EXHIBIT 10.2
LOAN AND SECURITY AGREEMENT
WCMA LOAN AND SECURITY AGREEMENT NO. 885-07D32 ("Loan Agreement") dated as
of November 25, 2003, between ATLAS TECHNOLOGIES, INC., a corporation organized
and existing under the laws of the State of Michigan having its principal office
at 000 X. Xxxxx Xx. Xxxxxx, XX 00000 ("Customer"), and XXXXXXX XXXXX BUSINESS
FINANCIAL SERVICES INC., a corporation organized and existing under the laws of
the State of Delaware having its principal office at 000 Xxxxx XxXxxxx Xxxxxx,
Xxxxxxx, XX 00000 ("MLBFS").
Pursuant to that certain WORKING CAPITAL MANAGEMENT(r) ACCOUNT AGREEMENT
NO. 885-07D32 and the accompanying Program Description (as the same may be, or
have been, amended, modified or supplemented, the "WCMA Agreement") between
Customer and MLBFS' affiliate, XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED ("MLPF&S"), Customer opened, or shall prior to the Activation Date
open, a Working Capital Management Account pursuant to the "WCMA Service" and
the "WCMA Program" described in the WCMA Agreement and any documents
incorporated therein. The WCMA Agreement is by this reference incorporated as a
part hereof. In conjunction therewith and as part of the WCMA Program, Customer
has requested that MLBFS provide, and subject to the terms and conditions herein
set forth MLBFS has agreed to provide, a commercial line of credit for Customer.
Accordingly, and in consideration of the premises and of the mutual
covenants of the parties hereto, Customer and MLBFS hereby agree as follows:
ARTICLE I. DEFINITIONS
1.1 Specific Terms. In addition to terms defined elsewhere in this Loan
Agreement, when used herein the following terms shall have the following
meanings:
"Activation Date" shall mean the date upon which MLBFS shall cause the WCMA
Line of Credit to be fully activated under MLPF&S' computer system as part of
the WCMA Program. "Bankruptcy Event" shall mean any of the following: (i) a
proceeding under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, liquidation, winding up or receivership law or statute
shall be commenced, filed or consented to by any Credit Party; or (ii) any such
proceeding shall be filed against any Credit Party and shall not be dismissed or
withdrawn within sixty (60) days after filing; or (iii) any Credit Party shall
make a general assignment for the benefit of creditors; or (iv) any Credit Party
shall generally fail to pay or admit in writing its inability to pay its debts
as they become due; or (v) any Credit Party shall be adjudicated a bankrupt or
insolvent; or (vi) any Credit Party shall take advantage of any other law or
procedure for the relief of debtors or shall take any action for the purpose of
or with a view towards effecting any of the foregoing; or (vii) a receiver,
trustee, custodian, fiscal agent or similar official for any Credit Party or for
any substantial part of any of their respective property or assets shall be
sought by such Credit Party or appointed.
"Business Day" shall mean any day other than a Saturday, Sunday, federal
holiday or other day on which the New York Stock Exchange is regularly closed.
"Business Guarantor" shall mean every Guarantor that is not a natural person.
"Certificate of Compliance" shall mean, as applicable, that duly executed
certificate, substantially the same form as Exhibit B attached hereto to the
extent such certificate shall be applicable, of the president, chief financial
officer or chief executive officer of Customer, certifying as to the matters set
forth in such certificate.
"Collateral" shall mean the WCMA Account, all Accounts, Chattel Paper,
Contract Rights, Inventory, Equipment, Fixtures, General Intangibles, Deposit
Accounts, Documents, Instruments, Investment Property, Financial Assets, and
Letter-of-Credit Rights of Customer, howsoever arising, whether now owned or
existing or hereafter acquired or arising, and wherever located; together with
all parts thereof (including spare parts), all accessories and accessions
thereto, all books and records (including computer records) directly related
thereto, all proceeds thereof (including, without limitation, proceeds in the
form of Accounts, insurance proceeds and all rights to payment and performance
under that certain Letter of Credit Number LC322190300791 issued by HSBC), and
the additional collateral described in Section 3.6 (b) hereof.
"Commitment Expiration Date" shall mean December 15, 2003.
"Credit Party" and "Credit Parties" shall mean, individually or
collectively, the Customer, all Guarantors and all Pledgors. "Default" shall
mean either an "Event of Default" as defined in Section 3.5 hereof, or an event
which with the giving of notice, passage of time, or both, would constitute such
an Event of Default.
"Default Rate" shall mean an annual interest rate equal to the lesser of:
(i) two percentage points over the Interest Rate; or (ii) the highest interest
rate allowed by applicable law. "Event of Loss" shall mean the occurrence
whereby any tangible Collateral is damaged beyond repair, lost, totally
destroyed or confiscated.
"Excess Interest" shall mean any amount or rate of interest (including the
Default Rate and, to the extent that they may be deemed to constitute interest,
any prepayment fees, late charges and other fees and charges) payable, charged
or received in connection with any of the Loan Documents which exceeds the
maximum amount or rate of interest permitted under applicable law. "GAAP" shall
mean the generally accepted accounting principles in effect in the United States
of America from time to time. "General Funding Conditions" shall mean each of
the following conditions to any WCMA Loan by MLBFS hereunder: (i) Customer shall
have validly subscribed to and continued to maintain the WCMA Account with
MLPF&S, and the WCMA Account shall then be reflected as an active "commercial"
WCMA Account (i.e., one with line of credit capabilities) on MLPF&S' WCMA
computer system; (ii) no Default or Event of Default shall have occurred and be
continuing or would result from the making of any WCMA Loan hereunder by MLBFS;
(iii) there shall not have occurred and be continuing any material adverse
change in the business or financial condition of any Credit Party; (iv) all
representations and warranties of all of the Credit Parties herein or in any of
the Loan Documents shall then be true and correct in all material respects; (v)
MLBFS shall have received this Loan Agreement and all of the other Loan
Documents duly executed and filed or recorded where applicable, all of which
shall be in form and substance satisfactory to MLBFS; (vi) MLBFS shall have
received evidence satisfactory to it as to the ownership of the Collateral and
the perfection and priority of MLBFS' liens and security interests thereon, as
well as the ownership of and the perfection and priority of MLBFS' liens and
security interests on any other collateral for the Obligations furnished
pursuant to any of the Loan Documents; (vii) MLBFS shall have received evidence
satisfactory to it of the insurance required hereby or by any of the Loan
Documents; and (viii) any additional conditions specified in the "WCMA Line of
Credit Approval" letter executed by MLBFS with respect to the transactions
contemplated hereby shall have been met to the satisfaction of MLBFS.
"Guarantor" shall mean each Person obligated under a guaranty, endorsement or
other undertaking by which such Person guarantees or assumes responsibility in
any capacity for the payment or performance of any of the Obligations. "Initial
Maturity Date" shall mean the first date upon which the WCMA Line of Credit will
expire (subject to renewal in accordance with the terms hereof); to wit:
December 31, 2004.
"Individual Guarantor" shall mean each Guarantor who is a natural person.
"Interest Due Date" shall mean the first Business Day of each calendar month
during the term hereof.
"Interest Rate" shall mean a variable per annum rate of interest equal to
the sum of 2.85% plus the One-Month LIBOR. "One-Month LIBOR" shall mean, as of
the date of any determination, the interest rate then most recently published in
the "Money Rates" section of The Wall Street Journal as the one-month London
Interbank Offered Rate. The Interest Rate will change as of the date of
publication in The Wall Street Journal of a One-Month LIBOR that is different
from that published on the preceding Business Day, if more than one rate is
published, then the highest of such rates. In the event that The Wall Street
Journal shall, for any reason, fail or cease to publish the One-Month LIBOR,
MLBFS will choose a reasonably comparable index or source to use as the basis
for the Interest Rate.
"Line Fee" shall mean a fee of $40,000.00 payable periodically by Customer
to MLBFS in accordance with the provisions of Section 2.2 hereof. "Loan
Documents" shall mean this Loan Agreement, any indenture, any guaranty of any of
the Obligations and all other security and other instruments, assignments,
certificates, certifications and agreements of any kind relating to any of the
Obligations, whether obtained, authorized, authenticated, executed, sent or
received concurrently with or subsequent to this Loan Agreement, or which
evidence the creation, guaranty or collateralization of any of the Obligations
or the granting or perfection of liens or security interests upon any Collateral
or any other collateral for the Obligations, including any modifications,
amendments or restatements of the foregoing.
"Location of Tangible Collateral" shall mean the address of Customer set
forth at the beginning of this Loan Agreement, together with any other address
or addresses set forth on an exhibit hereto as being a Location of Tangible
Collateral. "Maturity Date" shall mean the date of expiration of the WCMA Line
of Credit.
