CREDIT AGREEMENT
THIS AGREEMENT is entered into as of August 1, 1998, by and between
MOTORCAR PARTS & ACCESSORIES, INC., a New York corporation ("Borrower"), and
XXXXX FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITAL
Borrower has requested from Bank the credit accommodation described
below, and Bank has agreed to provide said credit accommodation to Borrower on
the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
THE CREDIT
SECTION 1.1 LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including August 1, 2001, not to exceed at any time the aggregate
principal amount of Thirty-five Million Dollars ($35,000,000.00) ("Line of
Credit"), the proceeds of which shall be used for Borrower's working capital
requirements. Borrower's obligation to repay advances under the Line of Credit
shall be evidenced by a promissory note substantially in the form of Exhibit A
attached hereto ("Line of Credit Note"), all terms of which are incorporated
herein by this reference.
(b) Letter of Credit Subfeature. As a subfeature under the Line of
Credit, Bank agrees from time to time during the term thereof to issue sight
commercial and usance commercial letters of credit for the account of Borrower
and in favor of beneficiaries acceptable to Bank to finance transactions
acceptable to Bank (each, a "Letter of Credit" and collectively, "Letters of
Credit"); provided however, that the form and substance of each Letter of Credit
shall be subject to approval by Bank, in its sole discretion; and provided
further, that the aggregate undrawn amount of all outstanding Letters of Credit
shall not at any time exceed Seven Million Five Hundred Thousand Dollars
($7,500,000.00); and provided further, that the aggregate undrawn amount of all
outstanding usance commercial Letters of Credit plus the aggregate amount of all
outstanding Acceptances (as defined in Section 1.1(c) below) shall not at any
time exceed Seven Million Five Hundred Thousand Dollars ($7,500,000.00). Each
Letter of Credit shall be issued for a term not to exceed ninety (90) days, as
designated by Borrower; provided however, that no Letter of Credit shall have an
expiration date subsequent September 1, 2001. The undrawn amount of all Letters
of Credit shall be reserved under the Line of Credit and shall not be available
for advances thereunder. Each Letter of Credit shall be subject to the
additional terms and conditions of the Letter of Credit Agreement and related
documents, if any, required by Bank in connection with the issuance thereof
(each, a "Letter of Credit Agreement" and collectively, "Letter of Credit
Agreements"). Each draft paid by Bank under a Letter of Credit shall be deemed
an advance under the Line of Credit and shall be repaid by Borrower in
accordance with the terms and conditions of this Agreement applicable to such
advances; provided however, that if the Line of Credit is not available, for any
reason whatsoever, at the time any draft is paid by Bank, or if advances are not
available under the Line of Credit at such time due to any limitation on
borrowings set forth herein, then the full amount of such draft shall be
immediately due and payable, together with interest thereon, from the date such
amount is paid by Bank to the date such amount is fully repaid by Borrower, at
the rate of interest applicable to advances under the Line of Credit. In such
event, Borrower agrees that Bank, at Bank's sole discretion, may debit any
demand deposit account maintained by Borrower with Bank for the full amount of
any such draft. Notwithstanding the foregoing, usance commercial Letters of
Credit shall be issued only to finance the importation of goods into the United
States, and shall contain such provisions and be issued in such manner as to
satisfy Bank that any banker's acceptance created by Bank's acceptance of a
draft thereunder shall be eligible for discount by a Federal Reserve Bank, will
not result in a liability of Bank subject to reserve requirements under any law,
regulation or administrative order, and will not cause Bank to violate any
lending limit imposed upon Bank by any law, regulation or administrative order.
Usance commercial Letters of Credit shall provide for drafts thereunder with
terms which do not exceed the lesser of ninety (90) days or such other period of
time as may be necessary for the acceptance created thereunder to be eligible
for discount and otherwise comply with this Agreement; provided however, that no
usance commercial Letter of Credit shall provide for drafts with a term which
ends subsequent to September 1, 2001. The amount of each matured bankers'
acceptance created by Bank's acceptance of a draft under a usance commercial
Letter of Credit shall be repaid by Borrower in accordance with the terms and
conditions of this Agreement applicable to Acceptances.
