Exhibit 10.32
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (as amended, modified,
supplemented or restated from time to time, this "Agreement") is entered into as
of May 31, 2001, by and between MOTORCAR PARTS & ACCESSORIES, INC., a New York
corporation ("Borrower"), and XXXXX FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
A. Borrower is currently indebted to Bank pursuant to the terms of that
certain Amended and Restated Credit Agreement between Borrower and Bank dated as
of April 20, 2000 (as amended, the "Prior Credit Agreement"). Borrower has
requested that Bank extend the credit accommodations described below (each, a
"Credit" and collectively, the "Credits"), and Bank has agreed to extend the
Credits to Borrower on the terms and conditions contained herein.
B. Borrower has requested Bank to extend the maturity date of the Prior
Credit Agreement and amend and restate certain other terms of the Original
Credit Agreement, and Bank has consented to such request on the terms and
subject to the conditions set forth 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 CREDITS
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 April
30, 2002, not to exceed at any time the aggregate principal amount of
Twenty-Four Million Seven Hundred Fifty Thousand Dollars ($24,750,000.00) ("Line
of Credit"), the proceeds of which shall be used solely for Borrower's general
corporate and working capital requirements and shall in no event be used to fund
the Escrow Account or any settlement of the Pending Litigation (as such terms
are defined in Section 1.3(b) below). 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) LIMITATION ON BORROWINGS. Outstanding borrowings under the Line of
Credit, to a maximum of the principal amount set forth above, shall not at any
time exceed an aggregate of (i) seventy-five percent (75.0%) of Borrower's
Eligible Accounts Receivable (as defined below), PLUS (ii) eighty percent
(80.0%) of the Appraised Net Recovery Value (as defined below) of Borrower's
inventory. The amount calculated pursuant to the preceding sentence is referred
to herein as the "Borrowing Base". All of the foregoing shall be determined by
Bank upon receipt and review of all collateral reports required hereunder and
such other documents and collateral information as Bank may from time to time
require. Borrower acknowledges that the Borrowing
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Base was established by Bank with the understanding that if there at any time
exists any other matters, events, conditions or contingencies which Bank
reasonably believes may affect payment of any portion of Borrower's accounts,
Bank, in its sole discretion, may reduce the foregoing advance rate against
Eligible Accounts Receivable to a percentage appropriate to reflect additional
dilution and/or establish additional reserves against Borrower's Eligible
Accounts Receivable.
As used herein, "Eligible Accounts Receivable" shall consist solely of
trade accounts created in the ordinary course of Borrower's business, upon which
Borrower's right to receive payment is absolute and not contingent upon the
fulfillment of any condition whatsoever, and in which Bank has a perfected
security interest of first priority, and shall not include:
(i) any account which is remains unpaid more than sixty (60) days past
the due date thereof;
(ii) that portion of any account for which there exists any right of
setoff (including deposits, loans and warranties), defense or discount (except
regular discounts allowed in the ordinary course of business to promote prompt
payment) or for which any defense or counterclaim has been asserted;
(iii) any account which represents an obligation of any state or
municipal government or of the United States government or any political
subdivision thereof (except accounts which represent obligations of the United
States government and for which the assignment provisions of the Federal
Assignment of Claims Act, as amended or recodified from time to time, have been
complied with to Bank's satisfaction);
(iv) any account which represents an obligation of an account debtor
located in a foreign country other than an account debtor located in the
Canadian provinces of Alberta, British Columbia, Manitoba, Ontario, Saskatchewan
or the Yukon Territory so long as, in Bank's determination, such Canadian
jurisdictions recognize Bank's first priority security interest in and right to
collect such account as a consequence of any security agreements and UCC filings
in favor of Bank and except to the extent any such account, in Bank's
determination, is supported by a letter of credit or insured under a policy of
foreign credit insurance, in each case in form, substance and issued by a party
acceptable to Bank;
(v) any account which arises from the sale or lease to or performance
of services for, or represents an obligation of, an employee, director,
affiliate, partner, member, parent or subsidiary of Borrower;
(vi) that portion of any account which represents interim or progress
xxxxxxxx or retention rights on the part of the account debtor;
(vii) any account which represents an obligation of any account debtor
when twenty percent (20%) or more of Borrower's accounts from such account
debtor are not eligible pursuant to (i) above;
(viii) that portion of any account from an account debtor which
represents the amount by which Borrower's total accounts from said account
debtor exceeds twenty-five
2
percent (25%) of Borrower's total accounts; PROVIDED, HOWEVER, that this
limitation shall not apply to any accounts owing by AutoZone so long as the
senior unsecured debt rating of AutoZone, Inc. by Standard & Poor's (a division
of the McGraw-Hills Companies) is BBB- or better AND such rating by Xxxxx'x
Investors Service is Baa3 or better;
(ix) any account deemed ineligible by Bank when Bank, in its sole
discretion, deems the creditworthiness or financial condition of the account
debtor, or the industry in which the account debtor is engaged, to be
unsatisfactory.
