EXHIBIT 10.38
CREDIT AGREEMENT
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
AND
MELLON BANK, N.A.
MARCH 25, 1997
TABLE OF CONTENTS
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PAGE(S)
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ARTICLE I DEFINITIONS..................................................... 1
SECTION 1.1 Defined Terms........................................... 1
SECTION 1.2 Other Definitional Provisions........................... 9
ARTICLE II THE CREDIT..................................................... 9
SECTION 2.1 The Revolving Loans..................................... 9
(a) The Revolving Commitment................................... 9
(b) Making the Revolving Loans................................. 9
(c) Reduction of the Revolving Commitment...................... 10
(d) Revolving Note............................................. 10
SECTION 2.2 Letters of Credit....................................... 10
SECTION 2.3 Repayment............................................... 13
(a) Mandatory Repayments....................................... 13
(b) Optional Payment........................................... 13
SECTION 2.4 Interest Rate and Payment Dates......................... 13
(a) Payment.................................................... 13
(b) Interest Rate.............................................. 13
(c) Rate Periods............................................... 14
(d) Default Rate of Interest................................... 14
(e) Selection, Conversion or Renewal of Rate Options........... 14
(f) Prime Rate Fallback........................................ 14
SECTION 2.5 Commitment Fee.......................................... 15
ARTICLE III GENERAL PROVISIONS CONCERNING THE LOANS....................... 15
SECTION 3.1 Use of Proceeds......................................... 15
SECTION 3.2 Computation of Interest and Fees........................ 15
(a) Calculations............................................... 15
(b) Determination by Bank...................................... 15
SECTION 3.3 Payments................................................ 15
SECTION 3.4 Payment on Non-Business Days............................ 16
SECTION 3.5 Reduced Return.......................................... 16
SECTION 3.6 Indemnities and Losses.................................. 16
(a) Indemnities................................................ 16
(b) Funding Losses............................................. 17
SECTION 3.7 Requirements of Law..................................... 17
ARTICLE IV CONDITIONS OF LENDING.......................................... 18
SECTION 4.1 Conditions Precedent to Initial Loans................... 18
SECTION 4.2 Conditions Precedent to Each Borrowing.................. 19
ARTICLE V REPRESENTATIONS AND WARRANTIES.................................. 20
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TABLE OF CONTENTS
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(continued)
PAGE(S)
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SECTION 5.1 Representations and Warranties.......................... 20
(a) Organization............................................... 20
(b) Authorization.............................................. 20
(c) Governmental Consents...................................... 21
(d) Validity................................................... 21
(e) Financial Condition........................................ 21
(f) Litigation................................................. 21
(g) Employee Benefit Plans..................................... 21
(h) Disclosure................................................. 21
(i) Environmental Matters...................................... 22
(j) Employee Matters........................................... 22
(k) Solvency................................................... 22
(l) Title to Properties........................................ 22
(m) Tax Returns................................................ 23
(n) Compliance with Other Agreements and Applicable Laws....... 23
ARTICLE VI COVENANTS...................................................... 23
SECTION 6.1 Affirmative Covenants................................... 23
(a) Financial Information...................................... 23
(b) Notices and Information.................................... 24
(c) Corporate Existence, Etc................................... 25
(d) Payment of Taxes and Claims................................ 25
(e) Maintenance of Properties; Insurance....................... 26
(f) Inspection................................................. 26
(g) Compliance with Laws Etc................................... 26
(h) Hazardous Waste Studies.................................... 26
SECTION 6.2 Negative Covenants...................................... 27
(a) Consolidated Fixed Charge Coverage Ratio................... 27
(b) Consolidated Current Ratio................................. 27
(c) Consolidated Total Liabilities to Tangible Net Worth Ratio. 27
(d) Consolidated Net Income.................................... 27
(e) Liens Etc.................................................. 27
(f) Indebtedness............................................... 27
(g) Consolidation, Merger or Dissolution....................... 27
(h) Loans, Investments, Secondary Liabilities.................. 27
(i) Asset Sales................................................ 28
(j) Dividends.................................................. 28
(k) Limitation on Granting of Liens and on Restrictions on
Subsidiary Dividends and Other Transfers................... 28
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TABLE OF CONTENTS
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(continued)
PAGE(S)
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(l) Transactions with Affiliates............................... 29
(m) Books and Records.......................................... 29
(n) Restructure................................................ 29
(o) No Further Negative Pledges................................ 29
ARTICLE VII EVENTS OF DEFAULT............................................. 29
SECTION 7.1 Events of Default....................................... 29
ARTICLE VIII MISCELLANEOUS................................................ 32
SECTION 8.1 Amendments, Etc......................................... 32
SECTION 8.2 Notices, Etc............................................ 32
SECTION 8.3 Right of Setoff......................................... 32
SECTION 8.4 No Waiver; Remedies..................................... 32
SECTION 8.5 Costs and Expenses...................................... 32
SECTION 8.6 Participations.......................................... 33
SECTION 8.7 Effectiveness: Binding Effect........................... 33
SECTION 8.8 Governing Law; Choice of Forum; Service of Process; Jury
Trial Waiver........................................... 33
SECTION 8.9 Waiver of Notices....................................... 34
SECTION 8.10 Destruction of Borrower's Documents.................... 34
SECTION 8.11 Entire Agreement....................................... 34
SECTION 8.12 Severability of Provisions............................. 35
SECTION 8.13 Execution in Counterparts.............................. 35
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CREDIT AGREEMENT
This Credit Agreement dated as of March 25, 1997 is entered into
between KEYSTONE AUTOMOTIVE INDUSTRIES, INC., a California corporation (the
"Borrower") and MELLON BANK, N.A. (the "Bank"). The Borrower and the Bank agree
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as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Defined Terms. As used in this Agreement, the following
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terms have the following meanings:
"Agreement": This Credit Agreement, as amended, supplemented or
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modified from time to time.
"Applicable Margin": As of any date of determination, with respect to
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Prime Rate Option Revolving Loans or Libor Rate Option Revolving Loans, as
applicable, the percentage set forth opposite the Leverage Ratio in effect as of
such date set forth in the table below:
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LEVERAGE RATIO APPLICABLE MARGIN APPLICABLE MARGIN
LIBOR RATE OPTION PRIME RATE OPTION
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Less than or equal to 1.15:1.00 .75% 0%
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Greater than 1.15:1.00 .875% 0%
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provided, however, that, notwithstanding the foregoing, for purposes of
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determining the Applicable Margin, the Leverage Ratio shall be deemed to be
greater than 1.15 to 1.0 at all time when an Event of Default or Potential Event
of Default has occurred and is continuing based on the Borrower's failure to
deliver any financial statement or compliance certificate as and when required
pursuant to Sections 6.1(a)(i) and (iv) or 6.1(a)(ii) and (iv), as applicable.
For purposes of this Agreement, any change in the Applicable Margin based on a
change in the Leverage Ratio shall be effective at such time as the Bank shall
have (i) reviewed the financial statements and compliance certificate required
by Sections 6.1(a)(i) and (iv) or 6.1(a)(ii) and (iv), as applicable, reflecting
such change in the Leverage Ratio warranting a change in the Applicable Margin
and (ii) redetermined the Applicable Margin based upon such financial statements
and compliance certificate. The initial Applicable Margin to be effective as of
the date hereof shall be .75% with respect to Libor Rate Option Revolving Loans
and 0% with respect to the Prime Rate Option Revolving Loans until such time as
Bank has received the audited annual financial statements for Borrower's fiscal
year ending March 28, 1997.
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"Average Unused Portion of the Revolving Commitment": The Revolving
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Credit less the average Daily Balance for the immediately preceding three-month
period.
"Bank": As set forth in the introductory paragraph of this Agreement.
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"Borrower": As set forth in the introductory paragraph of this
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Agreement.
"Borrowing": As defined in Section 2.1.
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"Business Day": Any day on which the Bank is open for business at the
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location where the Note is payable unless otherwise stated.
"Capital Expenditures": As applied to any Person, all expenditures
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made and liabilities incurred for the acquisition of any fixed asset or
improvement, replacement, substitution or addition thereto which has a useful
life of more than one year and including, without limitation, those arising in
connection with Capital Leases.
"Capital Leases": As applied to any Person, any lease of any property
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(whether real, personal or mixed) by that Person as lessee which would, in
accordance with GAAP, be required to be accounted for as a capital lease on the
balance sheet of that Person.
"Change of Control": Shall be deemed to have occurred at such times
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as: (a) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Act of 1934), becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than thirty percent (30%) of the total voting power of all
classes of stock then outstanding of Borrower normally entitled to vote in the
election of directors; or (b) the Borrower shall fail to own directly one
hundred percent (100%) of the issued and outstanding common stock of any
Guarantor or shall lose voting control of the issued and outstanding common
stock of any Guarantor.
"Commitment": The Bank's obligation to make Loans to the Borrower
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pursuant to Article II in the amount or amounts referred to therein.
"Consolidated Interest Expense": For any period shall mean total
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interest expense (including amounts properly attributable to Capital Leases in
accordance with GAAP) of Borrower and its Subsidiaries on a consolidated basis
for such period determined in conformity with GAAP.