(c) Acceptance Subfeature. As a subfeature under the Line of Credit,
Bank agrees to create banker's acceptances (each an "Acceptance" and
collectively, "Acceptances") for the account of Borrower by accepting drafts
drawn on Bank by Borrower from time to time during the term thereof, and by
accepting time drafts presented under usance commercial Letters of Credit issued
by Bank for the account of Borrower, for the purpose of financing the
importation of goods into the United States; provided however, that the form and
substance of each Acceptance shall be subject to approval by Bank, in its sole
discretion; and provided further, that the aggregate amount of all outstanding
Acceptances shall not at any time exceed Seven Million Five Hundred Thousand
Dollars ($7,500,000.00); and provided further, that the aggregate amount of all
outstanding Acceptances plus the aggregate undrawn amount of all outstanding
usance commercial Letters of Credit shall not at any time exceed Seven Million
Five Hundred Thousand Dollars ($7,500,000.00). Each Acceptance created by Bank's
acceptance of a draft drawn on Bank by Borrower shall be in the minimum amount
of Two Hundred Fifty Thousand Dollars ($250,000.00). Each Acceptance shall be
subject to the additional terms and conditions of an Acceptance Agreement in
form and substance satisfactory to Bank ("Acceptance Agreement"). Each
Acceptance shall be granted for a term not to exceed the lesser of ninety (90)
days, as designated by Borrower, or such period of time as may be necessary to
comply with the Acceptance Agreement; provided however, that no Acceptance shall
have an
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expiration date subsequent to September 1, 2001. The outstanding amount of all
Acceptances shall be reserved under the Line of Credit and shall not be
available for advances thereunder. The amount of each Acceptance which matures
shall be deemed an advance under the Line of Credit and shall be repaid by
Borrower in accordance with the terms and conditions of this Agreement
applicable to such advances; provided however, that if the Line of Credit is not
available, for any reason whatsoever, at the time any Acceptance matures, or if
advances are not available under the Line of Credit at such time due to any
limitation on borrowings set forth herein, then Borrower shall immediately pay
to Bank the full amount of such matured Acceptance, together with interest
thereon from the date such Acceptance matures to the date such amount is fully
paid by Borrower, at the rate of interest applicable to advances under the Line
of Credit. In such event, Borrower agrees that Bank, at Bank's sole discretion,
may debit any demand deposit account maintained by Borrower with Bank for the
full amount of any such Acceptance. All Acceptances created hereunder by Bank's
acceptance of drafts drawn on Bank by Borrower shall be discounted with Bank.
Bank shall not be obligated hereunder to discount Acceptances created by Bank's
acceptance of time drafts presented under usance commercial Letters of Credit.
(d) Borrowing and Repayment. Borrower may from time to time during the
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.
SECTION 1.2 INTEREST/FEES.
(a) Interest. The outstanding principal balance of the Line of Credit
shall bear interest at the rates of interest set forth in the Line of Credit
Note.
(b) Computation and Payment. Interest shall be computed on the basis of
a 360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in the Line of Credit Note.
(c) Unused Commitment Fee. Borrower shall pay to Bank a fee initially
equal to .20% per annum, and commencing September 1, 1998 equal to the
percentage per annum set forth below (in each case computed on the basis of a
360-day year, actual days elapsed), on the average daily unused amount of the
Line of Credit, which fee shall be calculated on an annual basis by Bank and
shall be due and payable by Borrower in arrears within five (5) days after each
billing is sent by Bank.
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If the Ratio of
Funded Debt to Then the Unused
EBITDA is Commitment Fee shall be
---------------- -----------------------
Less than 1.25 to 1.0 .20%
Equal to or greater .25%
than 1.25 to 1.0 but
less than 2.25 to 1.0
"Ratio of Funded Debt to EBITDA" shall have the meaning set forth in
Section 4.9(c) below.
Bank shall adjust the percentage of the unused commitment fee on a
quarterly basis, commencing with Borrower's fiscal quarter ending June 30, 1998,
if required to reflect a change in Borrower's Ratio of Funded Debt to EBITDA.
Each such adjustment shall be effective on the first Business Day (as defined in
Section 4.10 below) of Borrower's fiscal quarter following the quarter during
which Bank receives and reviews Borrower's most current fiscal quarter-end
financial statements in accordance with Section 4.3(b) below.
