Document:

exh10-9.htm

EXHIBIT 10.9

TALON INTERNATIONAL, INC.

RESTRICTED STOCK UNIT AGREEMENT

 

 

 

 

 

 

 

 

  

  

  

TALON INTERNATIONAL, INC.

NOTICE OF RESTRICTED STOCK UNIT GRANT

You have been granted the following Restricted Stock Units (“RSUs”) of Talon International, Inc. (“Talon” or the “Company”):

 

	
  

	
Name of Recipient:

	
Larry Dyne

 

	
  

	
Total Number of RSUs:

	
5,778,500

 

	
  

	
Value of Stock on Grant Date:

	

$   

 

	
  

	
Grant Date:

	
July 30, 2010

 

	 	
 
Vesting Commencement Date:

	
July 30, 2010

 

	
  

	
Vesting Schedule:

	
50% of the Total Number of RSUs will vest on the date which is thirteen months following the Vesting Commencement Date, and an additional 10% of the Total Number of RSUs will vest on each date which is eighteen, twenty-four, thirty, thirty-six and forty-two months following the Vesting Commencement Date, subject to acceleration as set forth in the Standard Terms.

By your signature and the signature of the Company’s representative below, you and the Company agree that the RSUs are granted under and governed by the terms and conditions of the Restricted Stock Unit Agreement, which is attached hereto and is made a part of this document.

 

	
Recipient:

	
Talon International, Inc.

	
 

 

By:  /s/ Larry Dyne      

Name:  Larry Dyne

 

	
 

 

By:         /s/ Lonnie Schnell      

Lonnie Schnell

Its:         Chief Executive Officer

 

 

  

  

  

TALON INTERNATIONAL, INC.

 

Restricted Stock Unit Agreement

 

1.           Terms.  Unless provided otherwise in the Notice of Restricted Stock Unit Grant (“Notice of Grant”), the following standard terms and conditions (“Standard Terms”) apply to Restricted Stock Units (“RSUs”) granted to you.  Your Notice of Grant and these Standard Terms constitute the entire understanding between you and Talon.

 

2.           Definitions.  In addition to the terms defined elsewhere in these Standard Terms, as used herein, the following terms shall have the following meanings:

 

(a)           “Administrator” means the Board or any of its Committees as shall be administering this RSU.

 

(b)           “Board” means the Board of Directors of the Company.

 

(c)           “Cause” shall have the meaning given such term in the Employment Agreement.

 

(d)           “Change in Control” shall mean (i) the dissolution or liquidation of the Company, (ii) any sale, lease, exchange or other transfer (in one or a series of transactions) of all or substantially all of the assets of the Company, (iii) any merger or consolidation of the Company in which the holders of voting stock of the Company immediately before the merger or consolidation will not own thirty five percent (35%) or more of the voting stock of the continuing or surviving corporation immediately after such merger or consolidation; or (iv) a change of fifty percent (50%) (rounded to the next whole person) in the membership of the Board within a twelve (12)-month period, unless the election or nomination for election by stockholders of each new director within such period was approved by the vote of a majority of the directors then still in office who were in office at the beginning of the twelve (12)-month period; provided, however, that the election or replacement by the holders of Series B Preferred Stock of the Company of directors that the holders of Series B Preferred Stock of the Company are entitled to elect shall not, by itself, constitute a “Change in Control” hereunder.  A Change in Control must also constitute a change in the ownership or effective control of the Company or the ownership of a substantial portion of the Company’s assets within the meaning of Code Section 409A.

 

(e)           “Code” means the Internal Revenue Code of 1986, and the regulations promulgated thereunder, as such is amended from time to time, and any reference to a section of the Code shall include any successor provision of the Code.

 

(f)           “Committee” means a committee appointed by the Board from among its members to administer this RSU.

 

(g)           “Common Stock” means the common stock, $0.001 par value, of the Company.

 

(h)           “Company” means Talon International, Inc.

 

  

  

  

(i)           “Consultant” means any person, including an advisor, engaged by the Company or a Subsidiary to render services and who is compensated for such services; provided such services are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and provided further that the term “Consultant” shall not include Directors who are paid only a director’s fee by the Company or who are not otherwise compensated by the Company for their services as Directors.

(j)           “Director” means a member of the Board.

 

(k)           “Permanent Disability” shall have the meaning given such term in the Employment Agreement.

 

(l)           “Employee” means any person, including Officers and Directors, employed by the Company or any Subsidiary of the Company.  Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.

 

(m)          “Employment Agreement” means that certain Executive Employment Agreement, dated of even date herewith, by and between you and the Company.

 

(n)           “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(o)           “Good Reason” shall have the meaning given such term in the Employment Agreement.

 

(p)           “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

 

(q)           “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

 

(r)           “Share” means a share of the Common Stock.

 

(s)           “Service” means service to the Company or any of its Subsidiaries as an Employee, Director or Consultant.

 

(t)           “Subsidiary” means any corporation or entity in which the Company owns or controls, directly or indirectly, fifty percent (50%) or more of the voting power or economic interests of such corporation or entity.