"Consolidated Tangible Net Worth": At any date of determination, the
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sum of the capital stock, additional paid-in capital, and retained earnings (or
minus accumulated deficit) of the Borrower and its Subsidiaries on a
consolidated basis, minus (i) treasury stock, and (ii) intangible assets
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(including, without limitation, franchises, patents, patent applications,
trademarks, brand names, goodwill, purchased contracts and deferred charges
(including unamortized debt discount and expense and organization costs)),
determined in conformity with GAAP.
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"Daily Balance": The amount of Loans and Letters of Credit owed at
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the end of a given day.
"Dollars and $": Dollars in lawful currency of the United States of
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America.
"EBITDA": For any period, the consolidated net income of Borrower and
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its Subsidiaries before Consolidated Interest Expense and provision for income
taxes and without giving effect to any extraordinary gains and gains from sales
of assets (other than sales of inventory in the ordinary course of business),
for such period, adjusted by adding thereto the amount of (a) depreciation and
(b) amortization of intangibles, in each case to the extent deducted in arriving
at consolidated net income for such period.
"ERISA": The Employee Retirement Income Security Act of 1974, as
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amended to the date hereof and from time to time hereafter and any successor
statute.
"ERISA Affiliate": As applied to any Person, any trade or business
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(whether or not incorporated) which is a member of a group of which that Person
is a member and which is under common control within the meaning of Section
414(b) and (c) of the Internal Revenue Code.
"Events of Default": Has the meaning set forth in Section 7.1.
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"Fixed Charge Coverage Ratio": As of the date of determination,
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EBITDA, for the twelve month period preceeding the date of determination minus
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Capital Expenditures for the twelve month period preceeding the date of
determination (excluding Permitted Acquisitions), divided by the sum of (i)
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Consolidated Interest Expense for the preceding twelve month period preceding
the date of determination, (ii) cash dividends or other cash distributions on
the capital stock of the Borrower actually paid during the twelve month period
preceding the date of determination, (iii) the principal amount of all long-term
liabilities determined in accordance with GAAP including Capital Leases coming
due within the twelve month period following the date of determination, and (iv)
provision for income taxes for the twelve month period preceeding the date of
determination.
"GAAP": Generally accepted accounting principles set forth in the
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opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession or any public commission having regulatory responsibility over the
Borrower or any Subsidiary.
"Guarantors": Any material Subsidiary of the Borrower, as determined
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by Bank, organized under the laws of the United States of America or any
political subdivision thereof.
"Indebtedness": Of any Person, without duplication:
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(a) all indebtedness of such Person for borrowed money;
(b) all Obligations of such Person for the deferred purchase
price of property or services but excluding trade payables and accrued
expenses incurred in the ordinary course of business;
(c) all Obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments but excluding trade payables
and accrued expenses incurred in the ordinary course of business;
(d) all Obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property);
(e) all Obligations of such Person as lessee under Capital
Leases;
(f) all Obligations, contingent or otherwise, of such Person
under acceptance, letter of credit or similar facilities;
(g) all Indebtedness of others referred to in clauses (a) through
(f) above guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such
Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor)
property, or to purchase or sell services, primarily for the purpose
of enabling the debtor to make payment of such Indebtedness or to
assure the holder of such Indebtedness against loss, (iii) to supply
funds to or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of whether such
property is received or such services are rendered) or (iv) otherwise
to assure a creditor against loss; and
(h) all Indebtedness referred to in clauses (a) through (f) above
secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on
property (including, without limitation, accounts and contract rights)
owned by such Person, even though such Person has not assumed or
become liable for the payment of such Indebtedness.
"Interest Rate Options": Has the meaning set forth in Section 2.4(b).
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"Internal Revenue Code": The Internal Revenue Code of 1986, as
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amended to the date hereof and from time to time hereafter and any successor
statute.
4
"Letters of Credit": The trade or standby letters of credit which are
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from time to time issued or opened by Bank for the account of Borrower.
"Leverage Ratio": At any date of determination, the ratio of (a)
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total liabilities of the Borrower and its Subsidiaries on a consolidated basis
at such date to (b) Consolidated Tangible Net Worth.
"Lien": Any lien, mortgage, deed of trust, pledge, security interest,
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charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest).
"Libor Rate": For any day for any proposed or existing Rate Segment
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corresponding to a Rate Period shall mean the rate per annum determined by the
Bank to be the rate per annum obtained by dividing (the resulting quotient to be
rounded upward to the nearest 1/16 of 1%) (A) the rate of interest (which shall
be the same for each day in such Rate Period) estimated in good faith by the
Bank in accordance with its usual procedures (which determination shall be
conclusive) to be the average of the rates per annum for deposits in United
States dollars offered to major money center banks in the London interbank
market at approximately 11:00 a.m., London time, two London Business Days prior
to the first day of such Rate Period for delivery on the first day of such Rate
Period in amounts comparable to such Rate Segment (or, if there are no such
comparable amounts actively traded, the smallest amounts actively traded) and
have maturities comparable to such Rate Period by (B) a number equal to 1.00
minus the Libor Rate Reserve Percentage for such day.
The "Libor Rate" may also be expressed by the following formula:
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[average of rates offered to major
money banks in the London inter-
Libor Rate = bank market estimated by the Bank]
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[1.00 - Libor Rate Reserve Percentage]
"LIBOR Rate Option": Has the meaning set forth in Section 2.4(b).
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"Libor Rate Reserve Percentage": For any day shall mean the
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percentage (rounded upward to the nearest 1/16 of 1%), as determined in good
faith by the Bank (which determination shall be conclusive) as representing for
such day the maximum effective reserve requirement (including, without
limitation, supplemental, marginal and emergency requirements ) for member banks
of the Federal Reserve System with respect to eurocurrency funding (currently
referred to as "Eurocurrency Liabilities") of any maturity. Each Libor Rate
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shall be adjusted automatically as of the effective date of any change in the
Libor Rate Reserve Percentage.
"Loans": Loans made to the Borrower pursuant to Section 2.1.
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5
"Loan Documents": This Agreement, the Note(s) and each guarantee,
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including, but not limited to, the guaranties of the Guarantors, and other
document required by the Bank in connection with this Agreement and/or the
credit extended hereunder.
"London Business Day": A day for dealing in deposits in Dollars by
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and among banks in the London interbank market.
"Maturity Date": March 23, 1998.
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"Note" and "Notes": The Revolving Note(s).
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"Obligation": With respect to any Person, any obligation of such
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Person of any kind, including, without limitation, any liability of such Person
on any claim, whether or not the right of any creditor to payment in respect of
such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured or unsecured, and
whether or not such claim is discharged, stayed or otherwise affected by any
insolvency proceeding under the U.S. Bankruptcy Code, as amended, or under any
other bankruptcy or insolvency law. Without limiting the generality of the
foregoing, the Obligations of the Borrower under the Loan Documents include (a)
the obligation to pay principal, interest, charges, expenses, fees, attorneys'
fees and disbursements, indemnities and other amounts payable by the Borrower
under any Loan Document and (b) the obligation to reimburse any amount in
respect of any of the foregoing that any Lender, in its sole discretion, may
elect to pay or advance on behalf of the Borrower.
"PBGC": The Pension Benefit Guaranty Corporation established pursuant
----
to Subtitle A of Title IV of ERISA.
"Permitted Acquisitions": Acquisitions, whether by merger or
----------------------
consolidation with any Person or the acquisition of all or substantially all of
the assets of any Person, of the Borrower and its Subsidiaries that meet all of
the following criteria: (i) the Borrower must be the surviving entity of any
such acquisition, (ii) the acquired business shall be engaged in the manufacture
or distribution of aftermarket collision replacement parts for automobiles and
light trucks, (iii) the Borrower shall be in pro-forma covenant compliance after
giving effect to the acquisition (including giving effect to the incurrence of
any debt associated with the acquisition) as of the most recently ended
reporting period, (iv) the acquired business, if acquired as an entity, must
have a positive net income for the trailing twelve months to the date of the
acquisition, (v) the Borrower shall not have acquired the business through a
hostile takeover or similar nonconsensual transaction, (vi) the total cash
consideration paid for any Permitted Acquisition (in a single transaction or in
a series of related transactions) shall not exceed $5,000,000; provided that the
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total cash consideration paid by Borrower for the acquisition of North Star
Plating Company shall not be included in determining Borrower's compliance with
the $5,000,000 maximum cash consideration to be paid for Permitted Acquisitions,
(vii) no Event of Default or Potential Event of Default would result from such
acquisition, and (viii) with respect to the acquisition by Borrower of North
Star Plating
6
Company, the Bank shall have approved any Liens remaining on the assets of North
Star Plating Company after giving effect to the acquisition.
"Person": An individual, partnership, corporation, limited liability
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company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority or other entity of whatever nature.
"Plan": Any employee pension benefit plan maintained or contributed
----
to by the Borrower or any ERISA Affiliate of the Borrower and insured by the
Pension Benefit Guaranty Corporation under Title IV of ERISA.