"Maximum WCMA Line of Credit" shall mean, as of any date of determination
thereof, an amount equal to the lesser of: (A) $4,000,000.00, or (B) 80% of
Customer's Accounts and Chattel Paper, as shown on its regular books and records
(excluding Accounts over 90 days old, Accounts directly or indirectly due from
any person or entity not domiciled in the United States or from any shareholder,
officer or employee of Customer or any affiliated entity), 50% of Customer's
Inventory as shown on its regular books and records (excluding all
work-in-process inventory), and a percentage, to be determined by MLBFS at it
sole discretion, of Customer's Eligible Foreign Account, as shown on its regular
books and record. For the purposes hereof, the term "Eligible Foreign Account"
shall mean that certain Account due to Customer from Yuejin Motor Group Imp. and
Exp. Co., Ltd, provided that (i) such Account is credit enhanced by letter of
credit #LC322190300791 having a face amount of $667,500 and issued by HSBC Bank
USA (the "LOC"); (ii) MLBFS has a first priority lien and security interest on
the proceeds of the Letter-of-Credit Rights of such LOC; and (iii) HBSC Bank USA
has consented in writing to pay to MLBFS all proceeds of such Letter-of-Credit
Rights of the LOC. "Obligations" shall mean all liabilities, indebtedness and
other obligations of Customer to MLBFS, howsoever created, arising or evidenced,
whether now existing or hereafter arising, whether direct or indirect, absolute
or contingent, due or to become due, primary or secondary or joint or several,
and, without limiting the generality of the foregoing, shall include principal,
accrued interest (including without limitation interest accruing after the
filing of any petition in bankruptcy), all advances made by or on behalf of
MLBFS under the Loan Documents, collection and other costs and expenses incurred
by or on behalf of MLBFS, whether incurred before or after judgment and all
present and future liabilities, indebtedness and obligations of Customer under
this Loan Agreement, under that certain Term Loan and Security Agreement dated
as of November 25, 2003 and that certain Term Loan and Security Agreement Dated
as of November 25, 2003.
"Permitted Liens" shall mean with respect to the Collateral: (i) liens for
current taxes not yet due and payable, other non-consensual liens arising in the
ordinary course of business for sums not due, and, if MLBFS' rights to and
interest in the Collateral are not materially and adversely affected thereby,
any such liens for taxes or other non-consensual liens arising in the ordinary
course of business being contested in good faith by appropriate proceedings;
(ii) liens in favor of MLBFS; (iii) liens which will be discharged with the
proceeds of the initial WCMA Loan; and (iv) any other liens expressly permitted
in writing by MLBFS. "Person" shall mean any natural person and any corporation,
partnership (general, limited or otherwise), limited liability company, trust,
association, joint venture, governmental body or agency or other entity having
legal status of any kind. "Pledgor" shall mean each Person who at any time
provides collateral, or otherwise now or hereinafter agrees to grant MLBFS a
security interest in any assets as security for Customer's Obligations.
"Renewal Year" shall mean and refer to the 12-month period immediately
following the Initial Maturity Date and each 12-month period thereafter. "WCMA
Account" shall mean and refer to the Working Capital Management Account of
Customer with MLPF&S identified as Account No. 885-07D32 and any successor
Working Capital Management Account of Customer with MLPF&S.
"WCMA Line of Credit" shall mean a line of credit funded by MLBFS through
the WCMA Account. "WCMA Loan" shall mean each advance made by MLBFS pursuant to
this Loan Agreement. "WCMA Loan Balance" shall mean an amount equal to the
aggregate unpaid principal amount of all WCMA Loans. "UCC" shall mean the
Uniform Commercial Code of Illinois as in effect in Illinois from time to time.
1.2 Other Terms. Except as otherwise defined herein: (i) all terms used in
this Loan Agreement which are defined in the UCC shall have the meanings set
forth in the UCC, and (ii) capitalized terms used herein which are defined in
the WCMA Agreement (including, without limitation, "Money Accounts", "Minimum
Money Accounts Balance", and "WCMA Directed Reserve Program") shall have the
meanings set forth in the WCMA Agreement, and (iii) accounting terms not defined
herein shall have the meaning ascribed to them in GAAP.
1.3 UCC Filing. Customer hereby authorizes MLBFS to file a record or
records (as defined or otherwise specified under the UCC), including, without
limitation, financing statements, in all jurisdictions and with all filing
offices as MLBFS may determine, in its sole discretion, are necessary or
advisable to perfect the security interest granted to MLBFS herein. Such
financing statements may describe the Collateral in the same manner as described
herein or may contain an indication or description of collateral that describes
such property in any other manner as MLBFS may determine, in its sole
discretion, is necessary, advisable or prudent to ensure the perfection of the
security interest in the Collateral granted to the MLBFS herein.
ARTICLE II. THE WCMA LINE OF CREDIT
2.1 WCMA PROMISSORY NOTE. FOR VALUE RECEIVED, Customer hereby promises to
pay to the order of MLBFS, at the times and in the manner set forth in this Loan
Agreement, or in such other manner and at such place as MLBFS may hereafter
designate in writing, the following: (a) on the Maturity Date, or if earlier, on
the date of termination of the WCMA Line of Credit, the WCMA Loan Balance; (b)
interest at the Interest Rate (or, if applicable, at the Default Rate) on the
outstanding WCMA Loan Balance, from and including the date on which the initial
WCMA Loan is made until the date of payment of all WCMA Loans in full; and (c)
on demand, all other sums payable pursuant to this Loan Agreement, including,
but not limited to, the periodic Line Fee. Except as otherwise expressly set
forth herein, Customer hereby waives presentment, demand for payment, protest
and notice of protest, notice of dishonor, notice of acceleration, notice of
intent to accelerate and all other notices and formalities in connection with
this WCMA Promissory Note and this Loan Agreement.
2.2 WCMA LOANS
(a) Activation Date. Provided that: (i) the Commitment Expiration Date
shall not then have occurred, and (ii) Customer shall have subscribed to the
WCMA Program and its subscription to the WCMA Program shall then be in effect,
the Activation Date shall occur on or promptly after the date, following the
acceptance of this Loan Agreement by MLBFS at its office in Chicago, Illinois,
upon which each of the General Funding Conditions and the Real Property Funding
Condition shall have been met or satisfied to the reasonable satisfaction of
MLBFS. No activation by MLBFS of the WCMA Line of Credit for a nominal amount
shall be deemed evidence of the satisfaction of any of the conditions herein set
forth, or a waiver of any of the terms or conditions hereof. Customer hereby
authorizes MLBFS to pay out of and charge to Customer's WCMA Account on the
Activation Date any and all amounts necessary to fully pay off any bank or other
financial institution having a lien upon any of the Collateral other than a
Permitted Lien.
(b) WCMA Loans. Subject to the terms and conditions hereof, during the
period from and after the Activation Date to the first to occur of the Maturity
Date or the date of termination of the WCMA Line of Credit pursuant to the terms
hereof, and in addition to WCMA Loans automatically made to pay accrued
interest, as hereafter provided: (i) MLBFS will make WCMA Loans to Customer in
such amounts as Customer may from time to time request in accordance with the
terms hereof, up to an aggregate outstanding amount not to exceed the Maximum
WCMA Line of Credit, and (ii) Customer may repay any WCMA Loans in whole or in
part at any time, and request a re-borrowing of amounts repaid on a revolving
basis. Customer may request such WCMA Loans by use of WCMA Checks, FTS, Visa(r)
charges, wire transfers, or such other means of access to the WCMA Line of
Credit as may be permitted by MLBFS from time to time; it being understood that
so long as the WCMA Line of Credit shall be in effect, any charge or debit to
the WCMA Account which but for the WCMA Line of Credit would under the terms of
the WCMA Agreement result in an overdraft, shall be deemed a request by Customer
for a WCMA Loan.
(c) Conditions of WCMA Loans. Notwithstanding the foregoing, MLBFS shall
not be obligated to make any WCMA Loan, and may without notice refuse to honor
any such request by Customer, if at the time of receipt by MLBFS of Customer's
request: (i) the making of such WCMA Loan would cause the Maximum WCMA Line of
Credit to be exceeded; or (ii) the Maturity Date shall have occurred, or the
WCMA Line of Credit shall have otherwise been terminated in accordance with the
terms hereof; or (iii) Customer's subscription to the WCMA Program shall have
been terminated; or (iv) an event shall have occurred and be continuing which
shall have caused any of the General Funding Conditions to not then be met or
satisfied to the reasonable satisfaction of MLBFS. The making by MLBFS of any
WCMA Loan at a time when any one or more of said conditions shall not have been
met shall not in any event be construed as a waiver of said condition or
conditions or of any Default, and shall not prevent MLBFS at any time thereafter
while any condition shall not have been met from refusing to honor any request
by Customer for a WCMA Loan.
(d) Limitation of Liability. MLBFS shall not be responsible, and shall have
no liability to Customer or any other party, for any delay or failure of MLBFS
to honor any request of Customer for a WCMA Loan or any other act or omission of
MLBFS, MLPF&S or any of their affiliates due to or resulting from any system
failure, error or delay in posting or other clerical error, loss of power, fire,
Act of God or other cause beyond the reasonable control of MLBFS, MLPF&S or any
of their affiliates unless directly arising out of the willful wrongful act or
active gross negligence of MLBFS. In no event shall MLBFS be liable to Customer
or any other party for any incidental or consequential damages arising from any
act or omission by MLBFS, MLPF&S or any of their affiliates in connection with
the WCMA Line of Credit or this Loan Agreement.
(e) Interest.
