UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 4, 2005
MICHELEX CORPORATION
(Exact name of registrant as specified in its charter)
Utah 000-26695 87-0636107
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(State of Incorporation) (Commission File Number) (IRS Employer
Identification #)
63 Trade Road
Massena, New York 13662
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(Address of Principal Executive Offices)
(315) 769-6616
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(Registrant's telephone number, including area code)
ITEM 2.04. Triggering Events That Accelerate or Increase a Direct Financial
Obligation.
(a)(1) The triggering event was a Credit Agreement between Michele Audio
Corporation ("Michele Audio"), a wholly-owned subsidiary of Michelex Corporation
and Wells Fargo Business Credit, Inc. ("Wells Fargo"), which amends the March
11, 2001 Credit Agreement whereby Michele Audio borrowed $7,000,000, including a
$4,400,000 term note and a $2,600,000 revolving line of credit.
(a)(2) A brief description of triggering event:
The triggering event is the April 29, 2005 Letter Agreement ("Letter Agreement")
which accelerates the terms of payment under the March 11, 2001 Credit Agreement
between Wells Fargo and Michele Audio.
(a)(3) The amount of the direct financial obligation, as increased if
applicable, and the terms of payment or acceleration that apply.
The terms of the acceleration of the Term Note and Revolving Line of
Credit under the Credit Agreement
Wells Fargo and Michele Audio have agreed that Michele Audio will seek
alternative financing sources to repay the Credit Agreement. Wells Fargo has
made demand for immediate payment in full and Michele Audio has confirmed that
certain obligations are due and payable and that certain events of default have
occurred.
Michele Audio has requested that Wells Fargo agree to make certain
discretionary Revolving Advances while Michele Audio seeks additional financing.
Wells Fargo has agreed to Future Revolving Advances based upon the express terms
and conditions set forth below.
Terms and Conditions of Wells Fargo Revolving Advances:
1. The maximum line under the Credit Agreement for Revolving Advances
shall be amended to $1,200,000. Any further Revolving Advances shall
be made at Wells Fargo's sole discretion and may cease to make further
Revolving Advances without notice to Michele Audio. Wells Fargo has
the present intention to make a Revolving Advance to Michele Audio in
the amount of $219,131.34.
2. Michele Audio shall provide Wells Fargo with Bills of Lading for all
accounts in excess of $2,000.00.
3. Wells Fargo will return the $37,500 annual line fee paid by Michele
Audio on March 11, 2005.
4. Wells Fargo shall defer, but not waive, the payment of (a) interest
accrued and accruing on the principal balance and (b) the $13,500
appraisal fees due on recent appraisal of Michele Audio's equipment
and (c) legal fees due until the earlier occurrence of the Revolving
Note being paid in full, or May 28, 2005. Wells Fargo will waive the
payment of all past-due reporting fees incurred from April 1 through
November 28, 2005.
5. Michele Audio will receive a 50% discount on legal fees incurred by
Wells Fargo between April 7 and April 29, 2005. The legal fees must be
paid be the earlier occurrence of payment in full on the Revolving
Note or May 28, 2005.
6. Michele Audio shall repay the Revolving Note by May 28, 2005, at which
time Wells Fargo will release its lien on Michele Audio's accounts and
inventory. Wells Fargo will issue a UCC-3 Amendment which provides for
a partial release of the UCC-1 Financing Statement on Michele Audio's
accounts and inventory, which will be held in escrow until the
Revolving Note and legal fees are paid in full. If Michele Audio has
not repaid Wells Fargo in full by May 28, 2005, the UCC-3 Amendment
will be destroyed and Wells Fargo will have no obligation to provide
such a release in the future.
7. If the Revolving Note and legal fees are paid in full by May 28, 2005,
Wells Fargo will not exercise its rights against the Collateral as a
result of the existing Events of Default until the earlier occurrence
of (i) a "Termination Event" or (ii) November 28, 2005 (the
"Termination Date"). A Termination Event refers to Michele Audio's
failure to comply with any provision of the letter agreement when
required. From the earlier occurrence of a Termination Event, or the
Termination Date, Wells Fargo may immediately begin exercising its
rights and remedies.
8. Michele Audio will continue to make monthly payments on the Term Note
when due. The outstanding balance of the Term Note shall be paid in
full by no later than 180 days after the Revolving Note has been paid
in full, but in no event later than November 28, 2005. When the Term
Note is repaid in accordance with the terms and no Termination Event
has occurred, Wells Fargo will waive any accrued but unpaid interest
in excess of the Floating Rate; otherwise interest shall continue to
accrue on the outstanding balance of the obligations at the Default
Rate.
9. Michele Audio will provide Wells Fargo an updated equipment list on
the fifteenth day of each month. Provided no Termination Event has
occurred, Michele Audio shall be permitted to sell certain items of
the equipment by providing Wells Fargo with prior written notice of
its intention to sell a piece of equipment and the sale price. The net
cash proceeds from the sale shall be equal to or greater than the
value of the equipment as reflected on the liquidation value
appraisal, with 100% of the net cash proceeds from the sale of the
specified equipment delivered immediately to Wells Fargo for
application to the reduction of the Term Note.
10. In the event the Term Note is not paid in accordance with the
specified terms (see paragraph 8 above), then (a) Michele Audio and
all Guarantors will provide their complete cooperation in Wells
Fargo's liquidation of the Collateral; (b) all interest in excess of
the Floating Rate interest will immediately be due and payable in full
by Michele Audio (c) $18,750 of the annual line fee returned by Wells
Fargo (Ref. paragraph 3 above), shall be due and payable in full by
Michele Audio; and (d) Michele Audio will be required to pay all legal
fees incurred by the Lender under the Credit Agreement, including, but
not limited to, the entire amount of legal fees incurred from April 7
through April 29, 2005 (Ref. paragraph 5 above).
11. Michele Audio and the Guarantors agree that none of them have any
offsets, claims or counterclaims against Wells Fargo or any of its
affiliates, officers, directors or others and, should any unknown
offsets exist, all are waived and Michele Audio and the Guarantors
release Wells Fargo from any liability associated with such unknown
offsets or claims.
The Current Amount of the Credit Agreement, Revolving Advances and the terms of
Payment
On April 29, 2005 the current amount of the $7,000,000 Credit Agreement is
$3,419,036.58, including the current balance of the $4,400,000 Term Note which
is $2,704,166.79 and the current balance of $2,600,000 Revolving Line of Credit
which is $714,869.79. The terms of payment on the Term Note pursuant to the
Credit Agreement as amended are monthly payments in the amount of $45,833.33.The
remainder of the Term Note is to be paid in full 180 days after the Revolving
Line of Credit is paid in full (on or before May 28, 2005) On May 1, 2005 Wells
Fargo made an additional Revolving Advance of $143,833.33 of which Michele Audio
made its May Monthly Payment of $45,833.33.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: May 4, 2005
By:
/s/ Tom Gramuglia
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Tom Gramuglia
Vice President