"Portion": "Prime Rate Portion" shall mean at any time the part,
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including the whole, of the unpaid principal amount of the Note bearing interest
at such time under the Prime Rate Option, in accordance with the first sentence
of Section 2.4(d) hereof, or in accordance with Section 2.4(f) hereof. "Libor
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Rate Portion" shall mean at any time, the part, including the whole, of the
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unpaid principal amount of the Note bearing interest at such time under the
Libor Rate Option or in accordance with the second sentence of Section 2.4(d)
hereof.
"Potential Event of Default": A condition or event which, after
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notice or lapse of time or both, would constitute an Event of Default if that
condition or event were not cured or removed within any applicable grace or cure
period.
"Prime Rate": The interest rate per annum announced from time to time
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by the Bank as its Prime Rate. The Prime Rate may be greater or less than other
interest rates charged by the Bank to other borrowers and is not solely based or
dependent upon the interest rate which the Bank may charge any particular
borrower or class of borrowers. Information concerning the Prime Rate may be
obtained from the Bank.
"Prime Rate Option": Has the meaning set forth in Section 2.4(b).
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"Rate Period": As defined in Section 2.4(c).
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"Rate Segment": Of the Libor Rate Portion at any time shall mean the
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entire principal amount of such Portion to which at such time there is
applicable a particular Rate Period beginning on a particular day and ending on
another particular day. (By definition, each Portion is at all times composed
of an integral number of discrete Rate Segments, each corresponding to a
particular Rate Period, and the sum of the principal amounts of all Rate
Segments of a particular Portion at any time equals the principal amount of such
Portion at such time).
"Regulation G, T, U and X": Regulations G, T, U and X, respectively,
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promulgated by the Board of Governors of the Federal Reserve System, as amended
from time to time, and any successors thereto.
7
"Revolving Commitment": The amount of $25,000,000, as such amount may
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be reduced pursuant to Section 2.1(c); provided, however, $5,000,000 of the
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Revolving Commitment amount shall be reserved to be made available by Bank to
the Borrower at such time and as needed to finance the acquisition by Borrower
of North Star Plating Company, such increased Revolving Commitment amount to
remain in effect thereafter upon the effectiveness of such acquisition.
"Revolving Loans": As defined in Section 2.1(a).
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"Revolving Note": As defined in Section 2.1(d).
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"S.E.C.": The United States Securities and Exchange Commission and
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any successor institution or body which performs the functions or substantially
all of the functions thereof.
"Solvent": When used with respect to any Person, that as of the date
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as to which the Person's solvency is to be measured:
(i) the fair saleable value of its assets is in excess of the
total amount of its liabilities (including contingent
liabilities) as they become absolute and matured;
(ii) it has sufficient capital to conduct its business; and
(iii) it is able to meet its debts as they mature.
"Standard Notice": An irrevocable notice provided by the Borrower to
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the Bank on a Business Day which is:
(i) at least the Business Day of the selection of, conversion to
or renewal of the Prime Rate Option or prepayment of any
Prime Rate Portion; and
(ii) at least three London Business Days in advance in the case
of selection of, conversion to or renewal of the Libor Rate
Option or prepayment of any Libor Rate Portion.
Standard Notice must be provided no later than 11:00 a.m., Los Angeles time, on
the last day permitted for such notice.
"Subsidiary": Of any Person means any corporation, partnership, joint
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venture, limited liability company, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such partnership,
8
limited liability company or joint venture or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or controlled
by such Person, by such Person and one or more of its other Subsidiaries or by
one or more of such Person's other Subsidiaries. References to a "wholly owned
Subsidiary" shall be deemed to include a Subsidiary that is wholly owned by such
Person except for directors or other qualifying shares.
"Total Indebtedness": All consolidated Indebtedness of the Borrower
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and its Subsidiaries.
SECTION 1.2 Other Definitional Provisions.
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(a) All terms defined in this Agreement shall have the defined
meanings when used in the Notes or any certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms not defined in
subsection 1.1, and accounting terms partly defined in subsection 1.1 to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified.
ARTICLE II
THE CREDIT
SECTION 2.1 The Revolving Loans.
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(a) The Revolving Commitment. The Bank agrees, on the terms and
------------------------
conditions hereinafter set forth, to make loans ("Revolving Loans") to the
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Borrower from time to time during the period from the date hereof to and
including the Maturity Date in an aggregate amount not to exceed the Revolving
Commitment, as such amount may be reduced pursuant to Section 2.1(c). Each
borrowing under this Section (a "Borrowing") shall be in a minimum amount of
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$1.00; provided that every selection of, conversion to or renewal of the Libor
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Rate Option shall be in a minimum principal amount of $500,000 or an integral
multiple of $100,000 above such amount. Within the limits of the Revolving
Commitment and prior to the Maturity Date, the Borrower may borrow, repay
pursuant to Section 2.2(b) and reborrow under this Section.
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(b) Making the Revolving Loans. The Borrower may borrow under the
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Revolving Commitment on any Business Day, provided that the Borrower shall give
the Bank Standard Notice specifying (i) the amount of the proposed Borrowing and
(ii) the requested date of the Borrowing. Upon satisfaction of the applicable
conditions set forth in Article IV, the proceeds of all such Loans will then be
made available to the Borrower by the Bank by crediting the account of the
Borrower on the books of the Bank, or as otherwise directed by the Borrower.
The Standard Notice may be given in writing (including facsimile
transmission) signed by one (1) authorized officer of the Borrower or orally,
but if the Standard Notice is provided orally, the Borrower shall confirm the
oral Standard Notice on the same day in writing (including facsimile
transmission) no later than 11:00 a.m., Los Angeles time, and any conflict
regarding a written or oral notice and the Bank's books and records applicable
to the same Borrowing shall be conclusively determined by the Bank's books and
records. The Bank shall not incur any liability to the Borrower in acting upon
any oral or written notice of Borrowing which the Bank believes in good faith to
have been given by a Person duly authorized to borrow on behalf of the Borrower.
(c) Reduction of the Revolving Commitment. The Borrower shall have
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the right, upon at least two Business Days' notice to the Bank, to terminate in
whole or reduce permanently in part the unused portion of the Revolving
Commitment, without premium or penalty, provided that each partial reduction
shall be in the aggregate amount of One Million Dollars ($1,000,000) or an
integral multiple thereof and that such reduction shall not reduce the Revolving
Commitment to an amount less than the amount outstanding hereunder on the
effective date of the reduction. Such notice shall be irrevocable and such
reduction shall not be reinstated.
(d) Revolving Note. The Loans made by the Bank pursuant hereto shall
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be evidenced by a promissory note of the Borrower, substantially in the form of
Exhibit A, with any appropriate insertions (the "Revolving Note"), payable to
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the order of the Bank and representing the obligation of the Borrower to pay the
aggregate unpaid principal amount of all Revolving Loans made by the Bank, with
interest thereon as prescribed in Section 2.4. The Bank is hereby authorized to
record in its books and records and on any schedule annexed to the Revolving
Note, the date and amount of each Revolving Loan made by the Bank, and the date
and amount of each payment of principal thereof, and in the case of Libor Rate
Option Loans, the Libor Rate, the Libor Rate Portion, and the Rate Period with
respect thereto, and any such recordation shall constitute prima facie evidence
----- -----
of the accuracy of the information so recorded; provided that failure by the
Bank to effect such recordation shall not affect the Borrower's obligations
hereunder.
SECTION 2.2 Letters of Credit.
-----------------
(a) Subject to, and upon the terms and conditions contained herein,
at the request of Borrower, Bank agrees to issue Letters of Credit for the
account of Borrower containing terms and conditions acceptable to Bank. Borrower
agrees to execute and deliver
10
any Bank applications or other agreements or documents required by the Bank for
the issuance of a Letter of Credit.
(b) In addition to any charges, fees or expenses charged by Bank in
connection with the application for, issuance, administration, or amendment of
any Letters of Credit, Borrower shall pay to Bank (i) with respect to each
issued standby letter of credit, a letter of credit fee at a rate equal to one
percent (1%) per annum of the face amount, subject to a minimum charge of $500,
payable upon issuance, such fee calculated on the basis of a three hundred sixty
(360) day year and for the actual number of days of the term for which the
standby letter of credit is to be outstanding; and (ii) with respect to trade
letters of credit, the Bank's customary charges, payable upon Borrower's receipt
of the Bank's invoice for such charges. The Borrower's obligation to pay such
fees shall survive the termination or non-renewal of this Agreement.
(c) No Letters of Credit shall be available unless on the date of the
proposed issuance of any Letter of Credit, the Revolving Loans available to
Borrower (subject to the Revolving Commitment and any availability reserves) are
equal to or greater than one hundred percent (100%) of the face amount thereof
and all other commitments and obligations made or incurred by Bank with respect
thereto. Effective on the issuance of each Letter of Credit, the amount of
Revolving Loans which might otherwise be available to Borrower shall be reduced
by one hundred percent (100%) of the face amount of the Letter of Credit. Each
Letter of Credit shall have an expiry date no later than the Maturity Date and
all such Letters of Credit shall be in form and substance acceptable to Bank in
its sole discretion. If Bank is obligated to advance funds under a Letter of
Credit, Borrower shall immediately reimburse such amount to Bank and, in the
absence of such reimbursement, the amount so advanced immediately and
automatically shall be deemed to be an advance under Section 2.1(a) above and,
thereafter, shall bear interest as a Revolving Loan initially at the Prime Rate
Option.