As used herein, "Appraised Net Recovery Value" of Borrower's inventory
shall mean the amount reflected as the "net recovery value" of Borrower's
inventory in the most recent quarterly appraisal of inventory (performed by the
Great American Group) required pursuant to Section 4.11.
(c) LETTER OF CREDIT SUBFEATURE. As a subfeature under the Line of Credit,
Bank agrees from time to time during the term thereof to issue or cause to be
issued standby letters of credit for the account of Borrower (each, a "Letter of
Credit" and collectively, "Letters of Credit") to provide credit support for
Borrower's workmen's compensation obligations; 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 One Million Six
Hundred Thousand Dollars ($1,600,000.00). On March 31, 2002, any Letter of
Credit with an expiry date subsequent to April 30, 2002 shall be fully cash
collateralized. The undrawn amount of all Letters of Credit shall be reserved
under the Line of Credit and shall not be available for borrowings 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 advances under
the Line of Credit are not available, for any reason, at the time any draft is
paid by Bank, then Borrower shall immediately pay to Bank the full amount of
such draft, 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, in its sole discretion, may debit any demand deposit account
maintained by Borrower with Bank for the amount of any such draft.
(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. The principal amount of the Line of Credit outstanding shall be repaid in
accordance with the provisions of the Line of Credit Note.
SECTION 1.2 TERM LOAN.
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(a) TERM LOAN. Subject to the terms and conditions of this Agreement, Bank
hereby agrees to make a loan to Borrower in the principal amount of Nine Million
Dollars ($9,000,000.00) ("Term Loan"), the proceeds of which shall be used for
general corporate and working capital purposes of Borrower; PROVIDED that no
portion of the Term Loan shall be used to fund the Escrow Account or any
settlement of the Pending Litigation. Borrower's obligation to repay the Term
Loan shall be evidenced by a promissory note substantially in the form of
EXHIBIT B attached hereto ("Term Note"), all terms of which are incorporated
herein by this reference. The Term Loan shall be funded on the Closing Date (as
defined below).
(b) REPAYMENT. The principal amount of the Term Loan shall be repaid in
accordance with the provisions of the Term Note.
(c) PREPAYMENT. Borrower may prepay principal on the Term Loan at any time,
in any amount and without penalty.
SECTION 1.3 INTEREST/FEES.
(a) INTEREST. Subject to Section 1.3(c), the outstanding principal balance
of the Line of Credit Note shall bear interest at the Prime Rate PLUS the
Applicable Line of Credit Margin MINUS any Litigation Margin Adjustment. The
outstanding principal balance of the Term Note shall bear interest at the Prime
Rate PLUS the Applicable Term Loan Margin MINUS any Litigation Margin
Adjustment. As of the Closing Date (as defined below), the Applicable Line of
Credit Margin shall be two and three-quarters percent (2.75%) and the Applicable
Term Loan Margin shall be three percent (3.0%). Each such margin shall be
adjusted quarterly on the date that the monthly financial statements for the
month corresponding with such quarter end are required to be delivered pursuant
to Section 4.3(b); PROVIDED, HOWEVER, that if a Default has occurred with
respect to any of the financial reporting obligations set forth in Section 4.3,
Bank shall have the option to apply the Applicable Line of Credit Margin and the
Applicable Term Loan Margin at 3.00% and 3.25%, respectively, and the option to
apply the default interest rate, until such Default is cured. If a Termination
of Settlement occurs, then on the first day of the calendar month following the
month in which any Termination of Settlement occurs, Borrower shall pay to Bank
additional interest in an amount equal to the sum of (x) the cumulative
reduction to interest otherwise payable pursuant to this Agreement as a result
of the Litigation Margin Adjustment, PLUS (y) the cumulative reduction to
interest otherwise payable pursuant to the Superseded Note (as defined below) as
a result of the establishment of the Escrow Account.