(i) An amount equal to accrued interest on the daily WCMA Loan Balance
shall be payable by Customer monthly on each Interest Due Date, commencing
with the first Interest Due Date after the Activation Date. Unless
otherwise hereafter directed in writing by MLBFS on or after the first to
occur of the Maturity Date or the date of termination of the WCMA Line of
Credit pursuant to the terms hereof, such interest will be automatically
charged to the WCMA Account on the applicable Interest Due Date, and, to
the extent not paid with free credit balances or the proceeds of sales of
any Money Accounts then in the WCMA Account, as hereafter provided, paid by
a WCMA Loan and added to the WCMA Loan Balance. All interest shall be
computed for the actual number of days elapsed on the basis of a year
consisting of 360 days.
(ii) Upon the occurrence and during the continuance of any Default,
but without limiting the rights and remedies otherwise available to MLBFS
hereunder or waiving such Default, the interest payable by Customer
hereunder shall at the option of MLBFS accrue and be payable at the Default
Rate. The Default Rate, once implemented, shall continue to apply to the
Obligations under this Loan Agreement and be payable by Customer until the
date MLBFS gives written notice that such Default has been cured to the
satisfaction of MLBFS.
(iii) Notwithstanding any provision to the contrary in any of the Loan
Documents, no provision of any of the Loan Documents shall require the
payment or permit the collection of Excess Interest. If any Excess Interest
is provided for, or is adjudicated as being provided for, in any of the
Loan Documents, then: (A) Customer shall not be obligated to pay any Excess
Interest; and (B) any Excess Interest that MLBFS may have received
hereunder or under any of the Loan Documents shall, at the option of MLBFS,
be either applied as a credit against the then unpaid WCMA Loan Balance or
refunded to the payor thereof.
(f) Payments. All payments required or permitted to be made pursuant to
this Loan Agreement shall be made in lawful money of the United States. Unless
otherwise directed by MLBFS, payments on account of the WCMA Loan Balance may be
made by the delivery of checks (other than WCMA Checks), or by means of FTS or
wire transfer of funds (other than funds from the WCMA Line of Credit) to MLPF&S
for credit to Customer's WCMA Account. Notwithstanding anything in the WCMA
Agreement to the contrary, Customer hereby irrevocably authorizes and directs
MLPF&S to apply available free credit balances in the WCMA Account to the
repayment of the WCMA Loan Balance prior to application for any other purpose.
Payments to MLBFS from funds in the WCMA Account shall be deemed to be made by
Customer upon the same basis and schedule as funds are made available for
investment in the Money Accounts in accordance with the terms of the WCMA
Agreement. All funds received by MLBFS from MLPF&S pursuant to the aforesaid
authorization shall be applied by MLBFS to repayment of the WCMA Loan Balance.
The acceptance by or on behalf of MLBFS of a check or other payment for a lesser
amount than shall be due from Customer, regardless of any endorsement or
statement thereon or transmitted therewith, shall not be deemed an accord and
satisfaction or anything other than a payment on account, and MLBFS or anyone
acting on behalf of MLBFS may accept such check or other payment without
prejudice to the rights of MLBFS to recover the balance actually due or to
pursue any other remedy under this Loan Agreement or applicable law for such
balance. All checks accepted by or on behalf of MLBFS in connection with the
WCMA Line of Credit are subject to final collection.
(g) Irrevocable Instructions to MLPF&S. In order to minimize the WCMA Loan
Balance, Customer hereby irrevocably authorizes and directs MLPF&S, effective on
the Activation Date and continuing thereafter so long as this Loan Agreement
shall be in effect: (i) to immediately and prior to application for any other
purpose pay to MLBFS to the extent of any WCMA Loan Balance or other amounts
payable by Customer hereunder all available free credit balances from time to
time in the WCMA Account; and (ii) if such available free credit balances are
insufficient to pay the WCMA Loan Balance and such other amounts, and there are
in the WCMA Account at any time any investments in Money Accounts (other than
any investments constituting any Minimum Money Accounts Balance under the WCMA
Directed Reserve Program), to immediately liquidate such investments and pay to
MLBFS to the extent of any WCMA Loan Balance and such other amounts the
available proceeds from the liquidation of any such Money Accounts.
(h) Late Charge. Any payment or deposit required to be made by Customer
pursuant to the Loan Documents not paid or made within ten (10) days of the
applicable due date shall be subject to a late charge in an amount equal to the
lesser of: (a) 5% of the overdue amount, or (b) the maximum amount permitted by
applicable law. Such late charge shall be payable on demand, or, without demand,
may in the sole discretion of MLBFS be paid by a Subsequent WCMA Loan and added
to the WCMA Loan Balance in the same manner as provided herein for accrued
interest with respect to the WCMA Line of Credit.
(i) Statements. MLPF&S will include in each monthly statement it issues
under the WCMA Program information with respect to WCMA Loans and the WCMA Loan
Balance. Any questions that Customer may have with respect to such information
should be directed to MLBFS; and any questions with respect to any other matter
in such statements or about or affecting the WCMA Program should be directed to
MLPF&S.
(j) Use of WCMA Loan Proceeds. The proceeds of each WCMA Loan initiated by
Customer shall be used by Customer solely for working capital in the ordinary
course of its business, or, with the prior written consent of MLBFS, for other
lawful business purposes of Customer not prohibited hereby. Customer agrees that
under no circumstances will the proceeds of any WCMA Loan be used: (i) for
personal, family or household purposes of any person whatsoever, or (ii) to
purchase, carry or trade in securities, or repay debt incurred to purchase,
carry or trade in securities, whether in or in connection with the WCMA Account,
another account of Customer with MLPF&S or an account of Customer at any other
broker or dealer in securities, or (iii) unless otherwise consented to in
writing by MLBFS, to pay any amount to Xxxxxxx Xxxxx and Co., Inc. or any of its
subsidiaries, other xxxx Xxxxxxx Xxxxx Bank USA, Xxxxxxx Xxxxx Bank & Trust Co.
or any subsidiary of either of them (including MLBFS and Xxxxxxx Xxxxx Credit
Corporation).
(k) Renewal at Option of MLBFS; Right of Customer to Terminate. MLBFS may
at any time, in its sole discretion and at its sole option, renew the WCMA Line
of Credit for one or more Renewal Years or extend the Maturity Date; it being
understood, however, that no such renewal or extension shall be effective unless
set forth in a writing executed by a duly authorized representative of MLBFS and
delivered to Customer. Unless any such renewal or extension is accompanied by a
proposed change in the terms of the WCMA Line of Credit (other than the
extension of the Maturity Date), no Customer approval shall be required.
Customer shall, however, have the right to terminate the WCMA Line of Credit at
any time upon written notice to MLBFS. Concurrently with any such termination,
Customer shall pay to MLBFS the entire WCMA Loan Balance and all other
Obligations.
(l) Line Fees.
(i) In consideration of the extension of the WCMA Line of Credit
by MLBFS to Customer during the period from the Activation Date to the
Initial Maturity Date, Customer has paid or shall pay the Line Fee to
MLBFS. If the Line Fee has not heretofore been paid by Customer,
Customer hereby authorizes MLBFS, at its option, to either cause the
Line Fee to be paid on the Activation Date with a WCMA Loan, or
invoice Customer for such Line Fee (in which event Customer shall pay
said fee within 5 Business Days after receipt of such invoice). No
delay in the Activation Date, howsoever caused, shall entitle Customer
to any rebate or reduction in the Line Fee or to any extension of the
Initial Maturity Date.
(ii) Customer shall pay to MLBFS an additional Line Fee for each
Renewal Year, or an extension fee for any extension of the Maturity
Date (each extension fee shall be equal to the pro rata amount of the
Line Fee corresponding to the length of the extension period). In
connection therewith, Customer hereby authorizes MLBFS, at its option,
to either cause each such fee to be paid with a WCMA Loan on or at any
time after the first Business Day of such Renewal Year or extension
period, as applicable, or invoiced to Customer at such time (in which
event Customer shall pay such Line Fee within 5 Business Days after
receipt of such invoice). Each Line Fee and extension fee shall be
deemed fully earned by MLBFS on the date payable by Customer, and no
termination of the WCMA Line of Credit, howsoever caused, shall
entitle Customer to any rebate or refund of any portion of such fee;
provided, however, that if Customer shall terminate the WCMA Line of
Credit not later than 5 Business Days after the receipt by Customer of
notice from MLBFS of a renewal of the WCMA Line of Credit, Customer
shall be entitled to a refund of any Line Fee charged by MLBFS for the
ensuing Renewal Year.
ARTICLE III. GENERAL PROVISIONS
3.1 REPRESENTATIONS AND WARRANTIES
Customer represents and warrants to MLBFS that:
(a) Organization and Existence. Customer is a corporation, duly organized
and validly existing in good standing under the laws of the State of Michigan
and is qualified to do business and in good standing in each other state where
the nature of its business or the property owned by it make such qualification
necessary; and, where applicable, each Business Guarantor is duly organized,
validly existing and in good standing under the laws of the state of its
formation and is qualified to do business and in good standing in each other
state where the nature of its business or the property owned by it make such
qualification necessary. (b) Execution, Delivery and Performance. Each Credit
Party has the requisite power and authority to enter into and perform the Loan
Documents. The Customer holds all necessary permits, licenses, certificates of
occupancy and other governmental authorizations and approvals required in order
to own and operate the Customer's business. The execution, delivery and
performance by Customer of this Loan Agreement and by each of the other Credit
Parties of such of the other Loan Documents to which it is a party: (i) have
been duly authorized by all requisite action, (ii) do not and will not violate
or conflict with any law, order or other governmental requirement, or any of the
agreements, instruments or documents which formed or govern any of the Credit
Parties, and (iii) do not and will not breach or violate any of the provisions
of, and will not result in a default by any of the Credit Parties under, any
other agreement, instrument or document to which it is a party or is subject.