(d) Except in Bank's discretion, the amount of all outstanding
Letters of Credit and all other commitments and obligations made or incurred by
Bank in connection therewith shall not at any time exceed Five Million Dollars
($5,000,000).
(e) Borrower shall indemnify and hold Bank harmless from and against
any and all losses, claims, damages, liabilities, costs and expenses which Bank
may suffer or incur in connection with any Letter of Credit and any documents,
drafts or acceptances relating thereto, including, but not limited to, any
losses, claims, damages, liabilities, costs and expenses due to any action taken
by any issuer or correspondent with respect to any Letter of Credit. Borrower
assumes all risks with respect to the acts or omissions of the drawer under or
beneficiary of any Letter of Credit and for such purposes the drawer or
beneficiary shall be deemed Borrower's agent. Borrower assumes all risks for,
and agrees to pay, all foreign, Federal, State and local taxes, duties and
levies relating to any goods subject to any Letter of Credit or any documents,
drafts or acceptances thereunder. Borrower hereby releases and holds Bank
harmless from and against any acts, waivers, errors, delays or omissions,
whether caused by Borrower, by any correspondent or otherwise with respect to or
relating to any Letter of Credit. The provisions of this Section 2.2(e) shall
survive the payment of
11
Obligations and the termination or non-renewal of this Agreement. Bank agrees to
provide Borrower written notice of any event giving rise to Borrower's indemnity
obligation hereunder, but Bank shall not be liable to Borrower or any third
party for any failure to provide such notice to Borrower.
(f) Nothing contained herein shall be deemed or construed to grant
Borrower any right or authority to pledge the credit of Bank in any manner.
Borrower shall be bound by any interpretation made in good faith by Bank, absent
gross negligence, or any correspondent under or in connection with any Letter of
Credit or any documents, drafts or acceptances thereunder, notwithstanding that
such interpretation may be inconsistent with any instructions of Borrower. Bank
shall have the sole and exclusive right and authority to, and Borrower shall
not: (i) at any time an Event of Default or Potential Event of Default exists or
has occurred and is continuing, (A) approve or resolve any questions of non-
compliance of documents, (B) give any instructions as to acceptance or rejection
of any documents or goods or (C) execute any and all applications for steamship
or airway guaranties, indemnities or delivery orders, and (ii) at all times, (A)
grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letters of Credit, or
documents, drafts or acceptances thereunder. Bank may take such actions either
in its own name or in Borrower's name.
(g) Any rights, remedies, duties or obligations granted or undertaken
by Borrower to any correspondent in any application for any Letter of Credit, or
any other agreement in favor of any correspondent relating to any Letter of
Credit, shall be deemed to have been granted or undertaken by Borrower to Bank.
Any duties or obligations undertaken by Bank to any issuer or correspondent in
any application for any Letter of Credit, or any other agreement by Bank in
favor of any correspondent relating to any Letter of Credit, shall be deemed to
have been undertaken by Borrower to Bank and to apply in all respects to
Borrower.
(h) Any and all charges, commission, fees, and costs incurred by Bank
relating to the Letters of Credit shall be considered Bank expenses under
Section 8.5 hereof and immediately reimbursable by Borrower to Bank.
(i) Immediately upon the termination of this Agreement, Borrower
agrees to either (i) provide cash collateral to be held by Bank in an amount
equal to 102% of the maximum amount of Bank's obligations under outstanding
Letters of Credit, or (ii) cause to be delivered to Bank releases of all of
Bank's obligations under outstanding Letters of Credit. At any time an Event of
Default or Potential Event of Default exists or has occurred and is continuing,
upon Bank's request, Borrower will either furnish cash collateral to Bank for
the Letters of Credit, and the Revolving Loans otherwise available to Borrower
shall not be reduced as provided in Section 2.2(c) to the extent of such cash
collateral. At Bank's discretion, any proceeds of Collateral received by Bank
after the occurrence and during the
12
continuation of an Event of Default or Potential Event of Default may be held as
the cash collateral required by this Section 2.2(i).
(j) If by reason of (i) any change in any applicable law, treaty,
rule, or regulation or any change in the interpretation or application by any
governmental authority of any such applicable law, treaty, rule, or regulation,
or (ii) compliance by Bank with any direction, request, or requirement
(irrespective of whether having the force of law) of any governmental authority
or monetary authority including, without limitation, Regulation D of the Board
of Governors of the Federal Reserve System as from time to time in effect (and
any successor thereto):
(A) any reserve, deposit, or similar requirement is or shall be
imposed or modified in respect of any Letters of Credit issued hereunder, or
(B) there shall be imposed on Bank any other condition regarding
any letter of credit, or Letter of Credit, as applicable, issued pursuant
thereto; and the result of the foregoing is to increase, directly or indirectly,
the cost to the Bank of issuing, making, or maintaining any Letter of Credit, or
to reduce the amount receivable in respect thereof by Bank, then, and in any
such case, Bank may, at any time within a reasonable period after the additional
cost is incurred or the amount received is reduced, notify Borrower, and
Borrower shall pay on demand such amounts as the Bank may specify to be
necessary to compensate the Bank for such additional cost or reduced receipt,
together with interest on such amount from the date of such demand until payment
in full thereof at the Prime Rate Option. The determination by the Bank, as the
case may be, of any amount due pursuant to this Section (j), as set forth in a
certificate setting forth the calculation thereof in reasonable detail, shall,
in the absence of manifest or demonstrable error, be final and conclusive and
binding on all of the parties hereto.
SECTION 2.3 Repayment.
---------
(a) Mandatory Repayments. The aggregate principal amount of the
--------------------
Revolving Loans outstanding on the Maturity Date, together with accrued interest
thereon, shall be due and payable in full on the Maturity Date. If at any time
the aggregate outstanding Borrowings exceed the Revolving Commitment then in
effect, the Borrower shall immediately repay the excess to the Bank.
(b) Optional Payment. The Borrower shall have the right at its option
----------------
from time to time to prepay the Prime Rate Portion in whole or in part without
premium or penalty. The Borrower shall have the right to prepay the Libor Rate
Portion in whole or in part subject to Borrower's reimbursement of Lender's
funding losses, if any, resulting from such prepayment under Section 3.6(b)
hereof. Prepayments shall be made by giving the Bank Standard Notice thereof
(which shall be irrevocable), specifying the date, and amount and type of
prepayment, and upon such date the amount so specified, accrued interest
thereon, and any amounts payable under Section 3.6(b) hereof shall be due and
payable.
13
SECTION 2.4 Interest Rate and Payment Dates.
-------------------------------
(a) Payment. The principal balance of the Note shall be paid in
-------
accordance with the terms set forth in the Note. Accrued interest on the Prime
Rate Portion shall be due and payable on the last Business Day of each month
commencing on April 30, 1997. Interest on each Rate Segment of the Libor Rate
Portion shall be due and payable on the last day of the corresponding Rate
Period. Interest on each Rate Segment of the Libor Rate Portion which has a
Rate Period equal to or less than three months shall be due and payable on the
last day of the corresponding Rate Period. Interest on each Rate Segment of the
Libor Rate Portion which has a Rate Period greater than three months shall be
due and payable on the third and sixth month anniversary date of the first day
of the corresponding Rate Period, if any, and on the last day of the
corresponding Rate Period. After maturity of any part of a Note (by
acceleration or otherwise), interest on such part of the Note shall be due and
payable ON DEMAND.
(b) Interest Rate. The unpaid principal amount of the Note shall bear
-------------
interest for each day until due on one or more bases selected by the Borrower
from among the interest rate options (the "Interest Rate Options") set forth
---------------------
below. The Borrower understands and agrees that, subject to the provisions
hereof, the Borrower may select any number of Interest Rate Options to apply
simultaneously to different parts of the unpaid principal amount of the Note and
may select any number of Rate Segments to apply simultaneously to different
parts of the Libor Rate Portion.
Available Interest Rate Options
-------------------------------
Prime Rate Option: A rate per annum for each day equal to the Prime Rate plus
-----------------
the Applicable Margin.
Libor Rate Option: A rate per annum for each day equal to the Libor Rate for
-----------------
such day plus the Applicable Margin.
(c) Rate Periods. At any time the Borrower selects, converts to or
------------
renews the Libor Rate Option, the Borrower shall fix a period (the "Rate
----
Period") which shall be one, two, three or six months, which shall be acceptable
to the Bank in the Bank's sole discretion, during which the Libor Rate Option
shall apply to the corresponding Rate Segment; provided, that the Borrower may
--------
not elect a Rate Period which will end after the Maturity Date. The Bank's
right to payment of principal and interest under the Note shall in no way be
affected by the fact that one or more Rate Periods may be in effect.