(b) INTEREST RATE DEFINITIONS. The following terms when used in this
Agreement shall have the following meanings:
(i) "Adjusted EBITDA" shall mean net income plus, to the extent
deducted to arrive at net income, the sum of (a) taxes, (b) interest expense,
(c) depreciation and amortization, (d) an amount not in excess of $1,500,000
related to the settlement of the Pending Litigation, (e) an amount not in excess
of $900,000 of non-recurring facilities closing and consolidation charge during
the fiscal quarter ended Xxxxx 00, 0000, (x) up to an aggregate amount not in
excess of $1,700,000 for inventory stock adjustments and core returns charged as
expenses during the months of December 2000 and January 2001, and (g) an amount
equal to any non-cash charge or non-cash credit to earnings resulting from the
reduction of the exercise price of the Warrants
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issued in favor of Bank pursuant to the Amendment to Warrant delivered pursuant
to Section 3.1(b)(iii).
(ii) "Applicable Line of Credit Margin" shall mean at any time the
applicable margin set forth below, based on the Funded Debt to Adjusted EBITDA
Ratio as of the most recent calculation date:
------------------------------------------------------------ ---------------------------------------------------------
FUNDED DEBT TO ADJUSTED EBITDA RATIO APPLICABLE LINE OF CREDIT MARGIN
------------------------------------------------------------ ---------------------------------------------------------
Less than or equal to 4.5 2.25%
------------------------------------------------------------ ---------------------------------------------------------
More than 4.5, but less than or equal to 5.0 2.50%
------------------------------------------------------------ ---------------------------------------------------------
More than 5.0, but less than or equal to 5.5 2.75%
------------------------------------------------------------ ---------------------------------------------------------
More than 5.5 3.00%
------------------------------------------------------------ ---------------------------------------------------------
(iii) "Applicable Term Loan Margin" shall mean the Applicable Line of
Credit Margin PLUS one quarter of one percent (0.25%).
(iv) "Escrow Account" shall mean an escrow account established in an
amount of not less than Seven Million Five Hundred Thousand Dollars
($7,500,000.00) pursuant to and as further described in the Memorandum of
Understanding.
(v) "Funded Debt" shall mean all indebtedness of Borrower outstanding
on any date of determination, including capitalized leases, standby letters of
credit and the maximum outstanding obligations of Borrower with respect to any
guaranties and contingent obligations.
(vi) "Funded Debt to Adjusted EBITDA Ratio" shall mean, as of any date
of determination, the ratio of Funded Debt as of the last day of the testing
period to the total of Borrower's Adjusted EBITDA for the twelve month period
ending on the last day of such testing period.
(vii) "Litigation Margin Adjustment" shall mean (a) one quarter of one
percent (0.25%) per annum for any period from and after the date the Escrow
Account is opened and prior to the Settlement, or (b) one half of one percent
(0.50%) from and after the Settlement; PROVIDED, HOWEVER, that no Litigation
Margin Adjustment shall be made if a Termination of Settlement occurs.
(viii) "Memorandum of Understanding" shall mean that certain
Memorandum of Understanding executed by the parties to the Pending Litigation
between March 7, 2001 and March 12, 2001 as filed in connection with the Pending
Litigation.
(ix) "Pending Litigation" shall mean that certain litigation pending
against Borrower identified as XXXXXX X. XXXXXXX, XXX ON BEHALF OF HIMSELF AND
OTHER SIMILARLY SITUATED, PLAINTIFF V. MOTORCAR PARTS AND ACCESSORIES, INC., XXX
XXXXX, XXXXXXX XXXXX AND XXXXX XXXXXXXXX, DEFENDANTS.