(d) Letter of Credit Fees. Borrower shall pay to Bank (i) fees upon the
issuance of each Letter of Credit equal to the greater of one-eighth percent
(1/8%) of the face amount thereof or $105.00, (ii) fees upon the payment or
negotiation by Bank of each draft under any Letter of Credit equal to the
greater of one-quarter percent (1/4%) of the amount of such draft or $100.00,
(iii) fees upon any amendment to any Letter of Credit equal to the greater of
one-eighth percent (1/8%) of the amount thereof or $80.00, and (iv) fees upon
the occurrence of any other activity with respect to any Letter of Credit
(including without limitation, the transfer, or cancellation of any Letter of
Credit) determined in accordance with Bank's standard fees and charges then in
effect for such activity.
(e) Acceptance Fees. For any Acceptance created hereunder by Bank's
acceptance of a draft drawn on Bank by Borrower, Borrower shall pay to Bank an
acceptance fee for each such Acceptance, payable on the date it is created,
equal to the greater of $250.00, or an amount determined by dividing by 360 the
product of (i) the sum of two percent (2%) plus a percentage equal to Bank's
Discount Rate in effect at the time of such Acceptance is created, (ii) the face
amount of such Acceptance, and (iii) the term of such Acceptance, in days. As
used herein, the term "Discount Rate" shall mean at any time the rate most
recently determined by Bank as its discount rate for buying prime eligible
acceptances in an amount equal to each Acceptance and with a term equal to the
term of each Acceptance, with the understanding that the Discount Rate is
evidenced by the recording thereof in such internal publication or publications
as Bank may designate. Each change in the Discount Rate applicable to
Acceptances hereunder shall become effective on the date each Discount Rate
change is determined by Bank. In discounting any Acceptance, Bank may deduct the
amount of the fee from Bank's payment of the amount thereof. For any Acceptance
created hereunder by Bank's acceptance of a draft presented under a usance
commercial Letter of Credit, Borrower shall pay to Bank, in addition to such
processing and other fees as may be due to Bank in connection with
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such Letter of Credit, an acceptance fee for each such Acceptance, payable on
the date it is created, in an amount determined by dividing by 360 the product
of (A) two percent (2%), (B) the face amount of such Acceptance, and (C) the
term of such Acceptance, in days. Bank shall have no obligation to repay all or
any portion of any Acceptance fee payable hereunder in the event an acceptance
is paid prior to maturity, by acceleration or otherwise.
SECTION 1.3 COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all principal, interest and fees due under the Line of Credit by charging
Borrower's demand deposit account number [ ] with Bank, or any other
demand deposit account maintained by Borrower with Bank, for the full amount
thereof. Should there be insufficient funds in any such demand deposit account
to pay all such sums when due, the full amount of such deficiency shall be
immediately due and payable by Borrower.
SECTION 1.4 COLLATERAL.
As security for all indebtedness of Borrower to Bank subject hereto,
Borrower hereby grants to Bank security interests of first priority in all
Borrower's accounts receivable and other rights to payment, general intangibles,
inventory and equipment. All of the foregoing shall be evidenced by and subject
to the terms of such security agreements, financing statements and other
documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand for
all costs and expenses incurred by Bank in connection with any of the foregoing
security, including without limitation, filing and recording fees and costs of
appraisals and audits.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement.
SECTION 2.1 LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the state of New York, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.
SECTION 2.2 AUTHORIZATION AND VALIDITY. This Agreement, the Line of
Credit Note, and each other document, contract and instrument required hereby or
at any time hereafter delivered to Bank in connection herewith (collectively,
the "Loan Documents") have been duly authorized, and upon their execution and
delivery in accordance with the provisions hereof will
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constitute legal, valid and binding agreements and obligations of Borrower or
the party which executes the same, enforceable in accordance with their
respective terms.
SECTION 2.3 NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.
SECTION 2.4 LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
SECTION 2.5 CORRECTNESS OF FINANCIAL STATEMENT. The financial statement
of Borrower dated March 31, 1998, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the financial condition of Borrower, (b) discloses all
liabilities of Borrower that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.
SECTION 2.6 INCOME TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of its income tax payable with respect to any
year.
SECTION 2.7 NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may be
bound that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8 PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.
SECTION 2.9 ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower
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(each, a "Plan"); no Reportable Event as defined in ERISA has occurred and is
continuing with respect to any Plan initiated by Borrower; Borrower has met its
minimum funding requirements under ERISA with respect to each Plan; and each
Plan will be able to fulfill its benefit obligations as they come due in
accordance with the Plan documents and under generally accepted accounting
principles.