(d) Default Rate of Interest. All Loans hereunder with accrued
------------------------
interest thereon, regardless of the Rate Option, and all other amounts owing
under the Loan Documents shall bear interest at a rate equal to 2% above the
applicable Interest Rate Option from and after the occurrence and during the
continuance of an Event of Default.
14
(e) Selection, Conversion or Renewal of Rate Options. Subject to the
------------------------------------------------
other provisions hereof, the Borrower may select any Interest Rate Option to
apply to the borrowings evidenced by the Note. Subject to the other provisions
hereof, the Borrower may convert any part of the unpaid principal amount of the
Note from any Interest Rate Option to the other Interest Rate Option: (a) at
any time with respect to the conversion from the Prime Rate Option to the Libor
Rate Option and (b) at the expiration of any Rate Period with respect to
conversion from or renewals of the Libor Rate Option as to the Rate Segment
corresponding to such expiring Rate Period. Whenever the Borrower desires to
select, convert or renew the Libor Rate Option, the Borrower shall give the Bank
Standard Notice thereof (which shall be irrevocable), specifying the date,
amount and type of the proposed new Rate Option. If such notice has been duly
given, and if the Bank in its sole discretion approves the proposed selection,
conversion or renewal, on and after the date specified in such notice, interest
shall be calculated upon the unpaid principal amount of the Note taking into
account such selection, conversion or renewal.
(f) Prime Rate Fallback. If any Rate Period expires, any part of the
-------------------
Rate Segment corresponding to such Rate Period which has not been converted or
renewed in accordance with Section 2.4(e) hereof automatically shall be
converted to the Prime Rate Option. If the Borrower fails to select, or if the
Bank fails to approve an Interest Rate Option to apply to the borrowings
evidenced by the Note, such borrowings shall be deemed to be at the Prime Rate
Option. If at any time the Bank shall have determined in good faith (which
determination shall be conclusive) that the accrual of interest at the Libor
Rate Option has been made unascertainable, impractical or unlawful by compliance
by the Bank in good faith with any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any government or political subdivision or any agency, authority,
bureau, central bank, commission, department or instrumentality of either, or
any court, tribunal, grand jury or arbitrator, in each case whether foreign or
domestic, or administration thereof by any official body charged with the
interpretation or administration thereof or with any request or directive of any
such event, the outstanding principal amount of the Note subject to the Libor
Rate Option shall accrue interest at the Prime Rate Option and the Borrower
shall not have the right to select the Libor Rate Option.
SECTION 2.5 Commitment Fee. The Borrower shall pay to the Bank on
--------------
the dates set forth in the following sentence, a fee (the "Commitment Fee") in
--------------
an amount equal to one-eight of one percent (.125%) per annum times the Average
Unused Portion of the Revolving Commitment. The Borrower shall pay the
Commitment Fee to the Bank quarterly in arrears, commencing on the last Business
Day of June 1997 and continuing on the last Business Day of each three-month
period ending thereafter during the term of this Agreement, and on the Maturity
Date.
ARTICLE III
GENERAL PROVISIONS CONCERNING THE LOANS
15
SECTION 3.1 Use of Proceeds. The proceeds of the Loans hereunder
---------------
shall be initially used by Borrower to repay Borrower's existing Indebtedness
with Union Bank of California and to refinance any Indebtedness assumed by the
Borrower upon the acquisition of North Star Plating Company. The remaining
balance of Loan proceeds shall be used from time to time for (i) general working
capital and corporate purposes, and (ii) Permitted Acquisitions and related
expenses.
SECTION 3.2 Computation of Interest and Fees.
--------------------------------
(a) Calculations. Interest in respect of the Prime Rate Option Loans
------------
shall be calculated on the basis of a 360 day year for the actual days elapsed.
Any change in the interest rate on a Prime Rate Loan resulting from a change in
the Prime Rate shall become effective as of the opening of business on the day
on which such change in the Prime Rate shall become effective. Interest in
respect of the Libor Rate Option Loans, and any fees payable hereunder, shall be
calculated on the basis of a 360 day year for the actual days elapsed.
(b) Determination by Bank. Each determination of an interest rate or
---------------------
fee by the Bank pursuant to any provision of this Agreement shall be conclusive
and binding on the Borrower in the absence of manifest error.
SECTION 3.3 Payments. The Borrower shall make each payment of
--------
principal, interest and fees hereunder and under the Notes, without setoff or
counterclaim, not later than 11:00 a.m. (Los Angeles time) on the day when due
in lawful money of the United States of America to the Bank at the office of the
Bank designated in writing in immediately available funds.
SECTION 3.4 Payment on Non-Business Days. Whenever any payment to be
----------------------------
made hereunder or under the Notes shall be stated to be due on a day which is
not a Business Day, such payment may be made on the next succeeding Business
Day, and with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
SECTION 3.5 Reduced Return. If the Bank shall have determined that
--------------
any applicable law, regulation, rule or regulatory requirement generally
applicable to banks located in California and Pennsylvania (collectively in this
Section 3.5, "Requirement" regarding capital adequacy, or any change therein, or
-----------
any change in the interpretation or administration thereof by any United States
federal or state governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by the
Bank with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on the
Bank's capital as a consequence of its Commitments and obligations hereunder to
a level below that which would have been achieved but for such Requirement,
change or compliance (taking into consideration the Bank's policies with respect
to capital adequacy) by an amount deemed by the Bank to be material (which
amount shall be
16
determined by the Bank's reasonable allocation of the aggregate of such
reductions resulting from such events), then from time to time, within five (5)
Business Days after demand by the Bank, the Borrower shall pay to the Bank such
additional amount or amounts as will compensate the Bank for such reduction. The
Bank does not presently have knowledge of any new Requirement or any pending
change in any existing Requirement which would result in such additional amounts
being owed.
SECTION 3.6 Indemnities and Losses.
----------------------
(a) Indemnities. Whether or not the transactions contemplated hereby
-----------
shall be consummated, the Borrower agrees to indemnify, pay and hold the Bank,
and the shareholders, officers, directors, employees and agents of the Bank
(each, an "Indemnified Person"), harmless from and against any and all claims,
-------------------
liabilities, losses, damages, costs and expenses (whether or not any of the
foregoing Indemnified Persons is a party to any litigation), including, without
limitation, reasonable attorneys' fees and costs (including, without limitation,
the reasonable estimate of the allocated cost of in-house legal counsel and
staff) and costs of investigation, document production, attendance at a
deposition, or other discovery, prior to the assumption of defense by the
Borrower, with respect to or arising out of any proposed acquisition by the
Borrower or any of its Subsidiaries of any Person or any securities (including a
self-tender), this Agreement or any use of proceeds hereunder, or any claim,
demand, action or cause of action being asserted against the Borrower or any of
its Subsidiaries (collectively, the "Indemnified Liabilities"), provided that
-----------------------
the Borrower shall have no obligation hereunder with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of any such
Indemnified Persons. If any claim is made, or any action, suit or proceeding is
brought, against any Indemnified Person pursuant to this Section, the
Indemnified Person shall notify the Borrower within thirty (30) days of the
Bank's being notified in writing of the commencement of such action, suit or
proceeding, and the Borrower will assume the defense of such action, suit or
proceeding, employing counsel selected by the Borrower and reasonably
satisfactory to the Indemnified Person, and pay the fees and expenses of such
counsel. This covenant shall survive termination of this Agreement and payment
of the outstanding Notes for a period of six (6) years.
(b) Funding Losses. The Borrower agrees to indemnify the Bank and to
--------------
hold the Bank harmless from any loss or expense, including, but not limited to,
any such loss or expense arising from interest or fees payable by the Bank to
lenders of funds obtained by it in order to maintain its Libor Rate Option Loans
hereunder, which the Bank may sustain or incur as a consequence of (i) payment,
prepayment or conversion of any part of any Rate Segment of the Libor Rate
Portion on a day other than the last day of the corresponding Rate Period
(whether or not any such payment is pursuant to demand by the Bank under the
Note and whether or not any such payment, prepayment or conversion is consented
to by the Bank, unless the Bank shall have expressly waived such indemnity in
writing); (ii) default by the Borrower in making a conversion or continuation
after the Borrower has given a notice thereof, (iii) default by the Borrower in
making any payment after the Borrower has given a notice of payment, (iv)
attempt by Borrower to revoke in whole or part any irrevocable notice given
pursuant to Section 2.4(e) hereof; or (v) breach of or default by any obligor in
the
17
performance or observance of any covenant or condition in the Note, any separate
security, guarantee or suretyship agreement between the Bank and any obligor, or
any other document executed and delivered to the Bank by any obligor in
connection with the indebtedness evidenced by the Note. If the Bank sustains any
such loss or expense, it shall from time to time notify the Borrower of the
amount determined in good faith by the Bank (which determination shall be
conclusive) to be necessary to indemnify the Bank for such loss or expense. Such
amount shall be due and payable by the Borrower ON DEMAND. This covenant shall
survive termination of this Agreement and payment of the outstanding Notes.
