) in connection with the negotiation, preparation, execution, filing, recording, modification, supplementing and waiver of the Loan Documents and the making, servicing and collection of the Loans. Borrower agrees to pay Bank's standard Documentation Preparation and Processing Fee for preparation, negotiation and handling of this Agreement. The obligations of the Borrower under this and the following section will survive the termination of this Agreement. INDEMNIFICATION 7.7 BORROWER AGREES TO INDEMNIFY, DEFEND AND HOLD BANK HARMLESS FROM AND AGAINST ANY AND ALL LOSS, LIABILITY, OBLIGATION, DAMAGE, PENALTY, JUDGMENT, CLAIM, DEFICIENCY AND EXPENSE (INCLUDING INTEREST, PENALTIES, ATTORNEYS' FEES AND AMOUNTS PAID IN SETTLEMENT) TO WHICH BANK MAY BECOME SUBJECT ARISING OUT OF OR BASED UPON THE LOAN DOCUMENTS, OR ANY LOAN, INCLUDING THAT RESULTING FROM BANK'S OWN NEGLIGENCE, EXCEPT AND TO THE EXTENT CAUSED BY BANK'S ------ GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. NATURE OF OBLIGATIONS 7.8 If more than one Borrower executes this Agreement, all of the representations, warranties, covenants and agreements of Borrower shall be joint and several obligations of all Borrowers. USURY NOT INTENDED 7.9 Borrower and Bank intend to conform strictly to applicable usury laws. Therefore, the total amount of interest (as defined under applicable law) contracted for, charged or collected under this Agreement or any other Loan Document will never exceed the Highest Lawful Rate. If Bank contracts for, charges or receives any excess interest, it will be deemed a mistake. Bank will automatically reform the Loan Document or charge to conform to applicable law, and if excess interest has been received, Bank will either refund the excess to Borrower or credit the excess on any unpaid principal amount of the Note or any other Loan Document. All amounts constituting interest will be spread throughout the full term of the Loan Document or applicable Note in determining whether interest exceeds lawful amounts. NO COURSE OF DEALING 7.10 NO COURSE OF DEALING BY BORROWER WITH BANK, NO COURSE OF PERFORMANCE AND NO TRADE PRACTICES OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE MAY BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS AGREEMENT. 8. DEFINITIONS. ----------- Unless the context otherwise requires, capitalized terms used in Loan Documents and not defined elsewhere shall have the meanings provided by GAAP, except as follows: AFFILIATE means, as to any Person, any other Person (a) that directly or - --------- indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such Person; (b) that directly or indirectly beneficially owns or holds five percent (5%) or more of any class of voting stock of such Person; or (c) five percent (5%) or more of the voting stock of which is directly or indirectly beneficially owned or held by the Person in question. The term "control" means to possess, directly or indirectly, the power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. Bank is not under any circumstances to be deemed an Affiliate of Borrower or any of its Subsidiaries. AGGREGATE BALANCE means the sum of the aggregate indebtedness evidenced by the - ----------------- Note, both principal and accrued and unpaid interest; plus all amounts available ---- for borrowing under the Note. Page 4 of 6 Pages Credit Agreement (With Borrowing Base) July 1, 1998 TurboChef Technologies, Inc. AUTHORITY DOCUMENTS means certificates of authority to transact business, - ------------------- certificates of good standing, borrowing resolutions (with secretary's certificate), secretary's certificates of incumbency, and other documents which empower and enable Borrower or its representatives to enter into agreements evidenced by Loan Documents or evidence such authority. BUSINESS DAY means a day when the main office of Bank is open for the conduct of - ------------ commercial lending business. COLLATERAL means all Property, tangible or intangible, real, personal or mixed, - ---------- now or hereafter subject to Security Documents, or intended so to be. COLLATERAL VALUE means the market value of the Marketable Collateral in which - ---------------- Bank has a first priority nod perfected security interest. Bank may determine the market value of the Marketable Collateral by any reasonable method, which determination shall be deemed conclusive absent manifest error. Using published figures in The Wall Street Journal or any reporting service used by Bank is ----------------------- agreed to be reasonable. COLLATERAL TO LOAN PERCENTAGE means the Collateral Value divided by the - ----------------------------- Aggregate Balance. CORPORATION means corporations, partnerships, limited liability companies, joint - ----------- ventures, joint stock associations, associations, banks, business trust and other business entities. GOVERNMENT ACCOUNTS means receivables owed by the U.S. government or by the - ------------------- government of any state, county, municipality, or other political subdivision as to which Banks security interest or ability to obtain direct payment of the proceeds is governed by any federal or state statutory requirements other than those of the Uniform Commercial Code, including, without limitation, the Federal Assignment of Claims Act of 1940, as amended. GOVERNMENTAL AUTHORITY means any foreign governmental authority, the United - ---------------------- States of America, any state of the United States and any political subdivision of any of the foregoing, and any agency, department, commission, board, bureau, court or other tribunal having jurisdiction over Bank of any Obligor, or any Subsidiary of Borrower or their respective Property. HIGHEST LAWFUL RATE means the maximum nonusurious rate of interest permitted to - ------------------- be charged by applicable Federal or Texas law (whichever permits the higher lawful rate) from time to time in effect. If Texas law determines the Highest Lawful Rate, the Highest Lawful Rate is the weekly rate ceiling as defined in Article 5069-1D.001 et seq., as amended, of the Texas Revised Civil Statutes. INDEBTEDNESS means and includes (a) all items which in accordance with GAAP - ------------ would be included on the liability side of a balance sheet on the date as of which Indebtedness is to be determined (excluding capital stock, surplus, surplus reserves and deferred credits); (b) all guaranties, endorsements and other contingent obligations in respect of, or any obligations to purchase or otherwise acquire, Indebtedness of others, and (c) all Indebtedness secured by any Lien existing on any interest of the Person with respect to which indebtedness is being determined, in Property owned subject to such Lien, whether or not the Indebtedness secured thereby has been assumed. LEGAL REQUIREMENT means any law, ordinance, decree, requirement, order, - ----------------- judgment, rule, regulation (or interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority. LIEN shall mean any mortgage, pledge, charge, encumbrance, security interest, - ---- collateral assignment or other lien or restriction of any kind, whether based on common law, constitutional provision, statute or contract. LOAN DOCUMENTS means this Agreement, the agreements, documents, instruments and - -------------- other writings contemplated by this Agreement or listed on Annex I, all other assignments, deeds, guaranties, pledges, instruments, certificates and agreements now or hereafter executed or delivered to the Bank pursuant to any of the foregoing, and all amendments, modifications, renewals, extensions, increases and rearrangements of, and substitutions for, any of the foregoing. MARKETABLE COLLATERAL means the financial assets listed below and all financial - --------------------- assets delivered or transferred to Bank or to Bank's control pursuant to this Agreement: 90,000 shares common stock Maytag Corporation registered in the name of Borrower. MINIMUM is 125% of the Aggregate Balance. - ------- ---- OBLIGATIONS means all principal, interest and other amounts which are or become - ----------- owing under this Agreement, the Note or any other Loan Document. OBLIGOR means each Borrower and any guarantor, surety, co-signer, general - ------- partner or other person who may now or hereafter be obligated to pay all or any part of the Obligations. ORGANIZATIONAL DOCUMENTS means, with respect to a corporation; the certificate - ------------------------ of incorporation, articles of incorporation and bylaws of such corporation; with respect to a limited liability company, the articles of organization, regulations and other documents establishing such entity, with respect to a partnership, joint venture, or trust, the agreement, certificate or instrument establishing such entity; in each case including all modifications and supplements thereof as of the date of the Loan Document referring to such Organizational Document and any and all future modifications thereof which are consented to by Bank. PARTIES means all Persons other than Bank executing any Loan Document. - ------- PERSON means any individual, Corporation, trust, unincorporated organization, - ------ Governmental Authority or any other form of entity. PROPER FORM means in form and substance satisfactory to the Bank. - ----------- PROPERTY means any interest in any kind of property or asset, whether real, - -------- personal or mixed, tangible or intangible. SECURITY DOCUMENTS means those Security Agreements listed on Annex I and all - ------------------ ------- supplements, modifications, amendment, extensions thereof and all other agreements hereafter executed and delivered to Bank to secure the Loans. SUBORDINATED DEBT means any Indebtedness subordinated to Indebtedness due Bank - ----------------- pursuant to a written subordination agreement in Proper Form by and among Bank, subordinated creditor and Borrower which at a minimum must prohibit: (a) any action by subordinated creditor which will result in an occurrence of an Event of Default or default under this Agreement, the subordination agreement or the subordinated Indebtedness; and (b) upon the happening of any Event of Default or default under any Loan Document, the subordination agreement, or any instrument evidencing the subordinated Indebtedness (i) any payment of principal and interest on the subordinated Indebtedness; (ii) any act to compel payment of principal or interest on subordinated Indebtedness; and (iii) any action to realize upon any Property securing the subordinated Indebtedness. SUBSIDIARY means, as to a particular parent Corporation, any Corporation of - ---------- which 50% or more of the indicia of equity rights is at the time directly or indirectly owned by such parent Corporation or by one or more Persons controlled by, controlling or under common control with such parent Corporation. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN BANK AND THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF BANK AND THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN BANK AND THE PARTIES. IN WITNESS WHEREOF, the parties have executed this agreement as of the Effective Date. BORROWER: TURBOCHEF TECHNOLOGIES, INC. By: /s/ DENNIS J. JAMESON ---------------------------------------------------------------------------- Name: Dennis J. Jameson ---------------------------------------------------------------------------- Title: EVP and CEO --------------------------------------------------------------------------- Address: 10500 Metric Dr., Suite 128, Dallas, TX 75243 ------------------------------------------------------------------------ BANK: CHASE BANK OF TEXAS, NATIONAL ASSOCIATION By: ---------------------------------------------------------------------------- Name: ---------------------------------------------------------------------------- Title: --------------------------------------------------------------------------- Address: ------------------------------------------------------------------------ EXHIBITS: ANNEXES: Page 5 of 6 Pages EX-27 4 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1998 APR-01-1998 JUN-30-1998 176,735 8,970,303 1,210,117 0 508,961 10,907,508 935,175 467,940 18,773,242 1,053,097 0 0 0 146,540 17,538,919 18,773,242 748,879 1,648,879 718,326 2,513,881 26,246 (891,248) 0 (891,248) 0 0 0 0 0 (891,248) (.06) (.06)
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