 

3.           Vesting of RSUs.

 

(a)           Provided that you continuously provide Service from the Grant Date specified in the Notice of Grant through each vesting date specified in the Notice of Grant, the RSUs shall vest and be converted into the right to receive the number of shares of Common Stock specified on the Notice of Grant with respect to such vesting date, except as otherwise provided in these Standard Terms.  If a vesting date falls on a weekend or any other day on which the Over-the-Counter Bulletin Board (the “OTCBB”) is not open, affected RSUs shall vest on the next following OTCBB business day.

 

 

  

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(b)           RSUs will vest to the extent provided in and in accordance with the terms of the Notice of Grant and these Standard Terms.  Except as expressly provided otherwise in these Standard Terms, if your Service (as defined below) terminates for any reason, whether voluntarily or involuntarily, all unvested RSUs shall be cancelled on the date of Service termination.

(c)           For purposes of these Standard Terms, your Service is not deemed terminated if, prior to sixty (60) days after the date of termination of your Service, you are re-engaged by the Company or a Subsidiary on a basis that would make you eligible for future RSU grants, nor would your transfer from the Company to any Subsidiary or from any one Subsidiary to another, or from a Subsidiary to the Company be deemed a termination of your Service.  Further, your provision of service as an employee, director or consultant to any partnership, joint venture or corporation not meeting the requirements of a Subsidiary in which the Company or a Subsidiary is a party shall be considered Service for purposes of this provision if either (a) the entity is designated by the Administrator as a Subsidiary for purposes of this provision or (b) you are specifically designated as providing Service for purposes of this provision.

 

4.           Conversion into Common Stock.

 

(a)           Shares of Common Stock will be issued or become free of restrictions as soon as practicable following vesting of the RSUs, provided that you have satisfied your tax withholding obligations as specified under Section 10 of these Standard Terms and you have completed, signed and returned any documents and taken any additional action that the Administrator reasonably deems appropriate to enable it to accomplish the delivery of the shares of Common Stock.  The shares of Common Stock will be issued in your name (or may be issued to your executor or personal representative or other applicable party, as permitted in Section 11, in the event of your death or Permanent Disability), and may be effected by recording shares on the stock records of the Company or by crediting shares in an account established on your behalf with a brokerage firm or other custodian, in each case as determined by the Administrator.  In no event will the Company be obligated to issue a fractional share.

 

(b)           Notwithstanding the foregoing, (i) the Company shall not be obligated to deliver any shares of Common Stock during any period when the Administrator reasonably determines that the conversion of an RSU or the delivery of shares hereunder would violate any federal, state or other applicable laws and/or may issue shares subject to any restrictive legends that, as reasonably determined by the Company’s counsel, is necessary to comply with securities or other regulatory requirements, and (ii) the date on which shares are issued may include a reasonable delay in order to provide the Company such time as it reasonably determines appropriate to address tax withholding and other administrative matters.

 

  

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5.           Adjustments of and Changes in the Common Stock.

 

(a)           The existence of outstanding RSUs shall not affect in any way the right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations, exchanges, or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company or any issuance of Shares or other securities or subscription rights thereto, or any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Shares or other securities of the Company or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.  Further, except as expressly provided herein or by the Administrator, (i) the issuance by the Company of shares of stock or any class of securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, (ii) the payment of a dividend in property other than Shares, or (iii) the occurrence of any similar transaction, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares subject to the RSUs, unless the Administrator shall determine that an adjustment is necessary or appropriate.

 

(b)           If the outstanding Shares or other securities of the Company, or both, for which the RSU is to be settled shall at any time be changed or exchanged by declaration of a stock dividend, stock split, combination of shares, extraordinary dividend of cash and/or assets, recapitalization, reorganization or any similar equity restructuring transaction (as that term is used in Statement of Financial Accounting Standards No. 123 (revised) affecting the Shares or other securities of the Company, the Administrator shall adjust the number and kind of Shares or other securities that are subject to the RSUs so as to maintain the proportionate number of Shares or other securities subject to the RSUs.

 

(c)           Subject to the other terms set forth in these Standard Terms, and not in limitation of any other rights you have under these Standard Terms (including, without limitation, acceleration of unvested RSUs upon the occurrence of a Change in Control as provide in Section 6 below), in the event the Company is a party to a merger or other reorganization, the RSUs shall be subject to the agreement of merger or reorganization, which agreement may provide, without limitation, for the assumption of outstanding RSUs by the surviving corporation or its parent, for their continuation by the Company (if the Company is a surviving corporation), for accelerated vesting and accelerated expiration, or for settlement in cash, unless such merger or other reorganization constitutes a Change in Control, in which case all RSUs will immediately vest, as discussed below in Section 6.

 

6.           Change in Control.  All unvested RSUs will vest immediately prior to the effective date of the occurrence of a Change in Control.  In addition, in the event that your Service is terminated by you for Good Reason or by the Company for reasons other than Cause within three (3) months prior to the occurrence of a Change in Control, then all unvested RSUs will vest immediately prior to the effective date of such termination.

 

 

  

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7.           Leaves of Absence.  For any purpose under these Standard Terms, your Service shall be deemed to continue while you are on a bona fide leave of absence, to the extent required by applicable law.  To the extent applicable law does not require such a leave to be deemed to continue your Service such Service shall be deemed to continue if, and only if, expressly provided in writing by the Administrator or an Officer of the Company or Subsidiary for whom you provide Service.