(x) "Prime Rate" shall mean at any time the rate of interest most
recently
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announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof in such
internal publication or publications as Bank may designate. Each change in the
rate of interest shall become effective on the date each Prime Rate change is
announced within Bank.
(xi) "Settlement" shall mean the Pending Litigation is settled and all
releases in favor of Borrower described in the Memorandum of Understanding have
been received by Borrower and a dismissal with prejudice of the Pending
Litigation has been filed with the United States District Court, Central
District of California, Western Division.
(xii) "Termination of Settlement" shall mean the settlement of the
Pending Litigation on the terms and subject to the conditions set forth in the
Memorandum of Understanding is revoked or terminated by any party, or any party
to the Memorandum of Understanding indicates in writing that it does not intend
to settle the Pending Litigation in accordance with the terms of the Memorandum
of Understanding.
(c) DEFAULT INTEREST. From and after the maturity date of the Line of
Credit Note and/or the Term Note, or such earlier date as all principal owing
under such note becomes due and payable by acceleration or otherwise, the
outstanding balance of the Line of Credit and the Term Loan shall bear interest
until paid in full at a rate per annum equal to four percent (4%) above the rate
of interest otherwise applicable to such obligations.
(d) COMPUTATION AND PAYMENT. Interest shall be computed on the basis of a
360 day year, actual days elapsed. Interest shall be payable on the Line of
Credit and on the Term Loan on the first day of each month, commencing June 1,
2001.
(e) RESTRUCTURING FEE. Borrower shall pay to Bank a restructuring fee equal
to one and one-quarter percent (1.25%) of the sum of the Line of Credit and the
Term Loan. One-quarter of one percent (0.25%) of the sum of the Line of Credit
and the Term Loan shall be fully earned and non-refundable and shall be paid in
cash on the Closing Date. The other one percent (1.0%) of the sum of the Line of
Credit and the Term Loan shall be fully earned on the Closing Date, but shall be
payable on December 15, 2001; PROVIDED that if the Term Loan is repaid in full,
the Line of Credit is repaid in full and terminated and all other fees and
expenses reimburseable to Bank pursuant to this Agreement and any other Loan
Document have been paid in full prior to such date, then the portion of the
restructuring fee due on December 15, 2001 shall be waived by Bank.
(f) UNUSED COMMITMENT FEE. Borrower shall pay to Bank a fee equal to
three-quarters of one percent (0.75%) per annum (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 a monthly basis by Bank and
shall be due and payable by Borrower in arrears on the first business day of the
following month.
(g) LETTER OF CREDIT FEES. Borrower shall pay to Bank fees upon the
issuance of each Letter of Credit, upon the payment or negotiation by Bank of
each draft under any Letter of
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Credit and upon the occurrence of any other activity with respect to any
Letter of Credit (including without limitation, the transfer, amendment or
cancellation of any Letter of Credit) determined in accordance with Bank's
standard fees and charges then in effect for such activity. In addition,
Borrower shall pay to Bank a fee equal to three percent (3.0%) per annum
(computed on the basis of a 360-day year, actual days elapsed) on the average
daily face amount of Letters of Credit outstanding, which fee shall be
calculated on a monthly basis by Bank and shall be due and payable by
Borrower in arrears on the first business day of the following month.
SECTION 1.4 MANDATORY PREPAYMENTS. Borrower shall repay the Line of Credit
on any date on which the outstanding balance of the Line of Credit plus the face
amount of all Letters of Credit outstanding exceeds the Borrowing Base. In
addition, Borrower shall prepay the Credits from time to time in an amount equal
to one hundred percent (100%) of (i) the net proceeds of any sales by Borrower
of assets outside the ordinary course of business, (ii) the net proceeds of any
debt or equity issuance by Borrower (exclusive of up to $1,500,000 of equity to
be issued by Borrower to Xxx Xxxxx in connection with the settlement of the
Pending Litigation), (iii) the net proceeds of any insurance payment received by
Borrower (exclusive of any payments received by Borrower under its Director's
and Officer's insurance policy in connection with the Pending Litigation), and
(iv) any and all local, state, or federal tax refunds received by Borrower from
time to time. Each prepayment of the Credits required by this Section 1.4 shall
first be applied to the Term Loan, and thereafter shall be applied to the
outstanding principal balance of the Line of Credit. On the date that any
repayment under the Line of Credit is required pursuant to the preceding
sentence, the Line of Credit shall be permanently reduced by a corresponding
amount.