SECTION 3.7 Requirements of Law. In the event that any law,
-------------------
regulation or directive generally applicable to banks located in California or
Pennsylvania or any change therein or in the interpretation or application
thereof or compliance by the Bank with any request or directive (whether or not
having the force of law) from any United States federal or state central bank or
other governmental authority, agency or instrumentality:
(a) does or shall impose, modify or hold applicable any reserve,
assessment rate, special deposit, compulsory loan or other requirement
(collectively in this Section 3.7 "Requirements") against assets held by, or
------------
deposits or other liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office of
the Bank which are not otherwise included in the determination of any Libor Rate
at the last Borrowing, conversion or continuation date of a Loan;
(b) does or shall impose, modify or hold applicable any of the
Requirements against Commitments to extend credit;
(c) does or shall impose on the Bank any other condition; and the
result of any of the foregoing is to increase the cost to the Bank of making,
renewing or maintaining its Revolving Commitment, or the Libor Rate Option Loans
or to reduce any amount receivable thereunder (which increase or reduction shall
be determined by the Bank's reasonable allocation of the aggregate of such cost
increases or reduced amounts receivable resulting from such events), then, in
any such case, the Borrower shall pay to the Bank, within five (5) Business Days
of its demand, any additional amounts necessary to compensate the Bank for such
additional cost or reduced amount receivable as determined by the Bank with
respect to Sections 3.5 and 3.7 of this Agreement. If the Bank becomes entitled
to claim any additional amounts pursuant to this subsection, it shall notify the
Borrower of the event by reason of which it has become so entitled. Such notice
shall contain a statement incorporating the calculation as to any additional
amounts payable pursuant to the foregoing sentence, and such statement submitted
by the Bank to the Borrower shall be conclusive in the absence of manifest
error. The Bank does not presently have knowledge of any new Requirement or any
pending change in any existing Requirement which would result in such additional
amounts being owed.
18
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.1 Conditions Precedent to Initial Loans. The obligation of
-------------------------------------
the Bank to make its initial Loan is subject to the conditions precedent that:
(a) The Bank shall have received on or before the day of the initial
Borrowing the following, each dated prior to or as of such day, in form and
substance satisfactory to the Bank:
(i) The Note(s) issued by the Borrower to the order of the
Bank;
(ii) Copies of the Articles of Incorporation, partnership
agreement or other organizational document of the Borrower, certified as of a
recent date by the Secretary of State of its state of formation or
incorporation;
(iii) Copies of the Bylaws, if any, of the Borrower,
certified by the Secretary or an Assistant Secretary of the Borrower;
(iv) Copies of resolutions of the Board of Directors or
other authorizing documents of the Borrower, in form and substance satisfactory
to the Bank, approving the Loan Documents and the Borrowings hereunder;
(v) An incumbency certificate executed by the Secretary or
an Assistant Secretary of the Borrower, or equivalent document, certifying the
names and signatures of the officers of the Borrower or other Persons authorized
to sign the Loan Documents and the other documents to be delivered hereunder;
(vi) An executed original of all Loan Documents;
(b) The Bank shall have completed its due diligence review of the
Borrower, and the scope and results thereof shall be satisfactory to the Bank in
its discretion;
(c) All fees required to be paid at closing shall have been paid;
(d) The Bank shall have received an opinion of counsel to the
Borrower and the Guarantors in form and substance acceptable to the Bank and its
counsel;
(e) No material adverse change shall have occurred since December 27,
1996 in the business, assets, operations, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries, taken as a whole, or in the
facts and information regarding such entities represented by the Borrower to the
Bank as of such date;
19
(f) No action, suit, investigation or proceeding shall have been
pending or threatened in any court or before any arbitration or governmental
authority that purports to affect the Borrower, any of its Subsidiaries or the
Loans contemplated hereby, or that could have a material adverse effect on the
Borrower or any of its Subsidiaries or the Loans contemplated hereby, or on the
ability of the Borrower and its Subsidiaries to perform their obligations under
the Loan Documents;
(g) The Borrower and its Subsidiaries shall have been in compliance
with all of their existing financial obligations;
(h) All information previously furnished by the Borrower to the Bank
shall be true and correct in all material respects;
(i) With the exception of Liens permitted under Section 6.2(e)
hereof, the Bank shall have received searches reflecting their release of all
other financing statements and fixture filings including, but not limited to,
those that may have been filed by Union Bank of California; and
(j) All corporate and legal proceedings and all instruments and
documents in connection with the transactions contemplated by this Agreement
shall be reasonably satisfactory in content, form and substance to the Bank and
its counsel, and the Bank and such counsel shall have received any and all
further information and documents which the Bank or such counsel may reasonably
have requested in connection therewith, such documents where appropriate to be
certified by proper corporate or governmental authorities.
SECTION 4.2 Conditions Precedent to Each Borrowing. The obligation
--------------------------------------
of the Bank to make a Loan on the occasion of each Borrowing (including the
initial Borrowing) shall be subject to the further conditions precedent that on
the date of such Borrowing (a) the following statements shall be true and the
Bank shall have received the notice required by Section 2.1(b), which notice
shall be deemed to be a certification by the Borrower that:
(i) The material representations and warranties contained in
Section 5.1 are correct on and as of the date of such Borrowing as
though made on and as of such date;
(ii) No event has occurred and is continuing, or would result
from such Borrowing, which constitutes an Event of Default or
Potential Event of Default;
(iii) Nothing shall have occurred and the Bank shall not have
become aware of any fact or condition not previously known, which the
Bank shall determine has, or could reasonably be expected to have, a
material adverse effect on the rights or remedies of the Bank, or on
the ability of the Borrower to perform its obligations to the Bank or
which has, or could
20
reasonably be expected to have, a materially adverse effect on the
performance, business, property, assets, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as
a whole; and
(iv) The security interests and liens in favor of the Bank are valid,
enforceable, and prior to all others' rights and interests, except
those the Bank consents to in writing; and
(v) All Loan Documents are in full force and effect;
and (b) the Bank shall have received such other approvals, opinions or documents
as the Bank may reasonably request.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties. The Borrower represents
------------------------------
and warrants as follows:
(a) Organization. The Borrower and each of its Subsidiaries is duly
------------
organized, validly existing and in good standing under the laws of the state of
its incorporation. The Borrower and each of its Subsidiaries is also duly
authorized, qualified and licensed in all applicable jurisdictions, and under
all applicable laws, regulations, ordinances or orders of public authorities, to
carry on its business in the locations and in the manner presently conducted
except where the failure to do so would not cause a material adverse effect.
(b) Authorization. The execution, delivery and performance by the
-------------
Borrower of the Loan Documents, and the making of Borrowings hereunder, are
within the Borrower's corporate powers, have been duly authorized by all
necessary corporate action, do not contravene (i) the Borrower's charter, by-
laws or other organizational document or (ii) any law or regulation (including
Regulations G, T, U and X) binding on or affecting the Borrower or its
properties, and will not constitute an event of default under any material
agreement to which the Borrower is a party or by which its assets or properties
may be bound.
(c) Governmental Consents. No authorization or approval or other
---------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body (except routine reports required pursuant to the Securities
Exchange Act of 1934, as amended (if such act is applicable to the Borrower),
which reports will be made in the ordinary course of business) is required for
the due execution, delivery and performance by the Borrower of the Loan
Documents.
21
(d) Validity. The Loan Documents are the binding obligations of the
--------
Borrower or other executing Person, if any, enforceable in accordance with their
respective terms.
(e) Financial Condition. The balance sheets of the Borrower and its
-------------------
consolidated Subsidiaries as of March 29, 1996 and December 27, 1996, and the
related statements of income and retained earnings of the Borrower and its
consolidated Subsidiaries, respectively, for the fiscal year and for the fiscal
nine months then ended, copies of which have been furnished to the Bank, fairly
present the financial condition of the Borrower and its consolidated
Subsidiaries as at such dates and the results of the operations of the Borrower
and its consolidated Subsidiaries for the respective periods ended on such
dates, all in accordance with GAAP, consistently applied, and since December 27,
1996, there has been no material adverse change in the business, operations,
properties, assets or condition (financial or otherwise) of the Borrower and its
Subsidiaries, taken as a whole.
(f) Litigation. Except as set forth on Schedule 5.1(f) hereto, there
----------
is no known pending or threatened action or proceeding affecting the Borrower or
any of its Subsidiaries before any court, governmental agency or arbitrator,
which may materially and adversely affect the consolidated financial condition
or operations of the Borrower or which may have a material adverse effect on the
Borrower's ability to perform its obligations under the Loan Documents, having
regard for its other financial obligations.
(g) Employee Benefit Plans. The Borrower and each of its ERISA
----------------------
Affiliates has fulfilled its obligations, if any, under the minimum funding
standards of ERISA and the Internal Revenue Code with respect to each Plan and
is in compliance in all material respects with the applicable provisions of
ERISA and the Internal Revenue Code, and has not incurred any liability with
respect to any Plan under Title IV of ERISA. No reportable event has occurred
under Section 4043(b) of ERISA for which the PBGC requires 30 day notice. No
action by the Borrower or of any ERISA Affiliate of the Borrower to terminate or
withdraw from any Plan has been taken and no notice of intent to terminate a
Plan has been filed under Section 4041 of ERISA. No proceeding has been
commenced with respect to a Plan under Section 4042 of ERISA, and no event has
occurred or condition exists which might constitute grounds for the commencement
of such a proceeding.