 

8.           Termination Without Cause, for Good Reason, or Upon Death or Disability.  In the event that your Service is terminated by you for Good Reason, by the Company for reasons other than Cause, or as a result of your Death or Permanent Disability, in each case at any time on or before the date that the initial 50% of your RSUs vest (i.e., the 13th month following the Vesting Commencement Date), than a portion of your RSUs equal to 50% of the Total Number of RSUs shall vest immediately prior to the effective date of such termination or, if later, the date of determination of your Permanent Disability.

 

9.           Termination for Cause.  In the event that your Service is terminated for Cause, all unvested RSUs shall be cancelled immediately prior to the effective date of such termination and neither you nor any beneficiary shall be entitled to any claim with respect to the cancelled RSUs whatsoever.

 

10.         Tax Withholding.

 

(a)           To the extent required by applicable federal, state or other law, you shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise by reason of vesting of an RSU and, if applicable, any sale of shares of Common Stock.  The Company shall not be required to issue or lift any restrictions on shares of Common Stock or to recognize any purported transfer of shares of Common Stock until such obligations are satisfied.  Upon your request, but not without your agreement, the Administrator may permit these obligations to be satisfied by having the Company withhold a portion of the shares of Common Stock that otherwise would be issued to you upon vesting of the RSUs, or to the extent permitted by the Administrator, by tendering shares of Common Stock previously acquired.

 

(b)           You are ultimately liable and responsible for all taxes owed by you in connection with your RSUs, regardless of whether the Administrator or the Company satisfies its tax withholding obligations that arise in connection with your RSUs.  The Company makes no representation or undertaking regarding the treatment of any tax withholding in connection with the grant, issuance, vesting or settlement of your RSUs or the subsequent sale of any of the shares of Common Stock underlying your RSUs that vest.  The Company does not commit and is under no obligation to administer the RSUs in a manner that reduces or eliminates your tax liability.

 

11.         Transferability; Rights as a Stockholder.

 

(a)           Unless otherwise provided by the Administrator, each RSU shall be transferable only:

 

  

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(i)           pursuant to your will or upon your death to your beneficiaries;

 

(ii)           by gift to your Immediate Family (defined below), partnerships whose only partners are you or members of your Immediate Family, limited liability companies whose only members are you or members of your Immediate Family, or trusts established solely for the benefit of you or members of your Immediate Family; or

 

(iii)           by gift to a foundation in which you and/or members of your Immediate Family control the management of the foundation’s assets.

 

(b)           For purposes of these Standard Terms, “Immediate Family” is defined as your spouse or domestic partner, children, grandchildren, parents, or siblings.  Any purported assignment, transfer or encumbrance that does not qualify under Section 11(a) above shall be void and unenforceable against the Company.  Any RSU transferred by you pursuant to this section shall not be transferable by the recipient except by will or the laws of descent and distribution.  The transferability of RSUs is subject to any applicable laws of your country of residence or employment.

 

(c)           You will have the rights of a stockholder only after shares of Common Stock have been issued to you following vesting of your RSUs and satisfaction of all other conditions to the issuance of those shares as set forth in these Standard Terms.  RSUs shall not entitle you to any rights of a stockholder of Common Stock and there are no voting or dividend rights with respect to your RSUs.  RSUs shall remain terminable pursuant to these Standard Terms at all times until they vest and convert into shares.  As a condition to having the right to receive shares of Common Stock pursuant to your RSUs, you acknowledge that unvested RSUs shall have no value for purposes of any aspect of your Service relationship with the Company.

 

12.         Disputes.  Any question concerning the interpretation of these Standard Terms, your Notice of Grant or the RSUs, any adjustments required to be made thereunder, and any controversy that may arise under the Standard Terms, your Notice of Grant or the RSUs shall be settled in accordance with Section 13.1 of your Employment Agreement.

 

13.         Other Matters.

 

(a)           Any prior agreements, commitments or negotiations concerning the RSUs are superseded by these Standard Terms and your Notice of Grant.  The grant of RSUs to you in any one year, or at any time, does not obligate the Company or any Subsidiary to make a grant in any future year or in any given amount and should not create an expectation that the Company or any Subsidiary might make a grant in any future year or in any given amount.

 

(b)           Nothing contained in these Standard Terms creates or implies an employment contract or term of employment upon which you may rely.

 

 

  

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(c)           Notwithstanding any provision of these Standard Terms or the Notice of Grant to the contrary, if, at the time of your termination of Service with the Company, you are a “specified employee” as defined in Section 409A of the Code, and one or more of the payments or benefits received or to be received by you pursuant to the RSUs would constitute deferred compensation subject to Section 409A, no such payment or benefit will be provided under the RSUs until the earliest of (A) the date which is six (6) months after your “separation from service” for any reason, other than death or “disability” (as such terms are used in Section 409A(a)(2) of the Code), (B) the date of your death or “disability” (as such term is used in Section 409A(a)(2)(C) of the Code) or (C) the effective date of a “change in the ownership or effective control” of the Company (as such term is used in Section 409A(a)(2)(A)(v) of the Code).  The provisions of this Section 13(c) shall only apply to the extent required to avoid your incurrence of any penalty tax or interest under Section 409A of the Code or any regulations or Treasury guidance promulgated thereunder.  In addition, if any provision of the RSUs would cause you to incur any penalty tax or interest under Section 409A of the Code or any regulations or Treasury guidance promulgated thereunder, the Administrator may reform such provision to maintain to the maximum extent practicable the original intent of the applicable provision without violating the provisions of Section 409A of the Code.