SECTION 1.5 COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all
principal, interest and fees due under any Loan Document (as defined below) by
charging Borrower's demand deposit account number 4608-043691 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. Borrower authorizes Bank to (a)
apply all amounts on deposit in such account at the close of each business day
to the outstanding balance of the Line of Credit, and (b) make advances under
the Line of Credit after the close of business each business day in an amount
equal to any overdraft reflected with respect to such demand deposit account;
PROVIDED, that Borrower acknowledges and agrees that any advance described in
this clause (b) shall be subject to all of the terms and conditions applicable
to advances under the Line of Credit set forth in this Agreement and the other
Loan Documents.
SECTION 1.6 COLLATERAL. As security for all indebtedness of Borrower to
Bank or Trade Bank subject hereto, Borrower hereby re-affirms its prior grant to
Bank and Trade Bank of security interests of first priority in all Borrower's
accounts, 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, deeds of trust and other documents as
Bank or Trade Bank shall reasonably require, all in form and substance
satisfactory to Bank (and, as appropriate, Trade Bank). Borrower shall reimburse
Bank and Trade Bank immediately upon demand for all costs and expenses incurred
by Bank or Trade Bank in connection with any of the foregoing security,
including without limitation, filing and recording fees and costs of
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appraisals and audits.
SECTION 1.7 CERTAIN LOAN DOCUMENTS SUPERSEDED. As of the Closing Date, the
Prior Credit Agreement shall be deemed to have been amended and restated in its
entirety by this Agreement, the Revolving Line of Credit Note in the principal
amount of $33,750,000.00 dated March 28, 2001 (the "Superseded Note") made by
Borrower in favor of Bank shall be amended and restated in its entirety by the
Line of Credit Note and the Term Note, and the indebtedness evidenced by the
Superseded Note shall be evidenced first by the Term Note, and then, to the
extent of the remaining principal amount outstanding thereunder, by the Line of
Credit Note. To the extent that the Prior Credit Agreement provides for costs,
expenses, fees and indemnities in favor of Bank, Borrower promises to pay all
such costs, expenses, fees and indemnities.
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, the Term 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 constitute
legal, valid and binding agreements and obligations of Borrower or the party
which executes the same, enforceable in accordance with their respective terms.
The Certificate of Incumbency delivered to Bank in connection with the First
Amendment to the Prior Credit Agreement remains true and correct as of the date
of this Agreement, and the officers of Borrower identified in such Certificate
of Incumbency are duly authorized by all necessary corporate action to execute
this Agreement and each other Loan Document to be executed and delivered in
connection herewith.
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.
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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 statements of
Borrower dated February 28, 2001, 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 disclosed on Schedule 5.2.
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
which would result in any obligation to pay additional taxes.
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 (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
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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 grant any of the Credits is subject to the fulfillment to Bank's
satisfaction of all of the following conditions on or before June 15, 2001:
(a) APPROVAL OF BANK COUNSEL. All legal matters incidental to the granting
of each of the Credits 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, the Line of Credit Note, and the Term Note.
(ii) An Amendment to Warrant in form and substance satisfactory to
Bank, which shall reduce the exercise price of the Warrant from $2.045 per share
to $0.01 per share.
(iii) A Corporate Borrowing Resolution and resolutions of the Board of
Directors of Borrower approving the execution and delivery of the Amendment to
Warrant.
(iv) Such other documents as Bank or Trade 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.
(e) REIMBURSEMENT OF EXPENSES; RESTRUCTURING FEE. Borrower shall have
reimbursed Bank for all fees, costs and expenses (including without limitation
the allocated cost of in-house counsel and all audit and appraisal fees)
incurred by Bank in connection with the negotiation of
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documentation of the transaction described herein and in the other Loan
Documents. In addition, Borrower shall have paid Bank the portion of the
restructuring fee required to be paid on the Closing Date as described in
Section 1.3(e).
