**EXHIBIT 10.16**

 

**Merrill Lynch                         WCMA Loan and SECURITY AGREEMENT**

 

WCMA LOAN AND SECURITY AGREEMENT NO. 273-07F24(“Loan Agreement) dated as of May 27, 2003, between THANKSGIVING COFFEE COMPANY, INC., a corporation organized and existing under the laws of the State of California having its principal office at 19100 S. Harbor Dr Fort Bragg CA 95437(“Customer”), and MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC., a corporation organized and existing under the laws of the State of Delaware having its principal office at 222 North LaSalle Street, Chicago, IL 60601 (“MLBFS”),

 

Pursuant to that certain WORKING CAPITAL MANAGEMENT* ACCOUNT AGREEMENT NO. 273-07F24 andthe accompanying Program Description (as the same may be, or have been, amended, modified or supplemented, the “WCMA Agreement”) between Customer and MLBFS’ affiliate MERRILL LYNCH, PIERCE, FENNER & SMITH 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 documentsincorporated 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 setforth 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 followingmeanings: 

 

“Activation Date” shall mean the date upon which MLBFS shall causethe 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, windingup 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by any Credit Party; or (ii) any such proceeding shall be filed against any Credit Party and shall not be dismissed or withdrawn within sixty (60) days after filing; or(iii) any Credit Party shall make a general assignment for the benefit of creditors; or (iv) any Credit Party shall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 beadjudicated 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) areceiver, 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 dayon which the New York Stock Exchange is regularly closed. 

 

“Business Guarantor”shall mean every Guarantor that is not a natural person. 

 

“Certificate ofCompliance” 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 executiveofficer 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 and Financial Assets ofCustomer, 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 (includingcomputer records) directly related thereto, all proceeds thereof (including, without limitation, proceeds in the form of Accounts and insurance proceeds), and the additional collateral described in Section 3.6 (b) hereof. 

 

“Commitment Expiration Date” shall mean June 10, 2003. 

 

“Credit Party” and “Credit Parties” shall mean, individually or collectively, theCustomer, all Guarantors and all Pledgers. 

 

“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) thehighest interest rate allowed by applicable law. 

 

“Event of Loss” shall meanthe 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 prepaymentfees, 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 Statesof America from time to time. 

 

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“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) onMLPF&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 materialadverse 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) MLBFSshall 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 satisfactoryto 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 othercollateral 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 conditionsspecified 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 assumesresponsibility 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: June 30, 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 termhereof. 

 

“Interest Rate” shall mean a variable per annum rate of interest equalto the sum of 3.30 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 theone-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 ispublished, 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 InterestRate. 

 

“Line Fee” shall mean a fee of $2,000.00 payable periodically byCustomer to MLBFS in accordance with the provisions of Section 2.2 hereof. 

 

“LoanDocuments” 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 theObligations, 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 orperfection 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 anyother 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 $200,000.00. 

 

“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 orcontingent, 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 anypetition 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 futureliabilities, indebtedness and obligations of Customer under this Loan Agreement. 

 

“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’ rightsto 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 MLBF5 a security interest in any assets as security for customer’s Obligations; 

 

–renewal year snail mean and refer ID me 12-monm period immediately following the Initial MaturityDale and each 12-month period thereafter. 

 

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“WCMA Account” shall mean and refer to the Working Capital Management Account of Customer with MLPF&S identified asAccount No. 273-07F24 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 timeto time. 

 

1.2    Other Terms.  Except as otherwise definedherein: (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, “MoneyAccounts”, “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 themin GAAP. 

 

1.3    UCC Filing.  Customer hereby authorizesMLBFS 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 necessaryor 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 suchproperty 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 herebypromises 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, onthe 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 ismade 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, Customerhereby 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 LoanAgreement. 

 

2.2    WCMA LOANS 

 

(a)    Activation Date.  Provided that: (i) the Commitment ExpirationDate 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 acceptanceof this Loan Agreement by MLBFS at its office in Chicago, Illinois, upon which each of the General Funding Conditions shall have been met or satisfied to the reasonable satisfaction of MLBFS. No activation by MLBFS of the WCMA Line of Credit for anominal 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 onthe 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 tothe 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 WCMALoans 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 wholeor 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® 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 thatso 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 WCMALoan. 

 

(c)    Conditions of WCMA Loans. Notwithstanding theforegoing, 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 theMaximum 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 Programshall 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 WCMALoan 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 conditionshall 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 otheract 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 arisingfrom 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. 

 

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(e)    Interest,  (i) An amount equal to accrued interest on the daily WCMA Loan Balance shall bepayable 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 oftermination 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 salesof 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, butwithout 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, onceimplemented, shall continue to apply to the Obligations under this Loan Agreement and be payable by Customer until the date MLBFS gives wntten 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, noprovision 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 notbe 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 orrefunded to the payor thereof. 