SECTION 2.10 OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11 ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
ARTICLE III
CONDITIONS
SECTION 3.1 CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation
of Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Line of Credit Note.
(ii) Corporate Borrowing Resolution.
(iii) Certificate of Incumbency.
(iv) Articles of Incorporation.
(v) Security Agreements covering all collateral as described in
Section 1.4. hereof.
(vi) UCC-1 Financing Statements covering all collateral as
described in Section 1.4. hereof.
(vii) Continuing Commercial Letter of Credit Agreement.
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(viii) Acceptance Agreement.
(ix) Such other documents as Bank may require under any other
Section of this Agreement.
(c) Financial Condition. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower, nor any material decline, as determined by Bank, in the market value
of any collateral required hereunder or a substantial or material portion of the
assets of Borrower.
(d) Insurance. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank, and where required
by Bank, with loss payable endorsements in favor of Bank.
SECTION 3.2 CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
(a) Compliance. The representations and warranties contained herein and
in each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in
writing:
SECTION 4.1 PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein.
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SECTION 4.2 ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.
SECTION 4.3 FINANCIAL STATEMENTS. Provide to Bank all of the following,
in form and detail satisfactory to Bank:
(a) not later than 120 days after and as of the end of each fiscal
year, an unqualified audited financial statement and 10-K statements of
Borrower, prepared by a certified public accountant acceptable to Bank, to
include a balance sheet, an income statement, a statement of cash flow, a
management letter and all footnotes, along with a compliance certificate from
the Chief Financial Officer or President of Borrower;
(b) not later than 45 days after and as of the end of each fiscal
quarter, a 10-Q financial statement of Borrower, prepared by Borrower, to
include a balance sheet and an income statement, along with a compliance
certificate from the Chief Financial Officer or President of Borrower;
(c) not later than 45 days after and as of the end of each fiscal
quarter, an aged listing of accounts receivable and accounts payable, and a
reconciliation of accounts; and
(d) from time to time such other information as Bank may reasonably
request.
SECTION 4.4 COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
SECTION 4.5 INSURANCE. Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.
SECTION 4.6 FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7 TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b)
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for which Borrower has made provision, to Bank's satisfaction, for eventual
payment thereof in the event Borrower is obligated to make such payment.
SECTION 4.8 LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower with a claim in excess of
$100,000.00.
SECTION 4.9 FINANCIAL CONDITION. Maintain Borrower's financial
condition as follows using generally accepted accounting principles consistently
applied and used consistently with prior practices (except to the extent
modified by the definitions herein):
(a) Tangible Net Worth initially not at any time less than
$60,000,000.00, with said minimum to increase (1) as of each fiscal quarter end
by an amount equal to 50% of Borrower's net income after taxes for such quarter,
and (2) from time to time by an amount equal to the net proceeds of any issuance
by Borrower of common or preferred stock. "Tangible Net Worth" shall be defined
as the aggregate of total stockholders' equity plus subordinated debt less any
intangible assets.
(b) Quick Ratio not at any time less than .70 to 1.0, with "Quick
Ratio" defined as the aggregate of unrestricted cash, unrestricted marketable
securities and accounts receivable convertible into cash divided by total
current liabilities (to include all outstanding borrowings under the Line of
Credit).
(c) Ratio of Funded Debt to EBITDA not greater than 2.25 to 1.0, with
"Funded Debt" defined as the principal balance outstanding under the Line of
Credit plus the principal balance outstanding under Borrower's leasing facility
with Bank as of any given calculation date, and with "EBITDA" defined as net
profit before tax plus interest expense (net of capitalization interest
expense), depreciation expense and amortization expense, calculated on a rolling
four-quarter basis as of any given calculation date.
SECTION 4.10 NOTICE TO BANK. Promptly (but in no event more than five
(5) Business Days after the occurrence of each such event or matter) give
written notice to Bank in reasonable detail of: (a) the occurrence of any Event
of Default, or any condition, event or act which with the giving of notice or
the passage of time or both would constitute an Event of Default; (b) any change
in the name or the organizational structure of Borrower; (c) the occurrence and
nature of any Reportable Event or Prohibited Transaction, each as defined in
ERISA, or any funding deficiency with respect to any Plan; or (d) any
termination or cancellation of any insurance policy which Borrower is required
to maintain, or any uninsured or partially uninsured loss through liability or
property damage, or through fire, theft or any other cause affecting Borrower's
property in excess of an aggregate of $100,000.00. As used herein, the term
"Business Day" shall mean any day other than a Saturday, Sunday or other day on
which commercial banks in California are authorized or required by law to close.