(h) Disclosure. No representation or warranty of the Borrower
----------
contained in this Agreement or any other document, certificate or written
statement furnished to the Bank by or on behalf of the Borrower for use in
connection with the transactions contemplated by this Agreement contains any
known untrue statement of a material fact or omits to state a known material
fact (known to the Borrower in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading. There is no fact known to the Borrower (other than matters of a
general economic nature) which materially and adversely affects the business,
operations, property, assets or condition (financial or otherwise) of the
Borrower and its Subsidiaries, taken as a whole, which has not been disclosed
herein or in such other documents, certificates and statements furnished to the
Bank for use in connection with the transactions contemplated hereby.
22
(i) Environmental Matters. Except as set forth in Schedule 5.1(i)
---------------------
hereto, neither the Borrower nor any Subsidiary, nor any of their respective
officers, employees, representatives or agents, nor, to the best of their
knowledge, any other person, has treated, stored, processed, discharged,
spilled, or otherwise disposed of any substance defined as hazardous or toxic by
any applicable federal, state or local law, rule, regulation, order or
directive, or any waste or by-product thereof, at any real property or any other
facility owned, leased or used by the Borrower or any Subsidiary, in violation
of any applicable statutes, regulations, ordinances or directives of any
governmental authority or court, which violations may result in liability to the
Borrower or any Subsidiary or any of their respective officers, employees,
representatives, agents or shareholders in an amount exceeding $100,000 for all
such violations; and the unresolved violations set forth in said Schedule 5.1(i)
will not result in liability to the Borrower or any Subsidiary or any of their
respective officers, employees, representatives, agents or shareholders in an
amount exceeding $100,000 for all such unresolved violations. Except as set
forth in said Schedule, no employee or other person has made a claim or demand
against the Borrower or any Subsidiary based on alleged damage to health caused
by any such hazardous or toxic substance or by any waste or by-product thereof;
and the unsatisfied claims or demands against the Borrower or any Subsidiary set
forth in said Schedule 5.1(i) will not result in uninsured liability to the
Borrower or any Subsidiary or any of their respective officers, employees,
representatives, agents or shareholders in an amount exceeding $100,000 in
excess of reserves on the books of the Borrower for all such unsatisfied claims
or demands. Except as set forth in said Schedule 5.1(i), neither the Borrower
nor any Subsidiary has been charged by any governmental authority with
improperly using, handling, storing, discharging or disposing of any such
hazardous or toxic substance or waste or by-product thereof or with causing or
permitting any pollution of any body of water; and the outstanding related
charges set forth in said Schedule 5.1(i) will not result in liability to the
Borrower or any Subsidiary or any of their respective officers, employees,
representatives, agents or shareholders in an amount exceeding $100,000 for all
such outstanding charges.
(j) Employee Matters. There is no known strike or work stoppage in
----------------
existence or threatened involving the Borrower or its Subsidiaries that may
materially and adversely affect the consolidated financial condition or
operations of the Borrower or that may have a material adverse effect on the
Borrower's ability to perform its obligations under the Loan Documents.
(k) Solvency. The Borrower and each of its Subsidiaries is Solvent.
--------
(l) Title to Properties. The Borrower and each of its Subsidiaries
-------------------
has good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind except those permitted under Section 6.2(e) hereof.
(m) Tax Returns. The Borrower and each of its Subsidiaries has filed
-----------
or caused to be filed, in a timely manner all tax returns, reports and
declarations which are required to be filed by it (without requests for
extension except as previously disclosed in writing to the Bank). All
information in such tax returns, reports and declarations is complete
23
and accurate in all material respects. The Borrower and each of its Subsidiaries
has paid or caused to be paid all taxes due and payable or claimed due and
payable in any assessment received by it, except taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to the Borrower or its Subsidiary and with respect to which adequate
reserves have been set aside on its books. Adequate provision has been made for
the payment of all accrued and unpaid Federal, State, county, local, foreign and
other taxes whether or not yet due and payable and whether or not disputed.
(n) Compliance with Other Agreements and Applicable Laws. Neither
----------------------------------------------------
Borrower nor any of its Subsidiaries is in default in any material respect
under, or in violation in any material respect of any of the terms of, any
agreement, contract, instrument, lease or other commitment to which it is a
party or by which it or any of its assets are bound and Borrower and each of its
Subsidiaries is in compliance in all material respects with all applicable
provisions of laws, rules, regulations, licenses, permits, approvals and orders
of any foreign, Federal, State or local governmental authority.
ARTICLE VI
COVENANTS
SECTION 6.1 Affirmative Covenants. So long as any Note shall remain
---------------------
unpaid or the Bank shall have any Commitment hereunder, the Borrower will,
unless the Bank shall otherwise consent in writing:
(a) Financial Information. Furnish to the Bank:
---------------------
(i) as soon as available, but in any event within 120 days
after the end of each fiscal year of the Borrower, (A) a copy of the
Borrower's audited consolidated balance sheet of itself and its
consolidated Subsidiaries as at the end of each fiscal year and the
related audited consolidated statements of income and retained
earnings (or comparable statement) employed in the business and
changes in financial position and cash flow for such year, setting
forth in each case in comparative form the figures for the previous
year, accompanied by an unqualified report and opinion thereon of
independent certified public accountants acceptable to the Bank, and,
if prepared, such accountants' letter to management, and (B) a copy of
the Borrower-prepared consolidating balance sheet, income statement
and cash flow prepared in connection with the statement provided in
subpart (A) above;
(ii) as soon as available, but in any event within 45 days
after the end of each fiscal quarter, the Borrower's unaudited
consolidated and consolidating balance sheets of itself and its
consolidated Subsidiaries as at the end of such period and the related
unaudited consolidated and consolidating statements of income and
retained earnings (or comparable statement) and changes in financial
24
position and cash flow for such period and year to date, setting forth
in each case in comparative form the figures as at the end of the
previous fiscal year as to the balance sheet and the figures for the
previous corresponding period as to the other statements, certified by
the Vice President - Finance or the Treasurer of the Borrower as being
fairly stated in all material respects subject to year end
adjustments; all such financial statements to be complete and correct
in all material respects and to be prepared in reasonable detail
acceptable to the Bank and in accordance with GAAP applied
consistently throughout the periods reflected therein (except as
approved by such accountants and disclosed therein); and
(iii) as soon as available, copies of all reports which the
Borrower sends to any of its security holders, and copies of all
reports and registration statements which the Borrower or any
Subsidiary files with the S.E.C. or any national securities exchange,
if any; and
(iv) (a) together with each delivery of financial statements
of Borrower and its Subsidiaries pursuant to subdivision (i) above, a
certificate, executed by the Vice President - Finance or the Treasurer
of the Borrower stating that such officer has reviewed the terms of
this Agreement and has made, or caused to be made under his
supervision, a review in reasonable detail of the transactions and
condition of the Borrower and its Subsidiaries during the accounting
period covered by such financial statements and that such review has
not disclosed the existence during or at the end of such accounting
period, and that such officer does not have knowledge of the existence
as at the date of such certificate, of any condition or event that
constitutes an Event of Default or Potential Event of Default, or, if
any such condition or event existed or exists, specifying the nature
and period of existence thereof and what action the Borrower has
taken, is taking and proposes to take with respect thereto; and (b)
together with each delivery of financial statements of the Borrower
and its Subsidiaries pursuant to subdivision (i) and (ii) above, a
certificate demonstrating in reasonable detail compliance during and
at the end of the applicable accounting periods with the restrictions
contained in Section 6.2 hereof.
(b) Notices and Information. Deliver to the Bank:
-----------------------
(i) promptly upon any officer of the Borrower obtaining
knowledge (a) of any condition or event which constitutes an Event of
Default or Potential Event of Default, (b) that any Person has given
any notice to the Borrower or any Subsidiary of the Borrower or taken
any other action with respect to a claimed default or event or
condition of the type referred to in Section 7.1(e), (c) of the
institution of any litigation involving an alleged liability
(including possible forfeiture of property) of the Borrower or any of
its Subsidiaries equal to or greater than $1,000,000 or any adverse
determination in any litigation
25
involving a potential liability of the Borrower or any
of its Subsidiaries equal to or greater than $100,000, or (d) of a
material adverse change in the business, operations, properties,
assets or condition (financial or otherwise) of the Borrower and its
Subsidiaries, taken as a whole, an officer's certificate specifying
the nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such holder or Person
and the nature of such claimed default, Event of Default, Potential
Event of Default, event or condition, and what action the Borrower has
taken, is taking and proposes to take with respect thereto;
(ii) promptly upon becoming aware of the occurrence of or
forthcoming occurrence of (a) any reportable event under Section
4043(b) of ERISA for which the PBGC requires 30 day notice, (b) any
action by the Borrower or any ERISA Affiliate of the Borrower to
terminate or withdraw from a Plan or the filing of any notice of
intent to terminate under Section 4041 of ERISA, (c) any notice of
noncompliance made with respect to a Plan under Section 4041(b) of
ERISA, and (d) the commencement of any proceeding with respect to a
Plan under Section 4042 of ERISA;
(iii) promptly, and in any event within 30 days after receipt
thereof, a copy of any notice, summons, citation, directive, letter or
other form of communication from any governmental authority or court
in any way concerning any action or omission on the part of the
Borrower or any of its Subsidiaries in connection with any substance
defined as toxic or hazardous by any applicable federal, state or
local law, rule, regulation, order or directive or any waste or
byproduct thereof, or concerning the filing of a lien upon, against or
in connection with the Borrower, its Subsidiaries, or any of their
leased or owned real or personal property, in connection with a
Hazardous Substance Superfund or a Post-Closure Liability Fund as
maintained pursuant to (S) 9507 of the Internal Revenue Code; and
(iv) promptly upon the Bank's request, such other
statements, lists of property and accounts, budgets, forecasts or
reports as to the Borrower and its Subsidiaries as the Bank may
reasonably request.