The date on which all such conditions have been satisfied (or waived by Bank in
its sole discretion) and the initial extension of credit is made by Bank
hereunder is referred to herein as the "Closing Date".
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.
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 AND INFORMATION. Provide to Bank all of
the following, in form and detail satisfactory to Bank:
(a) not later than June 30, 2001, Borrower's Form 10-K for the fiscal year
ended March 31, 2001 as filed with the Securities Exchange Commission (the
"SEC"), and financial
11
statements of Borrower, audited by independent certified public accountants
acceptable to Bank, to include a balance sheet, income statement and statement
of cash flows and all footnotes;
(b) not later than 45 days after and as of the end of each fiscal quarter,
Borrower's Form 10-Q as filed with the SEC;
(c) not later than 30 days after the end of each month, monthly financial
statements of Borrower (to include a narrative explaining the reasons for any
variances from the Projections (as defined below) and a progress report on the
Settlement of the Pending Litigation), together with a Compliance Certificate
substantially in the form of EXHIBIT C from the Chief Financial Officer or
President of Borrower (and accompanying calculations in form and substance
satisfactory to Bank);
(d) not later than the last business day of each calendar week, a cash
forecast for Borrower by week for the thirteen week period beginning of the
first day of the following calendar week together with the actual cash flows for
the preceding week, a comparison of such cash flows to the most recent cash
forecast and an explanation of any material variances;
(e) not later than 20 days after and as of the end of each month beginning
with the month ending June 30, 2001, a Borrowing Base Certificate substantially
in the form of EXHIBIT D, together with an inventory collateral report, an aged
listing of accounts receivable and accounts payable, and a reconciliation of
accounts, and immediately upon each request from Bank, a list of the names and
addresses of all Borrower's account debtors;
(f) contemporaneously with each annual and monthly financial statement of
Borrower required hereby, a certificate of the President or Chief Financial
Officer of Borrower that said financial statements are accurate and that there
exists no Event of Default nor any condition, act or event which with the giving
of notice or the passage of time or both would constitute an Event of Default;
(g) not later than July 31, 2001, a Certificate of Incumbency executed by
Borrower;
(h) within five business days of receipt by Borrower and in any event not
later than September 30, 2001, the management letter prepared by Borrower's
independent certified public accountants in connection with their audit for the
fiscal year ended March 31, 2001;
(i) promptly, and in any event within five business days after Borrower has
knowledge thereof, a report describing any material development in connection
with the Pending Litigation, including any Settlement or Termination of
Settlement; and
(j) 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.
12
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) 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 (a) any
litigation pending or threatened against Borrower with a claim in excess of
$100,000.00, and (b) the terms of any modifications to the settlement of any
pending or threatened litigation and the proposed source of funding for any such
settlement.
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) Monthly EBITDA, calculated on a monthly basis beginning with the month
ended April 30, 2001, shall at all times equal not less than 110% of the sum of
Borrower's monthly interest and lease payment obligations; PROVIDED, HOWEVER,
that if in any given month Borrower's EBITDA is less than 110% but not less than
100% of the sum of Borrower's monthly interest and lease payment obligations,
then Borrower shall not be in default under this provision so long as the sum of
Borrower's EBITDA for such month when combined with that of the immediately
preceding month exceeds 110% of the sum of Borrower's monthly interest and lease
payment obligations for such month when combined with that of the immediately
preceding month. "EBITDA" shall refer to Borrower's net income, PLUS in each
case to the extent deducted to arrive at net income, interest expense (net of
capitalized interest expense), taxes, depreciation expense and amortization
expense, and an amount equal to any non-cash charge or non-cash credit to
earnings resulting from the reduction of the exercise price of the Warrants
issued in favor of Bank pursuant to the Amendment to Warrant delivered pursuant
to Section 3.1(b)(iii).