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SECTION 4.11 YEAR 2000 COMPLIANCE. Perform all acts reasonably
necessary to ensure that (a) Borrower and any business in which Borrower holds a
substantial interest, and (b) all customers, suppliers and vendors that are
material to Borrower's business, become Year 2000 Compliant in a timely manner.
Such acts shall include, without limitation, performing a comprehensive review
and assessment of all of Borrower's systems and adopting a detailed plan, with
itemized budget, for the remediation, monitoring and testing of such systems. As
used herein, "Year 2000 Compliant" shall mean, in regard to any entity, that all
software, hardware, firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition of such entity, will
properly perform date sensitive functions before, during and after the year
2000. Borrower shall, immediately upon request, provide to Bank such
certifications or other evidence of Borrower's compliance with the terms hereof
as Bank may from time to time require.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1 USE OF FUNDS. Use any of the proceeds of any credit
extended hereunder except for the purposes stated in Article I hereof.
SECTION 5.2 OTHER INDEBTEDNESS. Create, incur, assume or permit to
exist any indebtedness or liabilities resulting from borrowings, loans or
advances, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except (a) the liabilities of Borrower to Bank,
(b) any other liabilities of Borrower existing as of, and disclosed to Bank
prior to, the date hereof, and (c) unsecured liabilities not to exceed an
aggregate of $3,000,000.00 at any time outstanding.
SECTION 5.3 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity; nor sell, lease, transfer
or otherwise dispose of all or a substantial or material portion of Borrower's
assets except in the ordinary course of its business.
SECTION 5.4 GUARANTIES. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments for deposit
or collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank and except for guaranties of the obligations of
Borrower's foreign affiliates not to exceed an aggregate of $150,000.00
outstanding at any time.
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SECTION 5.5 LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to
or investments in any person or entity, except (a) any of the foregoing existing
as of, and disclosed to Bank prior to, the date hereof, (b) any of the foregoing
made in the ordinary course of Borrower's business not to exceed an aggregate of
$100,000.00 outstanding at any time, and (c) any investments made with or
through Bank, whether in connection with a Bank deposit account or time deposit
or any other Bank investment product.
SECTION 5.6 DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower's stock now or hereafter outstanding.
SECTION 5.7 PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to
exist a security interest in, or lien upon, all or any portion of Borrower's
assets now owned or hereafter acquired, except (a) any of the foregoing in favor
of Bank or which is existing as of, and disclosed to Bank in writing prior to,
the date hereof, (b) liens for taxes and assessments not yet due, (c) mechanics,
warehousemen, carrier, landlord and other statutory liens which arise in the
ordinary course of Borrower's business for amounts not yet due, (d) liens on
equipment leased by Borrower, and (e) liens in security deposits made in the
ordinary course of Borrower's business.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1 The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in subsections (a) and (b) above), and
with respect to any such default which by its nature can be cured, such default
shall continue for a period of twenty (20) days from its occurrence.
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(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower has incurred any debt
or other liability to any person or entity, including Bank, except with respect
to any of the foregoing which is contested by Borrower as permitted hereby, and
in accordance with the terms of, Section 4.7 hereof.
(e) Any defined event of default under any of the Loan Documents other
than this Agreement.
(f) Any of the following which is not stayed or discharged within
thirty (30) days of its occurrence: the filing of a notice of judgment lien
against Borrower; or the recording of any abstract of judgment against Borrower
in any county in which Borrower has an interest in real property; or the service
of a notice of levy and/or of a writ of attachment or execution, or other like
process, against the assets of Borrower; or the entry of a judgment against
Borrower.