(c) Notices and Approvals. Except as may have been given or obtained, no notice
to or consent or approval of any governmental body or authority or other third
party whatsoever (including, without limitation, any other creditor) is required
in connection with the execution, delivery or performance by any Credit Party of
such of this Loan Agreement and the Loan Documents to which it is a party. (d)
Enforceability. The Loan Documents to which any Credit Party is a party are the
respective legal, valid and binding obligations of such Credit Party,
enforceable against it or them, as the case may be, in accordance with their
respective terms, except as enforceability may be limited by bankruptcy and
other similar laws affecting the rights of creditors generally or by general
principles of equity. (e) Collateral. Except for priorities afforded to any
Permitted Liens: (i) Customer has good and marketable title to the Collateral,
(ii) none of the Collateral is subject to any lien, encumbrance or security
interest, and (iii) upon the filing of all Uniform Commercial Code financing
statements authenticated or otherwise authorized by Customer with respect to the
Collateral in the appropriate jurisdiction(s) and/or the completion of any other
action required by applicable law to perfect its liens and security interests,
MLBFS will have valid and perfected first liens and security interests upon all
of the Collateral. (f) Financial Statements. Except as expressly set forth in
Customer's or any Business Guarantor's financial statements, all financial
statements of Customer and each Business Guarantor furnished to MLBFS have been
prepared in conformity with generally accepted accounting principles,
consistently applied, are true and correct in all material respects, and fairly
present the financial condition of it as at such dates and the results of its
operations for the periods then ended (subject, in the case of interim unaudited
financial statements, to normal year-end adjustments); and since the most recent
date covered by such financial statements, there has been no material adverse
change in any such financial condition or operation. All financial statements
furnished to MLBFS of any Guarantor other than a Business Guarantor are true and
correct in all material respects and fairly represent such Guarantor's financial
condition as of the date of such financial statements, and since the most recent
date of such financial statements, there has been no material adverse change in
such financial condition. (g) Litigation; Compliance With All Laws. No
litigation, arbitration, administrative or governmental proceedings are pending
or, to the knowledge of Customer, threatened against any Credit Party, which
would, if adversely determined, materially and adversely affect (i) such Credit
Party's interest in the Collateral or the liens and security interests of MLBFS
hereunder or under any of the Loan Documents, or (ii) the financial condition of
any Credit Party or its continued operations. Each Credit Party is in compliance
in all material respects with all laws, regulations, requirements and approvals
applicable to such Credit Party. (h) Tax Returns. All federal, state and local
tax returns, reports and statements required to be filed by any Credit Party
have been filed with the appropriate governmental agencies and all taxes due and
payable by any Credit Party have been timely paid (except to the extent that any
such failure to file or pay will not materially and adversely affect (i) either
the liens and security interests of MLBFS hereunder or under any of the Loan
Documents, (ii) the financial condition of any Credit Party, or (iii) its
continued operations). (i) Collateral Location. All of the tangible Collateral
is located at a Location of Tangible Collateral. (j) No Default. No "Default" or
"Event of Default" (each as defined in this Loan Agreement or any of the other
Loan Documents) has occurred and is continuing. (k) No Outside Broker. Except
for employees of MLBFS, MLPF&S or one of their affiliates, Customer has not in
connection with the transactions contemplated hereby directly or indirectly
engaged or dealt with, and was not introduced or referred to MLBFS by, any
broker or other loan arranger. Each of the foregoing representations and
warranties: (i) has been and will be relied upon as an inducement to MLBFS to
provide the WCMA Line of Credit, and (ii) is continuing and shall be deemed
remade by Customer concurrently with each request for a WCMA Loan.
3.2 FINANCIAL AND OTHER INFORMATION
(a) Customer shall furnish or cause to be furnished to MLBFS during the
term of this Loan Agreement all of the following: (i) Annual Financial
Statements. Within 120 days after the close of each fiscal year of Customer, a
copy of the annual audited financial statements of Customer, including in
reasonable detail, a balance sheet and statement of retained earnings as at the
close of such fiscal year and statements of profit and loss and cash flow for
such fiscal year; (ii) Certificate of Compliance. Within 45 days after the close
of each fiscal quarter of Customer, a Certificate of Compliance, duly executed
by an authorized officer of Customer, in the form of Exhibit B attached hereto,
or such other form as reasonably required by MLBFS from time to time; (iii)
Annual Collateral Audit. Within 120 days after the close of each fiscal year of
Customer, receipt and satisfactory review of a collateral audit of controls,
accounts receivable and inventory, prepared by a third party firm acceptable to
MLBFS. The costs associated with the audit will be the sole responsibility of
Customer. (iv) Interim Financial Statements. Within 45 days after the close of
each fiscal quarter of Customer, a copy of the interim financial statements of
Customer for such fiscal quarter (including in reasonable detail both a balance
sheet as of the close of such fiscal period, and statement of profit and loss
for the applicable fiscal period); (v) A/R Agings. Within 15 days after the
close of each fiscal month of Customer, a copy of the Accounts Receivable Aging
of Customer as of the end of such fiscal month; (vi) Inventory Reports. Within
15 days after the close of each fiscal month of Customer, a copy of the
Inventory Report (as and to the extent applicable, breaking out Inventory by
location, and separately reporting any work in process) of Customer as of the
end of such fiscal month; (vii) Borrowing Base Certificate. Within 15 days after
the close of each fiscal month of Customer, a Borrowing Base Certificate, duly
executed by an authorized officer of Customer, in the form of Exhibit B-1
attached hereto, or such other form as reasonably required by MLBFS from time to
time; (viii) SEC Reports. Customer shall furnish or cause to be furnished to
MLBFS not later than 10 days after the date of filing with the Securities and
Exchange Commission ("SEC"), a copy of each 10-K, 10-Q and other report required
to be filed with the SEC during the term hereof by each Business Guarantor; (ix)
Paid Tax Bills. A copy of each real estate tax xxxx on or issued in connection
with the Real Property, together with evidence of payment of such tax xxxx; and
(x) Other Information. Such other information as MLBFS may from time to time
reasonably request relating to Customer, any Credit Party or the Collateral.
(b) General Agreements With Respect to Financial Information. Customer
agrees that except as otherwise specified herein or otherwise agreed to in
writing by MLBFS: (i) all annual financial statements required to be furnished
by Customer to MLBFS hereunder will be prepared by either the current
independent accountants for Customer or other independent accountants reasonably
acceptable to MLBFS, and (ii) all other financial information required to be
furnished by Customer to MLBFS hereunder will be certified as correct in all
material respects by the party who has prepared such information, and, in the
case of internally prepared information with respect to Customer or any Business
Guarantor, certified as correct by their respective chief financial officer.
3.3 OTHER COVENANTS
Customer further covenants and agrees during the term of this Loan
Agreement that:
(a) Financial Records; Inspection. Each Credit Party (other than any
Individual Guarantor) will: (i) maintain at its principal place of business
complete and accurate books and records, and maintain all of its financial
records in a manner consistent with the financial statements heretofore
furnished to MLBFS, or prepared on such other basis as may be approved in
writing by MLBFS; and (ii) permit MLBFS or its duly authorized representatives,
upon reasonable notice and at reasonable times, to inspect its properties (both
real and personal), operations, books and records.
(b) Taxes. Each Credit Party will pay when due all of its respective taxes,
assessments and other governmental charges, howsoever designated, and all other
liabilities and obligations, except to the extent that any such failure to file
or pay will not materially and adversely affect either the liens and security
interests of MLBFS hereunder or under any of the Loan Documents, the financial
condition of any Credit Party or its continued operations.
(c) Compliance With Laws and Agreements. No Credit Party will violate (i)
any law, regulation or other governmental requirement, any judgment or order of
any court or governmental agency or authority; (ii) any agreement, instrument or
document which is material to its operations or to the operation or use of any
Collateral, in each case as contemplated by the Loan Documents; or (iii) any
agreement, instrument or document to which it is a party or by which it is
bound, if any such violation will materially and adversely affect either the
liens and security interests of MLBFS hereunder or under any of the Loan
Documents, the financial condition of any Credit Party, or its continued
operations.
(d) No Use of Xxxxxxx Xxxxx Name. No Credit Party will directly or
indirectly publish, disclose or otherwise use in any advertising or promotional
material, or press release or interview, the name, logo or any trademark of
MLBFS, MLPF&S, Xxxxxxx Xxxxx and Co., Incorporated or any of their affiliates.
(e) Notification By Customer. Customer shall provide MLBFS with prompt
written notification of: (i) any Default; (ii) any material adverse change in
the business, financial condition or operations of any Credit Party; (iii) any
information which indicates that any financial statements of any Credit Party
fail in any material respect to present fairly the financial condition and
results of operations purported to be presented in such statements; (iv) any
threatened or pending litigation involving any Credit Party; (v) any casualty
loss, attachment, lien, judicial process, encumbrance or claim affecting or
involving $25,000 or more of any Collateral; and (vi) any change in Customer's
outside accountants. Each notification by Customer pursuant hereto shall specify
the event or information causing such notification, and, to the extent
applicable, shall specify the steps being taken to rectify or remedy such event
or information.