 

(d)           Because these Standard Terms relate to terms and conditions under which you may be issued shares of Common Stock, an essential term of these Standard Terms is that it shall be governed by the laws of the State of Delaware, without regard to choice of law principles of the State of Delaware or other jurisdictions.  Any action, suit, or proceeding relating to these Standard Terms or the RSUs granted hereunder shall be brought in the state or federal courts of competent jurisdiction in the State of California.

(e)           Copies of the Company’s Annual Report to Stockholders for its latest fiscal year and the Company’s latest quarterly report are available, without charge, at the Company’s business office.

 

(f)           Any notice required by these Standard Terms shall be given in writing and shall be deemed effective upon personal delivery or upon deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid.  Notice shall be addressed to you at the address set forth in the records of the Company.  Notice shall be addressed to the Company at:

 

	 	
Talon International, Inc.

	 	
21900 Burbank Blvd. Suite 270

Woodland Hills, CA 91367

Attn:  Chairman of the Board

 

(g)           You shall have the right to elect to defer the settlement date of all or part of the RSUs set forth herein, as defined herein, by completing and returning to the Company the Restricted Stock Unit Deferral Election provided herewith no later than a date which is 30 calendar days following the Grant Date.

 

  

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EXECUTION COPY

LOAN  AND  SECURITY  AGREEMENT

THIS  LOAN  AND  SECURITY  AGREEMENT (this "Agreement") is made as of August 4, 2010 by and between Productive Concepts international, llc, an Indiana limited liability company ("Borrower"), and IMPCO TECHNOLOGIES, INC., a Delaware corporation ("Lender").  Capitalized terms used in this Agreement have the meanings assigned to them in Appendix A hereto.  Accounting terms not otherwise specifically defined herein shall be construed in accordance with GAAP consistently applied.

WHEREAS, Borrower, Lender, Robert Lykins, as seller (the "Seller") and, solely with respect to Section 2.3(c) thereof, Fuel Systems Solutions, Inc., a Delaware corporation, have entered into that certain Asset Purchase and Assumption Agreement, dated as of the date hereof (the "Purchase Agreement"), pursuant to which Seller desires to sell, and Lender desires to purchase, certain assets of the Borrower's vehicle modification and alternative fuels business (the "VMAF Business") specified therein and assume only those obligations expressly assumed therein; 

WHEREAS, in connection with and as a condition to the transactions contemplated by the Purchase Agreement, Borrower desires that Lender provide a loan facility to Borrower; 

WHEREAS, Lender has agreed to extend such loan facility to Borrower, subject to the grant of certain collateral security and subject to the other terms and conditions set forth herein and in the other Loan Documents; and

WHEREAS, the Borrower and Lender wish to memorialize the terms of their agreement by this writing.

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed as follows:

	  LOAN FACILITY

1.1Loan Facility.  Subject to the terms and conditions of, and in reliance upon the representations and warranties made in, and Borrower's satisfaction of the conditions set forth in, this Agreement and the other Loan Documents, Lender agrees to make loans (each, a "Loan") to Borrower, from time to time during the period that commences on the date hereof and ends on the Termination Date, (i) without the prior written consent of Lender, for the purpose of allowing Borrower to make Permitted Expenditures; and (ii) with the prior written consent of Lender, in Lender's sole discretion, for business purposes other than to make Permitted Expenditures; provided, however that the aggregate amount of all Extensions of Credit shall not exceed Four Million Four Hundred and Seventy-Five Thousand U.S. Dollars (U.S. $4,475,000) (the "Total Facility Amount").  The Loans shall be evidenced by a promissory note in the form of Exhibit A attached hereto (the "Note").  Each Loan shall bear interest on the principal balance thereof from time to time unpaid at the applicable interest per annum provided in Section 2 and payable as specified in Section 3.  

1.2Procedure for Borrowing.  Borrower may borrow under the Facility on any Business Day prior to the Termination Date by giving the Lender five (5) Business Days (or such shorter period as Lender consents to) prior written notice of a request for a Loan hereunder in substantially the form of the certificate attached hereto as Exhibit B (the "Borrowing Certificate").

1.3Additional Conditions for Borrowing. Without limiting the conditions, including Lender consent, set forth in Section 1.1 and 1.2, the Lender's obligation to extend Loans hereunder is subject to the satisfaction of the following conditions precedent:

1.3.1Representations and Warranties.  The representations and warranties made by the Borrower herein or which are contained in the Borrowing Certificate or any other certificate, document, agreement or financial statement furnished at any time under or in connection herewith, shall be correct on and as of the borrowing date for such Loan as if made on such date of borrowing.

1.3.2No Event of Default.  No Default or Event of Default shall have occurred and be continuing on the date a Loan is to be made, or is reasonably expected to occur after giving effect to a Loan.

1.3.3    Guaranty and Pledge Agreement.  Lender has received the Guaranty and Pledge Agreement which, as of the borrowing date for such Loan, have not been rescinded, terminated or challenged in any way.   

1.3.4Additional Matters.  All other documents and legal matters in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to Lender and its counsel.  

	  INTEREST AND  CHARGES

	Interest.