(b) Net Operating Income/(Loss), calculated on a monthly basis beginning
with the month ended April 30, 2001, shall never be more than 10% less than (in
the case of income) or 10% greater than (in the case of loss) the amount of
income/loss reflected in the Projections for such month; PROVIDED, HOWEVER, that
if in any given month Borrower's Net Operating Income/(Loss) does vary more than
such permitted 10% variance from the Projections for such
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month, Borrower shall not be in default under this provision so long as the sum
of Borrower's Net Operating Income/(Loss) for such month when combined with that
of the immediately preceding month is within such permitted 10% variance from
the Projections for such two-month period. "Net Operating Income/(Loss)" as used
herein shall mean all income (not including any interest income) before
deducting interest expense and taxes. "Projections" as used herein shall mean
those certain financial projections for the fiscal year ending March 31, 2002
prepared by Borrower and delivered to Bank, a copy of which are attached hereto
as EXHIBIT E.
(c) Gross sales, calculated on a monthly basis beginning with the month
ended April 30, 2001, shall never be less than 90% of the amount of gross sales
reflected in the Projections for such month; PROVIDED, HOWEVER, that if in any
given month Borrower's gross sales are less than 90% of gross sales as reflected
in the Projections for such month, Borrower shall not be in default under this
provision so long as the sum of Borrower's gross sales for such month when
combined with that of the two immediately preceding months is at least 90% of
the gross sales reflected in the Projections for such three-month period.
(d) Minimum Tangible Net Worth not at any time less than the sum of (i)
Borrower's Tangible Net Worth as of March 31, 2001, PLUS (ii) as of each month
end from and after May 31, 2001, an amount equal to 50% of Borrower's net income
after taxes for such month, PLUS (iii) an amount equal to any increase in
Tangible Net Worth in connection with the Settlement, including in connection
with a purchase of capital stock by Xxx Xxxxx, MINUS (iv) an amount equal to any
charge or credit to earnings resulting from the reduction of the exercise price
of the Warrants issued in favor of Bank pursuant to the Amendment to Warrant
delivered pursuant to Section 3.1(b)(iii). "Tangible Net Worth" is defined as
the aggregate of total stockholders' equity plus subordinated debt minus any
intangible assets.
(e) Minimum Adjusted EBITDA, calculated as of the last day of each month
beginning with the month ended April 30, 2001, of not less than the amount set
forth opposite such date for the twelve month period ending on such date:
April 30, 2001 $6,000,000
May 31, 2001 $6,000,000
June 30, 2001 and each $6,500,000
month ending thereafter
(f) Stock adjustments for the fiscal year ended March 31, 2002 shall not
exceed $900,000 or 30,000 units.
(g) Maximum Funded Debt to Adjusted EBITDA Ratio, calculated as of the last
day of calendar quarter beginning with the quarter ended March 31, 2001, less
than or equal to the ratio set forth opposite such date below:
March 31, 2001 less than or equal to 5.50
June 30, 2001 less than or equal to 5.75
September 30, 2001 less than or equal to 5.50
December 31, 2001 less than or equal to 5.00
March 31, 2002 less than or equal to 4.75
14
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.
SECTION 4.11 QUARTERLY FIELD EXAMINATIONS AND APPRAISALS. Borrower shall
permit Bank and its agents, representatives, auditors and appraisers access to
its facilities, books and records, and provide such other assistance as
requested by Bank or any such person (a) to enable Bank's appraisers to complete
quarterly inventory appraisals, with the first inventory appraisal after the
Closing Date to be completed by July 31, 2001 with respect to inventory as of
June 30, 2001, and to establish the "Appraised Net Recovery Value" of inventory
on a quarterly basis for purposes of Section 1.1(b), (b) to enable Bank's
auditors to complete quarterly field audit examinations. The results of each
field audit examination must be in form and substance satisfactory to Bank. Such
examinations and appraisals shall be in addition to and shall in no way limit
any other rights to audit and appraise Bank's collateral provided to Bank in
this Agreement and in the other Loan Documents. Borrower shall reimburse Bank
immediately upon demand for all costs and expenses incurred by Bank in
connection with such examinations and appraisals.
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 of the Credits
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, and (b) any
other liabilities of Borrower existing as of the date hereof and identified on
Schedule 5.2.
15
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.
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.
SECTION 5.8 CAPITAL EXPENDITURES. Make or incur Capital Expenditures in
excess of $1,000,000.00 in any twelve month period. "Capital Expenditures" shall
refer to the aggregate cost of all assets which have been (or shall be)
classified and accounted for as a capital asset on the Borrower's balance sheet.