(f) Entity Organization. Each Credit Party which is an entity will (i)
remain (A) validly existing and in good standing in the state of its
organization and (B) qualified to do business and in good standing in each other
state where the nature of its business or the property owned by it make such
qualification necessary, and (ii) maintain all governmental permits, licenses
and authorizations. Customer shall give MLBFS not less than 30 days prior
written notice of any change in name (including any fictitious name) or chief
executive office, place of business, or as applicable, the principal residence
of any Credit Party.
(g) Merger, Change in Business. Except upon the prior
written consent of MLBFS Customer shall not cause or permit any Credit Party to:
(i) be a party to any merger or consolidation with, or purchase or otherwise
acquire all or substantially all of the assets of, or any material stock,
partnership, joint venture or other equity interest in, any Person, or sell,
transfer or lease all or any substantial part of its assets; (ii) engage in any
material business substantially different from its business in effect as of the
date of application by Customer for credit from MLBFS, or cease operating any
such material business; or (iii) cause or permit any other Person to assume or
succeed to any material business or operations of such Credit Party.
(h) Fixed Charge Coverage. Customer's "Fixed Charge Coverage Ratio", as
defined and calculated as set forth in Exhibit B attached hereto, shall at all
times exceed 1.50 to 1.
(i) Minimum Tangible Net Worth. As of December 31, 2003, the sum of (x)
Customer's aggregate subordinated debt and (y) Customer's "Tangible Net Worth"
("Minimum Tangible Net Worth") shall exceed $2,400,000. As of June 30, 2004,
Customer's Minimum Tangible Net Worth shall not be less than $2,650,000.00.
After June 30, 2004, and as and as of the close of each fiscal year of Customer
thereafter, Customer's Minimum Tangible Net Worth shall not be less than
$250,000 higher than the Minimum Tangible Net Worth of Customer required
hereunder as of the close of the immediately preceding fiscal year of Customer
(so that as of December 31, 2004, such Minimum Tangible Net Worth shall be not
less than $2,900,000.00, as of December 31, 2005, such Minimum Tangible Net
Worth shall be not less than $3,150,000.00, etc.). For the purposes hereof,
subordinated debt shall mean any debt of Obligors for borrowed money which is
subordinated in right of payment and is payable on terms and conditions junior
to MLBFS. The term "Tangible Net Worth" shall mean Obligors net worth as shown
on Obligors' regular combined financial statements prepared in accordance with
GAAP, but excluding an amount equal to: (i) any Intangible Assets, and (ii) any
amounts now or hereafter directly or indirectly owing to Obligors by officers,
shareholders or affiliates of Obligors. "Intangible Assets" shall mean the total
amount of goodwill, patents, trade names, trade or service marks, copyrights,
experimental expense, organization expense, unamortized debt discount and
expense, the excess of cost of shares acquired over book value of related
assets, and such other assets as are properly classified as "intangible assets"
of the Obligors determined in accordance with GAAP.
(j) Total Liabilities To Tangible Net Worth and Subordinated Debt.
Customer's "Leverage Ratio" shall not at any time exceed 5.75 to 1. As of June
30, 2004, Customer's Leverage Ratio shall not exceed 4.00 to 1. As of December
31, 2004 and anytime thereafter, Customer's Leverage Ratio shall not exceed 3.50
to 1. For purposes hereof, "Leverage Ratio" shall mean the ratio of (i)
Customer's total liabilities less any subordinated debt of Customer, to (ii) the
sum of Customer's Tangible Net Worth plus any subordinated debt of Customer. The
term "Tangible Net Worth" shall mean Customer's net worth as shown on Customer's
regular financial statements prepared in accordance with GAAP, but excluding an
amount equal to: (i) any Intangible Assets, and (ii) any amounts now or
hereafter directly or indirectly owing to Customer by officers, shareholders or
affiliates of Customer. "Intangible Assets" shall mean the total amount of
goodwill, patents, trade names, trade or service marks, copyrights, experimental
expense, organization expense, unamortized debt discount and expense, the excess
of cost of shares acquired over book value of related assets, and such other
assets as are properly classified as "intangible assets" of the Customer
determined in accordance with GAAP. Subordinated debt shall mean any debt of
Customer for borrowed money which is subordinated in right of payment and is
payable on terms and conditions junior to MLBFS, and in a form and manner
acceptable to MLBFS.
(k) No Loans/Guarantees To Affiliates. Except upon the prior written
consent of MLBFS, no Credit Party shall directly or indirectly lend any moneys
to, or guaranty the debt of, any affiliated person or entity other than the
existing loans and guarantees existing as of the date hereof that are consented
to by MLBFS and reflected on Exhibit A attached hereto.
(l) No Loans/Transfers Of Assets. Except upon the prior written consent of
MLBFS, Customer shall not directly or indirectly lend any moneys, or transfer
any assets or property, to any unaffiliated person or entity other than arms
length transfers for fair consideration in the ordinary course of business.
(m) Productivity Technologies Corporation Management Fee Forebearance.
Until further notice and only upon the prior written consent of MLBFS, Customer
shall suspend monthly accrual and payment of any management fees to Productivity
Technologies Corporation.
(n) No Change In Management. Customer will maintain experienced and
competent professional senior management, including Xxxxxx X. Xxxxxxx and Xxxxx
X. Xxxxxx.
(o) Borrowed Debt. Except upon the prior written consent of MLBFS, no
Credit Party shall directly or indirectly incur or permit to exist any debt of
any Credit Party for borrowed money or the lease under a capital lease or
deferred purchase price of real or personal property other than: (i) debt to
MLBFS and (ii) debt existing as of the date hereof that are consented to by
MLBFS and reflected on Exhibit A attached hereto.
(p) Distributions to Shareholders.
Except upon the prior written consent of MLBFS, Customer shall not in any fiscal
year directly or indirectly pay any dividends or make any other distributions on
account of its stock to its shareholders.
3.4 COLLATERAL
(a) Pledge of Collateral. To secure payment and performance of the
Obligations, Customer hereby pledges, assigns, transfers and sets over to MLBFS,
and grants to MLBFS first liens and security interests in and upon all of the
Collateral, subject only to priorities afforded to Permitted Liens.
(b) Liens. Except upon the prior written consent of MLBFS, Customer shall
not create or permit to exist any lien, encumbrance or security interest upon or
with respect to any Collateral now owned or hereafter acquired other than
Permitted Liens.
(c) Performance of Obligations. Customer shall perform all of its
obligations owing on account of or with respect to the Collateral; it being
understood that nothing herein, and no action or inaction by MLBFS, under this
Loan Agreement or otherwise, shall be deemed an assumption by MLBFS of any of
Customer's said obligations.
(d) Sales and Collections. Customer shall not sell, transfer or otherwise
dispose of any Collateral, except that so long as no Event of Default shall have
occurred and be continuing, Customer may in the ordinary course of its business:
(i) sell any Inventory normally held by Customer for sale, (ii) use or consume
any materials and supplies normally held by Customer for use or consumption, and
(iii) collect all of its Accounts.
(e) Account Schedules. Upon the request of MLBFS, which may be made from
time to time, Customer shall deliver to MLBFS, in addition to the other
information required hereunder, a schedule identifying, for each Account and all
Chattel Paper subject to MLBFS' security interests hereunder, each account
debtor by name and address and amount, invoice or contract number and date of
each invoice or contract. Customer shall furnish to MLBFS such additional
information with respect to the Collateral, and amounts received by Customer as
proceeds of any of the Collateral, as MLBFS may from time to time reasonably
request.
(f) Alterations and Maintenance. Except upon the prior written consent of
MLBFS, Customer shall not make or permit any material alterations to any
tangible Collateral which might materially reduce or impair its market value or
utility. Customer shall at all times (i) keep the tangible Collateral in good
condition and repair, reasonable wear and tear excepted, (ii) protect the
Collateral against loss, damage or destruction and (iii) pay or cause to be paid
all obligations arising from the repair and maintenance of such Collateral, as
well as all obligations with respect to any Location of Tangible Collateral
(e.g., all obligations under any lease, mortgage or bailment agreement), except
for any such obligations being contested by Customer in good faith by
appropriate proceedings.
(g) Location. Except for movements required in the ordinary course of
Customer's business, Customer shall give MLBFS 30 days' prior written notice of
the placing at or movement of any tangible Collateral to any location other than
a Location of Tangible Collateral. In no event shall Customer cause or permit
any material tangible Collateral to be removed from the United States without
the express prior written consent of MLBFS. Customer will keep its books and
records at its principal office address specified in the first paragraph of this
Loan Agreement. Customer will not change the address where books and records are
kept, or change its name or taxpayer identification number. Customer will place
a legend acceptable to MLBFS on all Chattel Paper that is Collateral in the
possession or control of Customer from time to time indicating that MLBFS has a
security interest therein.