2.1.1Rate of Interest.  Interest on each Loan shall be at a fixed rate per annum equal to four percent (4%).  

2.1.2Default Rate of Interest.  Upon and after the occurrence of an Event of Default, and during the continuation thereof, interest on each Loan shall be at a fixed rate per annum equal to fifteen percent (15%) (the "Default Rate").

2.1.3Maximum Interest.  In no event whatsoever shall the aggregate of all amounts deemed interest under the Note and charged or collected pursuant to the terms of this Agreement exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto.  If any provisions of this Agreement are in contravention of any such law, such provisions shall be deemed amended to conform thereto.

	Computation of Interest.  Interest shall be calculated daily and shall be computed on the actual number of days elapsed over a year of 365 days.  

	Reimbursement of Expenses.  If, at any time or times regardless of whether or not an Event of Default then exists, Lender incurs legal or accounting expenses or any other costs or out-of-pocket expenses, in connection with (i) any amendment of or modification of this Agreement or any of the other Loan Documents; (ii) the administration of this Agreement or any of the other Loan Documents and the transactions contemplated hereby and thereby; (iii) any litigation, contest, dispute, suit, proceeding or action (whether instituted by Lender, Borrower or any other Person) in any way relating to the Collateral, this Agreement or any of the other Loan Documents or Borrower's affairs; or (iv) any action taken to inspect, verify, protect, preserve, restore, collect, sell, liquidate or otherwise dispose of or realize upon the Collateral; then all such legal and accounting expenses, other costs and out-of-pocket expenses of Lender shall be charged to Borrower.  All amounts chargeable to Borrower under this Section 2.3 shall be Obligations secured by all of the Collateral and shall be payable on the Maturity Date.

	  LOAN  ADMINISTRATION.

	Payments.  The Obligations shall be payable as follows:

	Principal and Interest.  The entire outstanding principal balance of any Loan, together will all accrued but unpaid interest thereon, shall be due and payable in full on December 2, 2010 (the "Maturity Date"). The Borrower may prepay on any date, without prepayment premium or penalty, all or any part of the principal of any Loan.  

	Costs, Fees and Charges.  Costs, fees and charges payable pursuant to this Agreement shall be payable by Borrower in full on the Maturity Date.

	  TERM  AND  TERMINATION

	Term of Agreement.  This Agreement shall be in effect for a period from the date hereof, through and including the Termination Date.

	Termination.

	Termination by Lender.  Lender may terminate this Agreement without notice upon or after the occurrence of an Event of Default under Sections 8.1.1, 8.1.2 or 8.1.5 herein.

	Termination by Mutual Agreement.  Lender and Borrower may mutually agree in writing to terminate this Agreement.  

	Effect of Termination.  All of the Obligations shall be immediately due and payable upon the date that this Agreement is terminated pursuant its terms.  All undertakings, agreements, covenants, warranties and representations of Borrower contained in the Loan Documents shall survive any such termination and Lender shall retain its Liens in the Collateral and all of its rights and remedies under the Loan Documents notwithstanding such termination until Borrower has paid the Obligations to Lender, in full, in immediately available funds.

	  SECURITY  INTERESTS

	Security Interest in Collateral.  To secure the prompt payment and performance to Lender of the Obligations, Borrower hereby grants to Lender, a continuing Lien upon all of Borrower's assets, including all of the following Property and interests in Property of Borrower, whether now owned or existing or hereafter created, acquired or arising and wheresoever located: all Accounts, General Intangibles, Inventory, Equipment, Investment Property, Deposit Accounts, Letter-of-Credit Rights, Payment Intangibles, Software, Supporting Obligations, and to the extent not included in the foregoing, all other personal property of any kind or description together with all books, records, writings, databases, information and other property relating to, used or useful in connection with, or evidencing, embodying, incorporating or referring to any of the foregoing, and all Proceeds, products, offspring, rents, issues, profits and returns of and from any of the foregoing.  

	Lien Perfection; Further Assurances.  Borrower hereby authorizes the filing of such UCC-1 financing statements as are required by the UCC and shall execute and deliver such other instruments, assignments or documents as are necessary to perfect Lender's Lien upon any of the Collateral and shall take such other action as may be required to perfect or to continue the perfection of Lender's Lien upon the Collateral.  Unless prohibited by applicable law, Borrower hereby irrevocably authorizes Lender to execute and file any such financing statements, including, without limitation, financing statements that indicate the Collateral (i) as all assets of Borrower or words of similar effect, or (ii) as being of an equal or lesser scope, or with greater or lesser detail, than as set forth in Section 5.1, on Borrower's behalf.  At Lender's request, Borrower shall also promptly execute or cause to be executed and shall deliver to Lender any and all documents, instruments and agreements deemed necessary by Lender to give effect to or carry out the terms or intent of this Agreement and the other Loan Documents.

	  REPRESENTATIONS  AND  WARRANTIES

	General Representations and Warranties.  Borrower makes for the benefit of Lender all of the representations and warranties of Borrower contained in the Purchase Agreement (which representations and warranties are incorporated herein by reference as if fully set forth herein).  In addition, the Borrower hereby represents and warrants that Lender has a valid and perfected first priority security interest in the Collateral (except as set forth on Schedule 1 annexed hereto, which lists the name of any secured party, the amount of the Lien, and the Collateral to which the Lien attaches), securing the payment of the Obligations, and such security interest is entitled to all of the rights, priorities and benefits afforded by the UCC or other applicable law as enacted in any relevant jurisdiction which relates to perfected security interests.