The limitation on Capital Expenditures set forth in this Section 5.8 shall be
tested on the last calendar day of each month, and shall include the twelve
months ending on such date, whether or not any portion of such period occurred
prior to the Closing Date.
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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 ten (10) days from its occurrence.
(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 seek 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
17
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 series or related transactions.
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 each 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 of the Credits 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.
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx, President
18
BANK: XXXXX FARGO BANK, NATIONAL ASSOCIATION
Loan Adjustment Group
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxx
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 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; PROVIDED, that Bank shall obtain
a written confidentiality agreement including standard terms and conditions in
connection with any such disclosure of material, non-public information relating
to Borrower.
SECTION 7.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to the Credits 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
19
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.
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. If 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.
20
(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 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
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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.
SECTION 7.12 GENERAL RELEASE. In consideration of the benefits provided to
Borrower under the terms and provisions hereof, Borrower hereby agrees as
follows ("General Release"):
(a) Borrower, for itself and on behalf of its successors and assigns, does
hereby release, acquit and forever discharge Bank, all of Bank's predecessors in
interest, and all of Bank's past and present officers, directors, attorneys,
affiliates, employees and agents, of and from any and all claims, demands,
obligations, liabilities, indebtedness, breaches of contract, breaches of duty
or of any relationship, acts, omissions, misfeasance, malfeasance, causes of
action, defenses, offsets, debts, sums of money, accounts, compensation,
contracts, controversies, promises, damages, costs, losses and expenses, of
every type, kind, nature, description or character, whether known or unknown,
suspected or unsuspected, liquidated or unliquidated, each as though fully set
forth herein at length (each, a "Released Claim" and collectively, the "Released
Claims"), that Borrower has as of the Effective Date of this Amendment
(hereafter, the "Release Date"), including without limitation, those Released
Claims in any way arising out of, connected with or related to any and all prior
credit accommodations, if any, provided by Bank, or any of Bank's predecessors
in interest, to Borrower, and any agreements, notes or documents of any kind
related thereto or the transactions contemplated thereby or hereby, or any other
agreement or document referred to herein or therein.
(b) Borrower hereby acknowledges, represents and warrants to Bank as
follows:
(i) Borrower understands the meaning and effect of Section 1542 of the
California Civil Code which provides:
"Section 1542. GENERAL RELEASE; EXTENT. A GENERAL RELEASE DOES NOT
EXTEND TO CLAIMS WHICH THE
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CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
(ii) With regard to Section 1542 of the California Civil Code,
Borrower agrees to assume the risk of any and all unknown, unanticipated or
misunderstood defenses and Released Claims which are released by the provisions
of this General Release in favor of Bank, and Borrower hereby waives and
releases all rights and benefits which it might otherwise have under Section
1542 of the California Civil Code with regard to the release of such unknown,
unanticipated or misunderstood defenses and Released Claims.
(c) Each person signing below on behalf of Borrower acknowledges that he or
she has read each of the provisions of this General Release. Each such person
fully understands that this General Release has important legal consequences and
each such person realizes that they are releasing any and all Released Claims
that Borrower may have as of the Release Date. Borrower hereby acknowledges that
it has had an opportunity to obtain a lawyer's advice concerning the legal
consequences of each of the provisions of this General Release.
(d) Borrower hereby specifically acknowledges and agrees that: (i) none of
the provisions of this General Release shall be construed as or constitute an
admission of any liability on the part of Bank; (ii) the provisions of this
General Release shall constitute an absolute bar to any Released Claim of any
kind, whether any such Released Claim is based on contract, tort, warranty,
mistake or any other theory, whether legal, statutory or equitable; and (iii)
any attempt to assert a Released Claim barred by the provisions of this General
Release shall subject Borrower to the provisions of applicable law setting forth
the remedies for the bringing of groundless, frivolous or baseless claims or
causes of action.
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, NATIONAL
INC., a New York corporation ASSOCIATION
By: ____________________________________ By: _______________________________
Xxxxxxx X. Xxxxx Xxxxx X. Xxx
Chief Executive Officer and President Vice President
By: ____________________________________
Xxxxxxx X. Xxxxxxx
Chief Financial Officer
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