(h) Insurance. Customer shall insure all of the tangible Collateral under a
policy or policies of physical damage insurance for the full replacement value
thereof against such perils as MLBFS shall reasonably require and also providing
that losses will be payable to MLBFS as its interests may appear pursuant to a
lender's or mortgagee's long form loss payable endorsement and containing such
other provisions as may be reasonably required by MLBFS. Customer shall further
provide and maintain a policy or policies of commercial general liability
insurance naming MLBFS as an additional party insured. Customer and each
Business Guarantor shall maintain such other insurance as may be required by law
or is customarily maintained by companies in a similar business or otherwise
reasonably required by MLBFS. All such insurance policies shall provide that
MLBFS will receive not less than 10 days prior written notice of any
cancellation, and shall otherwise be in form and amount and with an insurer or
insurers reasonably acceptable to MLBFS. Customer shall furnish MLBFS with a
copy or certificate of each such policy or policies and, prior to any expiration
or cancellation, each renewal or replacement thereof.
(i) Event of Loss. Customer shall at its expense promptly repair all
repairable damage to any tangible Collateral. In the event that there is an
Event of Loss and the affected Collateral had a value prior to such Event of
Loss of $25,000.00 or more, then, on or before the first to occur of (i) 90 days
after the occurrence of such Event of Loss, or (ii) 10 Business Days after the
date on which either Customer or MLBFS shall receive any proceeds of insurance
on account of such Event of Loss, or any underwriter of insurance on such
Collateral shall advise either Customer or MLBFS that it disclaims liability in
respect of such Event of Loss, Customer shall, at Customer's option, either
replace the Collateral subject to such Event of Loss with comparable Collateral
free of all liens other than Permitted Liens (in which event Customer shall be
entitled to utilize the proceeds of insurance on account of such Event of Loss
for such purpose, and may retain any excess proceeds of such insurance), or
permanently prepay the Obligations by an amount equal to the actual cash value
of such Collateral as determined by either the insurance company's payment (plus
any applicable deductible) or, in absence of insurance company payment, as
reasonably determined by MLBFS; it being further understood that any such
permanent prepayment shall cause an immediate permanent reduction in the Maximum
WCMA Line of Credit in the amount of such prepayment and shall not reduce the
amount of any future reductions in the Maximum WCMA Line of Credit that may be
required hereunder. Notwithstanding the foregoing, if at the time of occurrence
of such Event of Loss or any time thereafter prior to replacement or line
reduction, as aforesaid, an Event of Default shall have occurred and be
continuing hereunder, then MLBFS may at its sole option, exercisable at any time
while such Event of Default shall be continuing, require Customer to either
replace such Collateral or prepay the Obligations and reduce the Maximum WCMA
Line of Credit, as aforesaid.
(j) Notice of Certain Events. Customer shall give MLBFS immediate notice of
any attachment, lien, judicial process, encumbrance or claim affecting or
involving $25,000.00 or more of the Collateral.
(k) Indemnification. Customer shall indemnify, defend and save MLBFS
harmless from and against any and all claims, liabilities, losses, costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) of any nature whatsoever which may be asserted against or incurred by
MLBFS arising out of or in any manner occasioned by (i) the ownership,
collection, possession, use or operation of any Collateral, or (ii) any failure
by Customer to perform any of its obligations hereunder; excluding, however,
from said indemnity any such claims, liabilities, etc. arising directly out of
the willful wrongful act or active gross negligence of MLBFS. This indemnity
shall survive the expiration or termination of this Loan Agreement as to all
matters arising or accruing prior to such expiration or termination.
3.5 EVENTS OF DEFAULT The occurrence of any of the following events shall
constitute an "Event of Default" under this Loan Agreement:
(a) Exceeding the Maximum WCMA Line of Credit. If the WCMA Loan Balance
shall at any time exceed the Maximum WCMA Line of Credit and Customer shall fail
to deposit sufficient funds into the WCMA Account to reduce the WCMA Loan
Balance below the Maximum WCMA Line of Credit within five (5) Business Days
after written notice thereof shall have been given by MLBFS to Customer.
(b) Other Failure to Pay. Customer shall fail to pay to MLBFS or deposit
into the WCMA Account when due any other amount owing or required to be paid or
deposited by Customer under this Loan Agreement or any of the Loan Documents, or
shall fail to pay when due any other Obligations, and any such failure shall
continue for more than five (5) Business Days after written notice thereof shall
have been given by MLBFS to Customer.
(c) Failure to Perform. Any Credit Party shall default in the performance
or observance of any covenant or agreement on its part to be performed or
observed under any of the Loan Documents (not constituting an Event of Default
under any other clause of this Section), and such default shall continue
unremedied for ten (10) Business Days (i) after written notice thereof shall
have been given by MLBFS to Customer, or (ii) from Customer's receipt of any
notice or knowledge of such default from any other source.
(d) Breach of Warranty. Any representation or warranty made by any Credit
Party contained in this Loan Agreement or any of the Loan Documents shall at any
time prove to have been incorrect in any material respect when made.
(e) Default Under Other ML Agreement. A default or event of default by any
Credit Party shall occur under the terms of any other agreement, instrument or
document with or intended for the benefit of MLBFS, MLPF&S or any of their
affiliates, and any required notice shall have been given and required passage
of time shall have elapsed, or the WCMA Agreement shall be terminated for any
reason.
(f) Bankruptcy Event. Any Bankruptcy Event shall occur.
(g) Material Impairment. Any event shall occur which shall reasonably cause
MLBFS to in good faith believe that the prospect of full payment or performance
by the Credit Parties of any of their respective liabilities or obligations
under any of the Loan Documents has been materially impaired. The existence of
such a material impairment shall be determined in a manner consistent with the
intent of Section 1-208 of the UCC.
(h) Default Under Other Agreements. Any event shall occur which results in
any default of any material agreement involving any Credit Party or any
agreement evidencing any indebtedness of any Credit Party of $100,000.00 or
more.
(i) Collateral Impairment. The loss, theft or destruction of any
Collateral, the occurrence of any material deterioration or impairment of any
Collateral or any material decline or depreciation in the value or market price
thereof (whether actual or reasonably anticipated), which causes any Collateral,
in the sole opinion of MLBFS, to become unsatisfactory as to value or character;
or any levy, attachment, seizure or confiscation of the Collateral which is not
released within ten (10) Business Days.
(j) Contested Obligation. (i) Any of the Loan Documents shall for any
reason cease to be, or are asserted by any Credit Party not to be a legal, valid
and binding obligations of any Credit Party, enforceable in accordance with
their terms; or (ii) the validity, perfection or priority of MLBFS' first lien
and security interest on any of the Collateral is contested by any Person; or
(iii) any Credit Party shall or shall attempt to repudiate, revoke, contest or
dispute, in whole or in part, such Credit Party's obligations under any Loan
Document.
(k) Judgments. A judgment shall be entered against any Credit Party in
excess of $25,000 and the judgment is not paid in full and discharged, or stayed
and bonded to the satisfaction of MLBFS.
(l) Change in Control/Change in Management. (i) Any direct or indirect
sale, conveyance, assignment or other transfer of or grant of a security
interest in any ownership interest of any Credit Party which results, or if any
rights related thereto were exercised would result, in any change in the
identity of the individuals or entities in control of any Credit Party; or (ii)
the owner(s) of the controlling equity interest of any Credit Party on the date
hereof shall cease to own and control such Credit Party; or (iii) any Person (or
a replacement who is satisfactory to MLBFS in its sole discretion) named in
Section 3.3 (n) hereof, on the date hereof shall for any reason cease to be the
chief executive officer or senior manager of Productivity Technologies Corp.
(m) Withdrawal, Death, etc. The incapacity, death, withdrawal, dissolution,
or the filing for dissolution of: (i) any Credit Party; or (ii) any controlling
shareholder, partner, or member of any Credit Party.
3.6 REMEDIES
(a) Remedies Upon Default. Upon the occurrence and during the continuance
of any Event of Default, MLBFS may at its sole option do any one or more or all
of the following, at such time and in such order as MLBFS may in its sole
discretion choose:
(i) Termination. MLBFS may without notice terminate the WCMA Line of
Credit and all obligations to extend any credit to or for the benefit of
Customer (it being understood, however, that upon the occurrence of any
Bankruptcy Event all such obligations shall automatically terminate without
any action on the part of MLBFS).
(ii) Acceleration. MLBFS may declare the principal of and interest on
the WCMA Loan Balance, and all other Obligations to be forthwith due and
payable, whereupon all such amounts shall be immediately due and payable,
without presentment, demand for payment, protest and notice of protest,
notice of dishonor, notice of acceleration, notice of intent to accelerate
or other notice or formality of any kind, all of which are hereby expressly
waived; provided, however, that upon the occurrence of any Bankruptcy Event
all such principal, interest and other Obligations shall automatically
become due and payable without any action on the part of MLBFS.
(iii) Exercise Other Rights. MLBFS may exercise any or all of the
remedies of a secured party under applicable law and in equity, including,
but not limited to, the UCC, and any or all of its other rights and
remedies under the Loan Documents.
(iv) Possession. MLBFS may require Customer to make the Collateral and
the records pertaining to the Collateral available to MLBFS at a place
designated by MLBFS which is reasonably convenient to Customer, or may take
possession of the Collateral and the records pertaining to the Collateral
without the use of any judicial process and without any prior notice to
Customer.