	Survival of Representations and Warranties.  All representations and warranties of Borrower contained in this Agreement (or incorporated by reference herein) shall survive the execution, delivery and acceptance thereof by Lender and the parties thereto and the closing of the transactions described herein or related hereto.

	  COVENANTS  AND  CONTINUING  AGREEMENTS

	Affirmative Covenants.  During the term of this Agreement, and thereafter for so long as there are any Obligations to Lender, Borrower covenants that, unless otherwise consented to by Lender in writing, it shall promptly notify Lender in writing of the occurrence of any event or the existence of any fact which renders any representation or warranty in this Agreement or any of the other Loan Documents inaccurate, incomplete or misleading.

	Negative Covenants.  During the term of this Agreement, and thereafter for so long as there are any Obligations to Lender, Borrower covenants that, unless Lender has first consented thereto in writing, it will not:

	Mergers; Consolidations; Acquisitions; Structural Changes.  Consolidate with, merge with, or acquire the stock or assets of any Person, firm, joint venture, partnership, corporation, or other entity, whether by merger, consolidation, purchase of stock or otherwise (except for the transactions contemplated by the Purchase Agreement or a reincorporation in any other jurisdiction), or, directly or indirectly, through any agent or otherwise, solicit, engage in, respond to or otherwise enter into any discussions or provide any information relating to any transaction involving a merger, sale, recapitalization, reorganization or other business transaction involving Borrower.  

	Disposition of Assets.  Other than in the Ordinary Course of Business (as defined in the Purchase Agreement), sell, lease or otherwise dispose of any of its Properties, including any disposition of Property as part of a sale and leaseback transaction, to or in favor of any Person, except for the transactions contemplated by the Purchase Agreement.

	Loans.  Make any loans or other advances of money (other than for salary, travel advances, advances against commissions and other similar advances in the ordinary course of business) to any Person, without the prior written consent of the Lender. 

	Limitation on Liens.  Create or suffer to exist any Lien upon any of its Property, income or profits, whether now owned or hereafter acquired, except:

	Liens at any time granted in favor of Lender;

	Liens existing on the date hereof listed on Schedule 1 annexed hereto and such other Liens as Lender may hereafter approve in writing; and

	Liens arising in the ordinary course of Borrower's business by operation of law or regulation, but only if payment in respect of any such Lien is not at the time required and such Liens do not, in the aggregate, materially detract from the value of the Property of Borrower or materially impair the use thereof in the operation of Borrower's business.

	Distributions.  Declare or make any distributions or payments to Seller or any family member of Seller or any Related Party (as defined in the Purchase Agreement) other than on Schedule 7.2.5. 

	  EVENTS OF  DEFAULT;  RIGHTS  AND  REMEDIES  ON  DEFAULT

	Events of Default.  The occurrence of one or more of the following events shall constitute an "Event of Default":

	Payment of Note.  Borrower shall fail to pay any installment of principal, interest or premium, if any, owing on the Note or any Loan outstanding hereunder, on the Maturity Date.

	Consent Under General Motors Contract.  Borrower shall fail to obtain the consent to assignment required under the GM Contract (the "GM Consent") or shall receive notice that the GM Consent will not be forthcoming and such failure is not cured to Lender's satisfaction within seven (7) days after the sooner to occur of Borrower's receipt of notice of such breach from Lender or the date on which such failure or neglect first becomes known to any officer of Borrower.

	Purchase Agreement.  Borrower or Lender shall terminate the Purchase Agreement.

	Breach of Other Covenants.  Borrower shall fail or neglect to perform, keep or observe any covenant contained in this Agreement (other than a covenant which is dealt with specifically elsewhere in Section 8.1 hereof) or any Loan Document and the breach of such other covenant is not cured to Lender's satisfaction within three (3) days after the sooner to occur of Borrower's receipt of notice of such breach from Lender or the date on which such failure or neglect first becomes known to any officer of Borrower.

	Insolvency and Related Proceedings.  Borrower shall cease to be Solvent (as defined in the Purchase Agreement) or shall suffer the appointment of a receiver, trustee, custodian or similar fiduciary, or shall make an assignment for the benefit of creditors, or any suit or proceeding is commenced against Borrower alleging that Borrower is insolvent or not generally paying its debts as they become due or any petition for an order for relief shall be filed by or against Borrower under bankruptcy laws (if against Borrower or any Guarantor, the continuation of such proceeding for more than thirty (30) days), or Borrower shall make any offer of settlement, extension or composition to its unsecured creditors generally.

	Robert Lykins.  The death, cessation of employment or association with the Borrower of Robert Lykins.