 

(f)    Payments.  Allpayments 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, Customerhereby 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 Accountshall 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 theaforesaid 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 orstatement 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 therights 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 tofinal collection. 

 

(g)    Irrevocable Instructions toMLPF&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) toimmediately 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 suchavailable 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 AccountsBalance 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 bemade 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 permittedby 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 interestwith 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 withrespect 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. 

 

G)    Use of WCMA Loan Proceeds.  The proceeds of each WCMA Loaninitiated 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 agreesthat 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 insecurities, 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 anyamount to Men-ill Lynch and Co., Inc. or any of its subsidiaries, other than Merrill Lynch Bank USA, Merrill Lynch Bank & Trust Co. or any subsidiary of either of them (including MLBFS and Merrill Lynch Credit Corporation). 

 

(k)    Renewal at Option of MLBFS; Right of Customer to Terminate.  MLBFSmay 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 setforth 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 theMaturity 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 theentire WCMA Loan Balance and all other Obligations. 

 

 

 

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(I)    Line Fees.  (i) In consideration of the extension of the WCMA Line of Credit by MLBFS toCustomer during the period from the Activation Date to and including the last day of June, 2004 (the “Initial Line Period”), Customer has paid or shall pay the initial Line Fee to MLBFS. If the initial Line Fee has not heretofore been paidby Customer, Customer hereby authorizes MLBFS, at its option, to either cause the initial Line Fee to be paid on the Activation Date with a WCMA Loan, or invoice Customer for such initial Line Fee (in which event Customer shall pay said fee within 5Business 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 12-month period followingthe Initial Line Period to the Initial Maturity Date, and 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 theextension 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 12-month period or Renewal Year orextension 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 onthe 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 notlater 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, dulyorganized and validly existing in good standing under the laws of the State of California 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 qualificationnecessary. 

 

(b)    Execution, Delivery andPerformance.  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 andapprovals 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 aparty: (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 theCredit 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 beengiven 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 byany 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 PermittedLiens: (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 orotherwise 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 perfectedfirst liens and security interests upon all of the Collateral. 

 

(f)    Financial Statements.  Except as expressly set forth in Customer’s financial statements, all financial statements of Customer furnished to MLBFS have been prepared in conformity with generallyaccepted 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 caseof 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 financialstatements furnished to MLBFS of any 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 financialstatements, 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, whichwould, 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 anyCredit 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, reportsand 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 paywill 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). 

 

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(i)    Collateral Location.  All of the tangible Collateral is located at a Location of TangibleCollateral. 

 

G)    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 transactionscontemplated 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 andshall 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)  A/R Agings. Within 120 days after the close of each fiscal year of Customer, a copy ofthe Accounts Receivable Aging of Customer as of the end of such fiscal year; 

 

(iii)  Personal Financial Statements. Not later than 120 days after the close of each fiscal year of Customer, a current signed financial statement of each Individual Guarantor; and 

 

(iv)  Other Information. Such other information as MLBFS may from time to time reasonablyrequest relating to Customer, any Credit Party or the Collateral. 

 

(v)  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 byCustomer 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 toMLBFS 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, certified as correct by its 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 anyIndividual 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, orprepared 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, booksand records. 

 

(b)    Taxes.  Each Credit Party will paywhen 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 affecteither 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 governmentalrequirement, 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 theLoan 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 theLoan Documents, the financial condition of any Credit Party, or its continued operations. 

 

(d)    No Use of Merrill Lynch 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 orany trademark of MLBFS, MLPF&S, Merrill Lynch 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 oroperations 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 insuch 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 inCustomer’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 eventor information. 

 

(f)    Entity Organization.  Each CreditParty 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 byit make such qualification 

 

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necessary, and (ii) maintain all governmental permits, licenses and authorizations. Customer shall give MLBFS not less than 30 daysprior 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 permitany 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 assetSy (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 suchmaterial business; or (iii) cause or permit any other Person to assume or succeed to any material business or operations of such Credit Party. 

 

(h)    Initial WCMA Loan.  The initial WCMA Loan shall be in an amount equal to or greater than $5,000.00. 

 

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 beingunderstood 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 orotherwise 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 orconsume 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 otherinformation 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 eachinvoice 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 writtenconsent 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 goodcondition 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 allobligations 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 theordinary 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 shallCustomer 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 firstparagraph 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 inthe 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 MLBFSshall 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 reasonablyrequired 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 shall maintain such other insurance as may be required by law or iscustomarily 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 shallotherwise 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 orreplacement thereof. 

 

(i)    Event of Loss.  Customer shallat 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 tooccur 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 onsuch 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 Collateralfree 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 permanentlyprepay 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 determinedby 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 theMaximum 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 

 

 

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replacement or line reduction, as aforesaid, an Event of Default shall have occurred and be continuing hereunder, then MLBFS may atits 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 immediatenotice of any attachment, lien, judicial process, encumbrance or claim affecting or involving $25,000.00 or more of the Collateral. 