(v) Sale. MLBFS may sell any or all of the Collateral at public or
private sale upon such terms and conditions as MLBFS may reasonably deem
proper, whether for cash, on credit, or for future delivery, in bulk or in
lots. MLBFS may purchase any Collateral at any such sale free of Customer's
right of redemption, if any, which Customer expressly waives to the extent
not prohibited by applicable law. The net proceeds of any such public or
private sale and all other amounts actually collected or received by MLBFS
pursuant hereto, after deducting all costs and expenses incurred at any
time in the collection of the Obligations and in the protection, collection
and sale of the Collateral, will be applied to the payment of the
Obligations, with any remaining proceeds paid to Customer or whoever else
may be entitled thereto, and with Customer and each Guarantor remaining
jointly and severally liable for any amount remaining unpaid after such
application.
(vi) Delivery of Cash, Checks, Etc. MLBFS may require Customer to
forthwith upon receipt, transmit and deliver to MLBFS in the form received,
all cash, checks, drafts and other instruments for the payment of money
(properly endorsed, where required, so that such items may be collected by
MLBFS) which may be received by Customer at any time in full or partial
payment of any Collateral, and require that Customer not commingle any such
items which may be so received by Customer with any other of its funds or
property but instead hold them separate and apart and in trust for MLBFS
until delivery is made to MLBFS.
(vii) Notification of Account Debtors. MLBFS may notify any account
debtor that its Account or Chattel Paper has been assigned to MLBFS and
direct such account debtor to make payment directly to MLBFS of all amounts
due or becoming due with respect to such Account or Chattel Paper; and
MLBFS may enforce payment and collect, by legal proceedings or otherwise,
such Account or Chattel Paper.
(viii) Control of Collateral. MLBFS may otherwise take control in any
lawful manner of any cash or non-cash items of payment or proceeds of
Collateral and of any rejected, returned, stopped in transit or repossessed
goods included in the Collateral and endorse Customer's name on any item of
payment on or proceeds of the Collateral.
(b) Set-Off. MLBFS shall have the further right upon the occurrence and
during the continuance of an Event of Default to set-off, appropriate and apply
toward payment of any of the Obligations, in such order of application as MLBFS
may from time to time and at any time elect, any cash, credit, deposits,
accounts, financial assets, investment property, securities and any other
property of Customer which is in transit to or in the possession, custody or
control of MLBFS, MLPF&S or any agent, bailee, or affiliate of MLBFS or MLPF&S.
Customer hereby collaterally assigns and grants to MLBFS a continuing security
interest in all such property as Collateral and as additional security for the
Obligations. Upon the occurrence and during the continuance of an Event of
Default, MLBFS shall have all rights in such property available to collateral
assignees and secured parties under all applicable laws, including, without
limitation, the UCC.
(c) Power of Attorney. Effective upon the occurrence and during the
continuance of an Event of Default, Customer hereby irrevocably appoints MLBFS
as its attorney-in-fact, with full power of substitution, in its place and stead
and in its name or in the name of MLBFS, to from time to time in MLBFS' sole
discretion take any action and to execute any instrument which MLBFS may deem
necessary or advisable to accomplish the purposes of this Loan Agreement and the
other Loan Documents, including, but not limited to, to receive, endorse and
collect all checks, drafts and other instruments for the payment of money made
payable to Customer included in the Collateral. The powers of attorney granted
to MLBFS in this Loan Agreement are coupled with an interest and are irrevocable
until the Obligations have been indefeasibly paid in full and fully satisfied
and all obligations of MLBFS under this Loan Agreement have been terminated
(d) Remedies are Severable and Cumulative. All rights and remedies of MLBFS
herein are severable and cumulative and in addition to all other rights and
remedies available in the Loan Documents, at law or in equity, and any one or
more of such rights and remedies may be exercised simultaneously or
successively.
(e) No Marshalling. MLBFS shall be under no duty or obligation to (i)
preserve, protect or xxxxxxxx the Collateral; (ii) preserve or protect the
rights of any Credit Party or any other Person claiming an interest in the
Collateral; (iii) realize upon the Collateral in any particular order or manner,
(iv) seek repayment of any Obligations from any particular source; (v) proceed
or not proceed against any Credit Party pursuant to any guaranty or security
agreement or against any Credit Party under the Loan Documents, with or without
also realizing on the Collateral; (vi) permit any substitution or exchange of
all or any part of the Collateral; or (vii) release any part of the Collateral
from the Loan Agreement or any of the other Loan Documents, whether or not such
substitution or release would leave MLBFS adequately secured.
(f) Notices. To the fullest extent permitted by applicable law, Customer
hereby irrevocably waives and releases MLBFS of and from any and all liabilities
and penalties for failure of MLBFS to comply with any statutory or other
requirement imposed upon MLBFS relating to notices of sale, holding of sale or
reporting of any sale, and Customer waives all rights of redemption or
reinstatement from any such sale. Any notices required under applicable law
shall be reasonably and properly given to Customer if given by any of the
methods provided herein at least 5 Business Days prior to taking action. MLBFS
shall have the right to postpone or adjourn any sale or other disposition of
Collateral at any time without giving notice of any such postponed or adjourned
date. In the event MLBFS seeks to take possession of any or all of the
Collateral by court process, Customer further irrevocably waives to the fullest
extent permitted by law any bonds and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession, and any demand for possession prior to the commencement of any suit
or action.
3.7 MISCELLANEOUS
(a) Non-Waiver. No failure or delay on the part of MLBFS in exercising any
right, power or remedy pursuant to this Loan Agreement or any of the other Loan
Documents shall operate as a waiver thereof, and no single or partial exercise
of any such right, power or remedy shall preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy. Neither any waiver
of any provision of any of the Loan Documents, nor any consent to any departure
by Customer therefrom, shall be effective unless the same shall be in writing
and signed by MLBFS. Any waiver of any provision of this Loan Agreement or any
of the other Loan Documents and any consent to any departure by Customer from
the terms of this Loan Agreement or any of the other Loan Documents shall be
effective only in the specific instance and for the specific purpose for which
given. Except as otherwise expressly provided herein, no notice to or demand on
Customer shall in any case entitle Customer to any other or further notice or
demand in similar or other circumstances.
(b) Disclosure. Customer hereby irrevocably authorizes MLBFS and each of
its affiliates, including without limitation MLPF&S, to at any time (whether or
not an Event of Default shall have occurred) obtain from and disclose to each
other, and to any third party in connection with Section 3.7 (g) herein, any and
all financial and other information about Customer. In connection with said
authorization, the parties recognize that in order to provide a WCMA Line of
Credit certain information about Customer is required to be made available on a
computer network accessible by certain affiliates of MLBFS, including MLPF&S.
Customer further irrevocably authorizes MLBFS to contact, investigate, inquire
and obtain consumer reports, references and other information on Customer from
consumer reporting agencies and other credit reporting services, former or
current creditors, and other persons and sources (including, without limitation,
any Affiliate of MLBFS) and to provide to any references, consumer reporting
agencies, credit reporting services, creditors and other persons and sources
(including, without limitation, affiliates of MLBFS) all financial, credit and
other information obtained by MLBFS relating to the Customer.
(c) Communications. Delivery of an agreement, instrument or other document
may, at the discretion of MLBFS, be by electronic transmission. Except as
required by law or otherwise provided herein or in a writing executed by the
party to be bound, all notices demands, requests, accountings, listings,
statements, advices or other communications to be given under the Loan Documents
shall be in writing and shall be served either personally, by deposit with a
reputable overnight courier with charges prepaid, or by deposit in the United
States mail by certified mail, return receipt required. Notices may be addressed
to Customer as set forth at its address shown in the preamble hereto, or to any
office to which billing or account statements are sent; to MLBFS at its address
shown in the preamble hereto, or at such other address designated in writing by
MLBFS. Any such communication shall be deemed to have been given upon, in the
case of personal delivery the date of delivery, one Business Day after deposit
with an overnight courier, two (2) Business Days after deposit in the United
States by certified mail (return receipt required), or receipt of electronic
transmission (which shall be presumed to be three hours after the time of
transmission unless an error message is received by the sender), except that any
notice of change of address shall not be effective until actually received.
(d) Fees, Expenses and Taxes. Customer shall pay or reimburse MLBFS for:
(i) all UCC, real property or other filing, recording, and search fees and
expenses incurred by MLBFS in connection with the verification, perfection or
preservation of MLBFS' rights hereunder or in any Collateral or any other
collateral for the Obligations; (ii) any and all stamp, transfer, mortgage,
intangible, document, filing, recording and other taxes and fees payable or
determined to be payable in connection with the borrowings hereunder or the
execution, delivery, filing and/or recording of the Loan Documents and any other
instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith; and (iii) all fees and out-of-pocket
expenses (including, attorneys' fees and legal expenses) incurred by MLBFS in
connection with the preparation, execution, administration, collection,
enforcement, protection, waiver or amendment of this Loan Agreement, the other
Loan Documents and such other instruments or documents, and the rights and
remedies of MLBFS thereunder and all other matters in connection therewith.
Customer hereby authorizes MLBFS, at its option, to either cause any and all
such fees, expenses and taxes to be paid with a WCMA Loan, or invoice Customer
therefore (in which event Customer shall pay all such fees, expenses and taxes
within 5 Business Days after receipt of such invoice). The obligations of
Customer under this paragraph shall survive the expiration or termination of
this Loan Agreement and the discharge of the other Obligations.