	Acceleration of the Obligations.  Upon or at any time after the occurrence of an Event of Default under (i) Section 8.1.1, (ii) 8.1.2, (iii) solely with respect to a breach of the covenants contained in Section 7.2.5 above, Section 8.1.4, or (iv) Section 8.1.5 above, the Obligations shall, at the option of Lender and without presentment, demand, protest or further notice by Lender, become at once due and payable and Borrower shall forthwith pay to Lender, the full amount of such Obligations;

	Other Remedies.  Upon and after the occurrence of an Event of Default under (i) Section 8.1.1, (ii) 8.1.2, (iii) solely with respect to a breach of the covenants contained in Section 7.2.5 above, Section 8.1.4, or (iv) Section 8.1.5 above, Lender shall have and may exercise from time to time all of the rights and remedies of a secured party under the UCC or under other applicable law, and all other legal and equitable rights to which Lender may be entitled, all of which rights and remedies shall be cumulative and shall be in addition to any other rights or remedies contained in this Agreement or any of the other Loan Documents, and none of which shall be exclusive.

	Remedies Cumulative; No Waiver.  All covenants, conditions, provisions,  and other undertakings of Borrower contained in this Agreement, any of the Loan Documents, or in any document referred to herein or contained in any agreement supplementary hereto shall be deemed cumulative to and not in derogation or substitution of any of the terms, covenants, conditions, or agreements of Borrower herein contained.  No failure or delay of Lender to require strict performance of any provision of this Agreement or any of the Loan Documents, or to accelerate the debt evidenced by reason of an Event of Default hereunder, acceptance of a past-due installment, or indulgences granted from time to time shall be construed (i) as a novation of this Agreement or any of the Loan Documents, or as a reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or any other right or remedy granted to Lender hereunder or by the laws of the State of New York, and Borrower hereby expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing.  No extension of the time for the payment of the Loan, made by agreement with any person now or hereafter liable for the payment of the Loan, shall operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part, unless Lender agrees otherwise in writing and all requirements, Liens, rights, powers, and remedies under this Agreement and any of the Loan Documents shall continue in full force and effect until the Loan and all other Obligations owing or to become owing from Borrower to Lender shall have been fully satisfied.

	  MISCELLANEOUS

	Indemnity.  Borrower hereby agrees to indemnify Lender and hold Lender harmless from and against any liability, loss, damage, suit, action or proceeding ever suffered or incurred by Lender (including reasonable attorneys fees and legal expenses) as the result of Borrower's failure to observe, perform or discharge Borrower's duties hereunder.  In addition, Borrower shall defend Lender against and hold it harmless from all claims of any Person (including Productive Concepts, Inc. or any creditor thereof) with respect to the Collateral or any Loan.  Notwithstanding any contrary provision in this Agreement, the obligation of Borrower under this Section 9.1 shall survive the payment in full of the Obligations and the termination of this Agreement.

	Modification of Agreement; Assignment.  This Agreement may not be modified, altered or amended, except by an agreement in writing signed by Borrower and Lender.  Borrower may not sell, assign or transfer any interest in this Agreement, any of the other Loan Documents, or any of the Obligations, or any portion thereof, including, without limitation, Borrower's rights, title, interests, remedies, powers, and duties hereunder or thereunder.  Borrower hereby consents to Lender's participation, sale, assignment, transfer or other disposition, at any time or times hereafter, of this Agreement and any of the other Loan Documents, or of any portion hereof or thereof, including, without limitation, Lender's rights, title, interests, remedies, powers, and duties hereunder or thereunder.  In the case of an assignment, the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as it would if it were "Lender" hereunder and Lender shall be relieved of all obligations hereunder upon any such assignments.  Borrower agrees Lender may disclose credit information regarding Borrower and any Guarantor to any potential assignee.

	Severability.  Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

	Successors and Assigns.  This Agreement, and the Loan Documents shall be binding upon and inure to the benefit of the successors and assigns of Borrower and Lender permitted under Section 9.2 hereof.

	Execution in Counterparts.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument.

	Notice.  Except as otherwise provided herein, all notices, requests and demands to or upon a party hereto, to be effective, shall be in writing and shall be sent by certified or registered mail, return receipt requested, by personal delivery against receipt, by overnight courier or by facsimile and, unless otherwise expressly provided herein, shall be deemed to have been validly served, given or delivered immediately when delivered against receipt, one Business Day after deposit in the mail, postage prepaid, or with an overnight courier or, in the case of facsimile notice, when sent, addressed as follows:

	
If to Lender:
	
IMPCO Technologies, Inc.

	 	
780 Third Avenue

25th Floor

New York, New York 10017

	 	
Attention:
	
Matthew Beale

	 	
Facsimile No:
	
(646) 502-7171

	

If to Borrower:
	

Productive Concepts International, LLC

1274 S. State Rd. 32

Union City, Indiana 47390

	 	
Attention:
	
Robert Lykins

	 	
Facsimile No:
	
(765) 964-3993

	 	 	 

or to such other address as each party may designate for itself by notice given in accordance with this Section 9.6.

	Entire Agreement.  This Agreement and the other Loan Documents, together with all other instruments, agreements and certificates executed by the parties in connection therewith or with reference thereto, embody the entire understanding and agreement between the parties hereto and thereto with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings and inducements, whether express or implied, oral or written.

	Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.  

(a)The validity, interpretation and enforcement of this Agreement and the other Loan Documents and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York (without giving effect to principles of conflicts of law).

(b)Borrower and Lender irrevocably consent and submit to the non-exclusive jurisdiction of the State of New York and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or any of the other Loan Documents or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Loan Documents or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Lender shall have the right to bring any action or proceeding against Borrower or its property in the courts of any other jurisdiction which Lender deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against Borrower or its property).

