Page 34 - 2019 Apple Supply Chain Co-op, Inc. Annual Report

CENTRALIZED SUPPLY CHAIN SERVICES, LLC
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2019 and 2018

NOTE 3 - LINE OF CREDIT

At December 31, 2019 and 2018, the Company had a $1,000,000 revolving line of credit with its primary
bank. The line of credit bears interest at the Prime Rate and matures on July 24, 2020. The Company had
no borrowings and incurred no related interest expense for the years ended December 31, 2019 and 2018.
The line of credit contains a restrictive financial covenant related to tangible net worth. At
December 31, 2019 the Company was in compliance with the financial covenant.

The line of credit is secured by substantially all assets of the Company and guaranteed by its Members.
The Company is required to maintain a minimum compensating balance of $400,000 with its primary bank
in support of the line of credit.

NOTE 4 - NOTE PAYABLE

On December 27, 2019, the Company entered into a $725,000 note payable with Dine Brands Global, Inc.
(the “Lender”). Borrowings under the note bear interest at a rate of 5.00%. However, provided the Company
complies with all provisions of the agreement, all accrued interest will be waived by the lender at the maturity
date. The entire principal balance and all accrued and unpaid interest is due in full on December 31, 2020.
However, if the Company provides written notice to the lender that it wishes to extend the maturity date no
later than November 1, 2020, and the Company complies with all provisions of the agreement, the maturity
date may be extended to December 31, 2021.

NOTE 5 - COMMITMENTS AND CONTINGENCIES

During 2013, the Company entered into a renewed three-year service agreement with an unrelated third
party to provide a web-based interface that allows the Company to access vendor data at a fixed fee rate
of $951,000 per year. Under the agreement, the Company pays a monthly subscription fee. For the years
ended December 31, 2019 and 2018, the Company paid approximately $1,031,000 and $1,329,000 in
subscription fees, respectively.

The future minimum payments under the subscription agreement are as follows:

2020 $ 951,000
2021 951,000
2022 79,250

$ 1,981,250

Effective January 1, 2020, the Company entered into a renewed three-year agreement with an unrelated
third party to provide produce management services at a variable annual rate. The agreement includes an
automatic two-year renewal if neither party terminates. During 2019 and 2018, the total fixed service fee
recognized under this agreement was $560,000.

The future minimum payments under the subscription agreement are as follows:

2020 $ 560,000
2021 588,000
2022 602,700

$ 1,750,700

(Continued)

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