(e) Right to Perform Obligations. If Customer shall fail to do any act or
thing which it has covenanted to do under any of the Loan Documents or any
representation or warranty on the part of Customer contained in the Loan
Documents shall be breached, MLBFS may, in its sole discretion, after 5 Business
Days written notice is sent to Customer (or such lesser notice, including no
notice, as is reasonable under the circumstances), do the same or cause it to be
done or remedy any such breach, and may expend its funds for such purpose. Any
and all reasonable amounts so expended by MLBFS shall be repayable to MLBFS by
Customer upon demand, with interest at the Interest Rate during the period from
and including the date funds are so expended by MLBFS to the date of repayment,
and all such amounts shall be additional Obligations. The payment or performance
by MLBFS of any of Customer's obligations hereunder shall not relieve Customer
of said obligations or of the consequences of having failed to pay or perform
the same, and shall not waive or be deemed a cure of any Default.
(f) Further Assurances. Customer agrees to do such further acts and things
and to execute and deliver to MLBFS such additional agreements, instruments and
documents as MLBFS may reasonably require or deem advisable to effectuate the
purposes of the Loan Documents, to confirm the WCMA Loan Balance, or to
establish, perfect and maintain MLBFS' security interests and liens upon the
Collateral, including, but not limited to: (i) executing financing statements or
amendments thereto when and as reasonably requested by MLBFS; and (ii) if in the
reasonable judgment of MLBFS it is required by local law, causing the owners
and/or mortgagees of the real property on which any Collateral may be located to
execute and deliver to MLBFS waivers or subordinations reasonably satisfactory
to MLBFS with respect to any rights in such Collateral.
(g) Binding Effect. This Loan Agreement and the Loan Documents shall be
binding upon, and shall inure to the benefit of MLBFS, Customer and their
respective successors and assigns. MLBFS reserves the right, at any time while
the Obligations remain outstanding, to sell, assign, syndicate or otherwise
transfer or dispose of any or all of MLBFS' rights and interests under the Loan
Documents. MLBFS also reserves the right at any time to pool the WCMA Loan with
one or more other loans originated by MLBFS or any other Person, and to
securitize or offer interests in such pool on whatever terms and conditions
MLBFS shall determine. Customer consents to MLBFS releasing financial and other
information regarding Credit Parties, the Collateral and the WCMA Loan in
connection with any such sale, pooling, securitization or other offering.
Customer shall not assign any of its rights or delegate any of its obligations
under this Loan Agreement or any of the Loan Documents without the prior written
consent of MLBFS. Unless otherwise expressly agreed to in a writing signed by
MLBFS, no such consent shall in any event relieve Customer of any of its
obligations under this Loan Agreement or the Loan Documents.
(h) Interpretation; Construction. (i) Captions and section and paragraph
headings in this Loan Agreement are inserted only as a matter of convenience,
and shall not affect the interpretation hereof; (ii) no provision of this Loan
Agreement shall be construed against a particular Person or in favor of another
Person merely because of which Person (or its representative) drafted or
supplied the wording for such provision; and (iii) where the context requires:
(a) use of the singular or plural incorporates the other, and (b) pronouns and
modifiers in the masculine, feminine or neuter gender shall be deemed to refer
to or include the other genders.
(i) Governing Law. This Loan Agreement, and, unless otherwise expressly
provided therein, each of the Loan Documents, shall be governed in all respects
by the laws of the State of Illinois, not including its conflict of law
provisions.
(j) Severability of Provisions. Whenever possible, each provision of this
Loan Agreement and the other Loan Documents shall be interpreted in such manner
as to be effective and valid under applicable law. Any provision of this Loan
Agreement or any of the Loan Documents which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Loan Agreement and the Loan Documents or affecting
the validity or enforceability of such provision in any other jurisdiction.
(k) Term. This Loan Agreement shall become effective on the date accepted
by MLBFS at its office in Chicago, Illinois, and, subject to the terms hereof,
shall continue in effect so long thereafter as the WCMA Line of Credit shall be
in effect or there shall be any Obligations outstanding. Customer hereby waives
notice of acceptance of this Loan Agreement by MLBFS.
(l) Exhibits. The exhibits to this Loan Agreement are hereby incorporated
and made a part hereof and are an integral part of this Loan Agreement
(m) Counterparts. This Loan Agreement may be executed in one or more
counterparts which, when taken together, constitute one and the same agreement.
(n) Jurisdiction; Waiver. Customer acknowledges that this Loan Agreement is
being accepted by MLBFS in partial consideration of MLBFS' right and option, in
its sole discretion, to enforce this Loan Agreement and all of the Loan
Documents in either the State of Illinois or in any other jurisdiction where
Customer or any Collateral may be located. Customer irrevocably submits itself
to jurisdiction in the State of Illinois and venue in any state or federal court
in the County of Xxxx for such purposes, and Customer waives any and all rights
to contest said jurisdiction and venue and the convenience of any such forum,
and any and all rights to remove such action from state to federal court.
Customer further waives any rights to commence any action against MLBFS in any
jurisdiction except in the County of Xxxx and State of Illinois. Customer agrees
that all such service of process shall be made by mail or messenger directed to
it in the same manner as provided for notices to Customer in this Loan Agreement
and that service so made shall be deemed to be completed upon the earlier of
actual receipt or three (3) days after the same shall have been posted to
Customer or Customer's agent. Nothing contained herein shall affect the right of
MLBFS to serve legal process in any other manner permitted by law or affect the
right of MLBFS to bring any action or proceeding against Customer or its
property in the courts of any other jurisdiction. Customer waives, to the extent
permitted by law, any bond or surety or security upon such bond which might, but
for this waiver, be required of MLBFS. Customer further waives the right to
bring any non-compulsory counterclaims.
(o) Jury Waiver. MLBFS and Customer hereby each expressly waive any and all
rights to a trial by jury in any action, proceeding or counterclaim brought by
either of the parties against the other party with respect to any matter
relating to, arising out of or in any way connected with the WCMA Line of
Credit, the Obligations, this Loan Agreement, any of the Loan Documents and/or
any of the transactions which are the subject matter of this Loan Agreement.
(p) Integration. This Loan Agreement, together with the other Loan
Documents, constitutes the entire understanding and represents the full and
final agreement between the parties with respect to the subject matter hereof,
and may not be contradicted by evidence of prior written agreements or prior,
contemporaneous or subsequent oral agreements of the parties. There are no
unwritten oral agreements of the parties. Without limiting the foregoing,
Customer acknowledges that: (i) no promise or commitment has been made to it by
MLBFS, MLPF&S or any of their respective employees, agents or representatives to
extend the availability of the WCMA Line of Credit or the Maturity Date, or to
increase the Maximum WCMA Line of Credit, or to make any WCMA Loan on any terms
other than as expressly set forth herein or to otherwise extend any other credit
to Customer or any other party; (ii) no purported extension of the Maturity
Date, increase in the Maximum WCMA Line of Credit or other extension or
agreement to extend credit shall be valid or binding unless expressly set forth
in a written instrument signed by MLBFS; and (iii) this Loan Agreement
supersedes and replaces any and all proposals, letters of intent and approval
and commitment letters from MLBFS to Customer, none of which shall be considered
a Loan Document. No amendment or modification of any of the Loan Documents to
which Customer is a party shall be effective unless in a writing signed by both
MLBFS and Customer.
(q) Survival. All representations, warranties, agreements and covenants
contained in the Loan Documents shall survive the signing and delivery of the
Loan Documents, and all of the waivers made and indemnification obligations
undertaken by Customer shall survive the termination, discharge or cancellation
of the Loan Documents.
(r) Customer's Acknowledgments. The Customer acknowledges that the
Customer: (i) has had ample opportunity to consult with counsel and such other
parties as deemed advisable prior to signing and delivering this Loan Agreement
and the other Loan Documents; (ii) understands the provisions of this Loan
Agreement and the other Loan Documents, including all waivers contained therein;
and (iii) signs and delivers this Loan Agreement and the other Loan Documents
freely and voluntarily, without duress or coercion.
(SIGNATURE PAGE TO FOLLOW)
This Loan Agreement and the other Loan Documents are executed under seal
and are intended to take effect as sealed instruments.
IN WITNESS WHEREOF, this Loan Agreement has been executed as of the day and
year first above written.
ATLAS TECHNOLOGIES, INC.
By:
-------------------------------- ------------------------------
Signature (1) Signature (2)
-------------------------------- ------------------------------
Printed Name Printed Name
-------------------------------- ------------------------------
Title Title
Accepted at Chicago, Illinois:
XXXXXXX XXXXX BUSINESS FINANCIAL SERVICES INC.
By:
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EXHIBIT A
ATTACHED TO AND HEREBY MADE A PART OF WCMA LOAN AND SECURITY AGREEMENT NO.
885-07D32 BETWEEN XXXXXXX XXXXX BUSINESS FINANCIAL SERVICES INC. AND ATLAS
TECHNOLOGIES, INC.
Additional Locations of Tangible Collateral:
000 X. Xxxxx Xx. Xxxxxx, XX 00000
0000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Existing loans and Guarantees (Section 3.3 (k)):
Existing Debt (Section 3.3 (o)):