(c)Borrower hereby waives personal service of any and all process upon them and consents that all such service of process may be made by certified mail (return receipt requested) directed to the address set forth in Section 9.6 and service so made shall be deemed to be completed three (3) Business Days after the same shall have been so deposited in the U.S. mails, or, at Lender's option, by service upon Borrower in any other manner provided under the rules of any such courts.  

(d)BORROWER AND LENDER EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  BORROWER AND LENDER EACH HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(e)Lender shall not have any liability to Borrower (whether in tort, contract, equity or otherwise) for losses suffered by Borrower in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement or any of the Loan Documents, or any act, omission or event occurring in connection herewith or therewith, unless it is determined by a final and non-appealable judgment or court order binding on Lender, that the losses were the result of (i) acts or omissions constituting gross negligence or willful misconduct of Lender, (ii) Lender's material breach of its obligations hereunder or under any of the other Loan Documents or (iii) Lender's failure to comply with any requirement of law.  In any such litigation, Lender shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Agreement.

[Signature Page Follows]

IN  WITNESS  WHEREOF,  this Loan and Security Agreement has been duly executed as of the date first written above.

PRODUCTIVE CONCEPTS INTERNATIONAL, LLC, as borrower

 

 

By: ___/s/ Robert D. Lykins____________

Name:Robert D. Lykins

Title:President

 

 

 

IMPCO TECHNOLOGIES, INC., as lender

 

By: ___/s/ Matthew Beale______________

Name:Matthew Beale
Title: Executive Vice President and Secretary

APPENDIX  A

GENERAL  DEFINITIONS

The terms Account, General Intangibles, Inventory, and all such terms shall have the meaning assigned thereto under the UCC.  The following terms shall have the following meanings (terms defined in the singular to have the same meaning when used in the plural and vice versa):

"Business Day" means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New Jersey or is a day on which banking institutions located in such State are closed.

"Collateral" means all of the Property and interests in Property described in Section 5 of this Agreement, and all other Property and interests in Property that now or hereafter secure the payment and performance of any of the Obligations.

"Default" means an event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, become an Event of Default.

"Extensions of Credit" means, at any particular time, the aggregate principal amount of Loans then outstanding.  Any reference to Extensions of Credit shall include, without limitation, any Loans made to, for the account of, or for the benefit of Borrower, as the case may be, on the date of the determination thereof.

"Facility" means the Loans and other financial accommodations provided to Borrower by Lender pursuant to this Agreement and the other Loan Documents.

"GM Contract" means that certain Purchase Contract between Seller and General Motors LLC, effective June 17, 2010, and denoted contract number 2NCK0000.

"Guarantor" means Robert Lykins, Amy Lykins, and any other Person who may hereafter guarantee payment or performance of the whole or any part of the Obligations.

"Guaranty" means that certain Personal Guaranty, dated as of the date hereof, delivered by Robert Lykins and Amy Lykins for the benefit of Lender, in the form attached hereto as Exhibit C. 

"Lien" means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on common law, statute or contract.  The term "Lien" shall also include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting Property.  For the purpose of this Agreement, Borrower shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes.

"Loan Documents" means this Agreement, the Note, the Security Documents, and any and all agreements, instruments and documents, heretofore, now or hereafter executed by Borrower or any other third party and delivered to Lender in respect of the transactions contemplated by this Agreement.

"Maturity Date" has the meaning given to such term in Section 3.1.1 of this Agreement.

"Note" means the Note specified in Section 1.1 of this Agreement.

"Obligations" means all Loans and all other advances, debts, liabilities, obligations, covenants and duties, together with all interest, fees and other charges thereon, owing, arising, due or payable from Borrower to Lender, and/or to any affiliate of Lender,  of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, whether arising under this Agreement, any of the other Loan Documents, the Franchise Agreement or otherwise whether direct or indirect (including those acquired by assignment), absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising and however acquired.

"Permitted Expenditures" means capital expenditures to be made by Borrower solely in connection with its VMAF Business and its performance of the GM Contract as disclosed on Schedule 2 attached hereto.  

"Person" means an individual, partnership, corporation, limited liability company, joint stock company, land trust, business trust, or unincorporated organization, or a government or agency or political subdivision thereof.

"Pledge Agreement" means that certain Pledge Agreement, dated as of the date hereof, between Robert Lykins and the Lender, in the form attached hereto as Exhibit D.

"Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

"Security Documents" means this Loan and Security Agreement, the Pledge Agreement and the Guaranty.

"Termination Date" means the date that is the earlier of: (i) Maturity Date, and (ii) the date that Loans representing, in aggregate, the Total Facility Amount are satisfied in full.

"Total Facility Amount" has the meaning given to such term in Section 1.1.

"UCC" means the Uniform Commercial Code as in effect in the State of Indiana on the date of this Agreement, as the UCC may be amended or otherwise modified from time to time.

"VMAF Business" has the meaning assigned to such term in the Recitals hereto.

Certain Matters of Construction.  The terms "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision.  Any pronoun used shall be deemed to cover all genders.  The section titles, table of contents and list of exhibits appear as a matter of convenience only and shall not affect the interpretation of this Agreement.  All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations.  All references to any of the Loan Documents shall include any and all modifications thereto and any and all extensions or renewals thereof.  All references to "includes" or "including" shall be deemed to be followed by the works "without limitation".

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