 

(k)    Indemnification.  Customer shall indemnity, defend and save MLBFS harmless from and against any and all claims, liabilities, losses, costs andexpenses (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 actor 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” underthis Loan Agreement: 

 

(a)    Exceeding the Maximum WCMA Line ofCredit.  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 Creditwithin 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 LoanAgreement 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 defaultin 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 continueunremedied 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 anyCredit 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 anyreason. 

 

(f)    Bankruptcy Event.  Any Bankruptcy Eventshall occur. 

 

(g)    Material Impairment.  Any event shalloccur 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 materiallyimpaired. 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 anyagreement 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 valueor 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 Collateralwhich 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 torepudiate, 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, orstayed and bonded to the satisfaction of MLBFS. 

 

(I)    Change inControl/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 wereexercised 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 suchCredit Party; or (iii) the Person (or a replacement who is satisfactory to MLBFS in its sole discretion) who is the chief executive officer or holds such similar position, or any senior manager of such Credit Party on the date hereof shall for anyreason cease to be the chief executive officer or senior manager of such Credit Party. 

 

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(m)    Withdrawal, Death, etc.  The incapacity, death, withdrawal, dissolution, or the filing fordissolution 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 insuch 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 anyBankruptcy 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 dueand 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 asecured 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 toMLBFS 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 publicor 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 ofredemption, 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 deductingall 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 whoeverelse 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 theform 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 anyCollateral, 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 anyaccount 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 enforcepayment 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 repossessedgoods 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 andapply 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 ofCustomer 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 allsuch 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 partiesunder 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 LoanAgreement 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 attorneygranted 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

 

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(d)    Remedies are Severable and Cumulative.  All rights and remedies of MLBFS herein are severableand 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 marshal! 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) seekrepayment 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 theCollateral; (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 wouldleave MLBFS adequately secured. 

 

(f)    Notices.  To thefullest 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 tonotices 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 anyof 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 waiverthereof, 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 LoanDocuments, 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 toany 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, nonotice 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 saidauthorization, 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. Customerfurther 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, andother 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 hereinor 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 personalty, bydeposit 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 toany 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 ofpersonal 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 (whichshall 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 MLBFSfor: (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 collateralfor 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, filingand/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 andlegal 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, andthe 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 Customertherefore (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 Agreementand the discharge of the other Obligations, 

 

(e)    Right to PerformObligations.  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, MLBFSmay, 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 

 

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done or remedy any such breach, and may expend its funds for such purpose. Any and all reasonable amounts so expended by MLBFSshall 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. Thepayment 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 anyDefault. 

 

(f)    Further Assurances.  Customer agrees to dosuch 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 LoanBalance, 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 toMLBFS with respect to any rights in such Collateral. 

 

(g)    BindingEffect.  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 remainoutstanding, 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 loansoriginated 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, theCollateral 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 withoutthe 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 andparagraph 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 inthe 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, notincluding its conflict of law provisions. 

 

(j)    Severability ofProvisions.  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 theLoan 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 Agreementand 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 termshereof, 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. 

 

(I)    Exhibits.  The exhibits to this Loan Agreement are herebyincorporated 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 LoanAgreement 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 whereCustomer 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 Cook for such purposes, and Customer waives any and all rights tocontest 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 exceptin the County of Cook 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 madeshall 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 anyother 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 securityupon 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 counterclaimbrought 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 thetransactions 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 subjectmatter hereof, and may not be contradicted by evidence of prior written 

 

 

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agreements or prior, contemporaneous oral agreements of the parties. There are not 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 Creditor the Maturity Date, or to increase the Maximum Line of Credit, or to make an 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 theMaturity 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 MLBFSA; and (iii) this Loan Agreement supercedes andreplaces 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 partyshall be effective unless in writing signed by both MLBFS and Customer. 

 

cancellation ofthe Loan Documents. 

 

Documents freely and voluntarily, without duress or coercion.

 

(s) California Financial Code. This Loan Agreement and the Loan Documents are madepursuant to Article 4 of Chapter 3 of Division 9 of the California 

 

Financial Code(commencing with Section 22000.) 

 

This Loan Agreement and the other Loan Documents areexecuted under seal and are intended to take effect as sealed instruments. 

 

IN WITNESSWHEREOF, this Loan Agreement has been executed as of the day and year first above written. 

 
THANKSGIVING COFFEE COMPANY, INC.    By–                 Signature (1)     Signature (2)                  Printed Name     Printed Name                  Title     Title
 

Accepted at Chicago, Illinois: 

 

MERRILL LYNCH BUSINESS FINANCIAL 

SERVICES INC. 

 

 

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