(g) Borrower shall become insolvent, or shall suffer or consent to or
apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of creditors;
Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors or
any other relief under the Bankruptcy Reform Act, Title 11 of the United States
Code, as amended or recodified from time to time ("Bankruptcy Code"), or under
any state or federal law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant to the Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced against
Borrower, or Borrower shall file an answer admitting the jurisdiction of the
court and the material allegations of any involuntary petition; or Borrower
shall be adjudicated a bankrupt, or an order for relief shall be entered against
Borrower by any court of competent jurisdiction under the Bankruptcy Code or any
other applicable state or federal law relating to bankruptcy, reorganization or
other relief for debtors.
(h) There shall exist or occur any event or condition which Bank in
good faith believes impairs, or is substantially likely to impair, the prospect
of payment or performance by Borrower of its obligations under any of the Loan
Documents.
(i) The dissolution or liquidation of Borrower.
(j) Any change in ownership during the term of this Agreement of an
aggregate of twenty-five percent (25%) or more of the common stock of Borrower
in any single transaction or group of related transactions.
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SECTION 6.2 REMEDIES. Upon the occurrence of any Event of Default: (a)
all indebtedness of Borrower under each of the Loan Documents, any term thereof
to the contrary notwithstanding, shall at Bank's option and without notice
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by Borrower; (b)
the obligation, if any, of Bank to extend any further credit under any of the
Loan Documents shall immediately cease and terminate; and (c) Bank shall have
all rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit accommodation from Bank subject hereto and to exercise
any or all of the rights of a beneficiary or secured party pursuant to
applicable law. All rights, powers and remedies of Bank may be exercised at any
time by Bank and from time to time after the occurrence of an Event of Default,
are cumulative and not exclusive, and shall be in addition to any other rights,
powers or remedies provided by law or equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2 NOTICES. All notices, requests and demands which any party
is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: MOTORCAR PARTS & ACCESSORIES, INC.
Attn: Xxxxxxx Xxxxx, President
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
BANK: XXXXX FARGO BANK, NATIONAL ASSOCIATION
South Bay Regional Commercial Banking Xxxxxx
000 X. Xxxxx Xxxx., Xxxxx 000
Xxxx Xxxxx, XX 00000
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days
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after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent
by telecopy, upon receipt.
SECTION 7.3 COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents, Bank's continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.
SECTION 7.4 SUCCESSORS, ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit extended by Bank to Borrower, Borrower or its
business, or any collateral required hereunder.
SECTION 7.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to any extension of credit by Bank subject hereto and supersede all
prior negotiations, communications, discussions and correspondence concerning
the subject matter hereof. This Agreement may be amended or modified only in
writing signed by each party hereto.
SECTION 7.6 NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7 TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
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SECTION 7.8 SEVERABILITY OF PROVISIONS. 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 any remaining provisions
of this Agreement.
SECTION 7.9 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same Agreement.
SECTION 7.10 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
SECTION 7.11 ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan Documents, or any
past, present or future extensions of credit and other activities, transactions
or obligations of any kind related directly or indirectly to any of the Loan
Documents, including without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or other remedies
pursuant to any of the Loan Documents. Any party may by summary proceedings
bring an action in court to compel arbitration of a Dispute. Any party who fails
or refuses to submit to arbitration following a lawful demand by any other party
shall bear all costs and expenses incurred by such other party in compelling
arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered by
the American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in California
selected by the AAA or other administrator. Tf there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. ss.91 or any similar applicable state law.
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(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration or reference hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the contrary,
in any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
California, and (iii) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
California. Judgment confirming an award in such a proceeding may be entered
only if a court determines the award is supported by substantial evidence and
not based on legal error under the substantive law of the state of California.
(f) Real Property Collateral; Judicial Reference. Notwithstanding
anything herein to the contrary, no Dispute shall be submitted to arbitration if
the Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the
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mortgage, lien or security interest specifically elects in writing to proceed
with the arbitration, or (ii) all parties to the arbitration waive any rights or
benefits that might accrue to them by virtue of the single action rule statute
of California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
(g) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
MOTORCAR PARTS & ACCESSORIES, XXXXX FARGO BANK,
INC. NATIONAL ASSOCIATION
By: /s/ Xxxxxxx Xxxxx By: /s/ Xxxx Xxxxxx
--------------------------- -----------------------
Xxxxxxx Xxxxx Xxxx Xxxxxx
President/ Vice President
Chief Operating Officer
By: /s/ Xxxxx Xxxxxxxx
-----------------------------
Xxxxx Xxxxxxxx
Chief Financial Officer/
Assistant Secretary
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