(c) Corporate Existence, Etc. At all times preserve and keep in full
-------------------------
force and effect its and its Subsidiaries' corporate existence and rights and
franchises material to its business and those of each of its Subsidiaries.
(d) Payment of Taxes and Claims. Pay, and cause each of its
---------------------------
Subsidiaries to pay, taxes, assessments and other governmental charges imposed
upon it or any of its properties or assets or in respect of any of its
franchises, business, income or property before any penalty or interest accrues
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become due and payable and
which by law have or may become a lien upon any of its properties or assets,
prior to the time
26
when any penalty or fine shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor.
(e) Maintenance of Properties; Insurance. Maintain or cause to be
------------------------------------
maintained in good repair, working order and condition all material properties
used or useful in the business of the Borrower and its Subsidiaries and from
time to time will make or cause to be made all appropriate repairs, renewals and
replacements thereof. The Borrower will maintain or cause to be maintained, with
financially sound and reputable insurers, insurance with respect to its
properties and business and the properties and business of its Subsidiaries
against loss or damage of the kinds customarily insured against by corporations
of established reputation engaged in the same or similar businesses and
similarly situated, of such types and in such amounts as are customarily carried
under similar circumstances by such other corporations. The Borrower will
comply with any other insurance requirement set forth in any other Loan Document
and, upon the request of the Bank, deliver to the Bank a copy of each insurance
policy, or, if permitted by the Bank, a certificate of insurance listing all
insurance in force.
(f) Inspection. Permit any authorized representatives designated by
----------
the Bank to visit and inspect any of the properties of the Borrower or any of
its Subsidiaries, including its and their financial and accounting records, and
to make copies and take extracts therefrom, and to discuss its and their
affairs, finances and accounts with its and their officers and independent
public accountants, all at such reasonable times during normal business hours
and as often as may be reasonably requested.
(g) Compliance with Laws Etc. Exercise, and cause each of its
-------------------------
Subsidiaries to exercise, all due diligence in order to comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, including, without limitation, all rules and regulations
of public utility commissions or similar regulatory authorities, and all
environmental laws, rules, regulations and orders, noncompliance with which
would materially and adversely affect the business, properties, assets,
operations or condition (financial or otherwise) of the Borrower and its
Subsidiaries, taken as a whole.
(h) Hazardous Waste Studies. Promptly, and in any event within thirty
-----------------------
(30) days after submission, provide the Bank with copies of all such
investigations, studies, samplings and testings as may be requested by any
governmental or regulatory authority relative to any substance defined as
hazardous or toxic by any applicable federal, state or local law, rule,
regulation, order or directive, or any waste or by-product thereof, at or
affecting any real property or any facility owned, leased or used by the
Borrower or any Subsidiary.
SECTION 6.2 Negative Covenants. So long as any Note shall remain
------------------
unpaid or the Bank shall have any Commitment hereunder, the Borrower will not,
without the written consent of the Bank:
27
(a) Consolidated Fixed Charge Coverage Ratio. As of the end of each
----------------------------------------
fiscal quarter, Borrower and its Subsidiaries on a consolidated basis permit the
Fixed Charge Coverage Ratio to be less than 1.2:1.0.
(b) Consolidated Current Ratio. At any time, permit the ratio of (i)
--------------------------
the total current assets of the Borrower and its Subsidiaries on a consolidated
basis to (ii) the total current liabilities of the Borrower and its Subsidiaries
on a consolidated basis to be less than 1.40:1.00.
(c) Consolidated Total Liabilities to Tangible Net Worth Ratio. At
----------------------------------------------------------
any time, permit the ratio of (i) the total liabilities of the Borrower and its
Subsidiaries on a consolidated basis to (ii) Consolidated Tangible Net Worth to
be greater than 1.25:1.00.
(d) Consolidated Net Income. For any fiscal quarter of the Borrower,
-----------------------
commencing with the Borrower's fiscal quarter ending March 28, 1997, permit the
net income of the Borrower and its Subsidiaries on a consolidated basis to be
less than $1.00.
(e) Liens Etc. Create or suffer to exist, or permit any of its
---------
Subsidiaries to create or suffer to exist, any Lien upon or with respect to any
of its properties, whether now owned or hereafter acquired, or assign, or permit
any of its Subsidiaries to assign, any right to receive income, in each case to
secure any indebtedness of any Person other than Liens in favor of Bank and, to
the extent the aggregate Indebtedness secured thereby does not exceed
$2,500,000, the following: (i) Liens reflected on Schedule 6.2(e) hereto; (ii)
---------------
purchase money Liens upon or in any property acquired or held by the Borrower or
any Subsidiary in the ordinary course of business to secure the purchase price
of such property or to secure indebtedness incurred solely for the purpose of
financing the acquisition of such property; and (iii) Liens for taxes not yet
due;
(f) Indebtedness. Create, incur, assume or permit to exist, or permit
------------
any Subsidiary to create, incur, assume or permit to exist, any direct or
contingent Indebtedness, liabilities or lease obligations (other than those to
the Bank), or become liable for the debts of others without the Bank's written
consent, except for (i) acquiring goods, supplies or merchandise on normal trade
credit; (ii) endorsing negotiable instruments received in the usual course of
business; (iii) obtaining surety bonds in the usual course of business; and (iv)
Indebtedness of the Borrower and its Subsidiaries in an aggregate amount
outstanding at any one time not to exceed $3,500,000.
(g) Consolidation, Merger or Dissolution. Consolidate with or merge
------------------------------------
into any other corporation or entity except for Permitted Acquisitions.
(h) Loans, Investments, Secondary Liabilities. Make or permit to
-----------------------------------------
remain outstanding, or permit any Subsidiary to make or permit to remain
outstanding, any loan or advance to, or guarantee, induce or otherwise become
contingently liable, directly or indirectly, in connection with the obligations,
stock or dividends of, or own, purchase or acquire any stock, obligations or
securities of or any other interest in, or make any capital
28
contribution to, any other Person, or make or permit to remain outstanding loans
and advances to any of its officers, directors and shareholders or enter into or
permit to remain outstanding guarantees in connection with the obligations of
any of its officers, directors and shareholders, in an aggregate amount
outstanding at any time, collectively among the Borrower and its Subsidiaries,
in excess of $250,000, except that the Borrower and its Subsidiaries may,
without limitation as to the dollar amount of any such transactions:
(i) own, purchase or acquire certificates of deposit issued
by the Bank, commercial paper rated Moody's P-1, municipal bonds rated
▇▇▇▇▇'▇ ▇▇ or better, direct obligations of the United States of
America or its agencies, and obligations guaranteed by the United
States of America;
(ii) continue to own the existing capital stock of the
Borrower's Subsidiaries;
(iii) endorse negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
and
(iv) allow the Borrower's Subsidiaries to make or permit to
remain outstanding advances from the Borrower's Subsidiaries to the
Borrower.
(i) Asset Sales. Convey, sell, lease, transfer or otherwise dispose
-----------
of, or permit any Subsidiary to convey, sell, lease, transfer or otherwise
dispose of, during any fiscal year of the Borrower, in one transaction or a
series of transactions, outside the ordinary course of business, assets of the
Borrower or of any of its Subsidiaries, whether now owned or hereafter acquired,
having an aggregate value in excess of $100,000.
(j) Dividends. Authorize, declare or pay any dividends, except that
---------
for so long as no Event of Default or Potential Event of Default has occurred
and is continuing, the Borrower may declare and pay dividends on its equity
securities.
(k) Limitation on Granting of Liens and on Restrictions on Subsidiary
-----------------------------------------------------------------
Dividends and Other Transfers. Borrower will not, and it will not permit any of
-----------------------------
its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any encumbrance or restriction on the ability of
(i) any Subsidiary to (A) pay dividends or make any other distribution on its
capital stock or any other equity interest or participation in its profits owned
by Borrower or any Subsidiary, or pay or repay any indebtedness owed to Borrower
or a Subsidiary, (B) make loans or advances to Borrower or (C) transfer any of
its properties or assets to the Borrower or any Subsidiary or (ii) Borrower or
any Subsidiary to grant Liens or security interests on the assets of such Person
in favor of Bank, except for such encumbrances or restrictions existing under or
by reason of (A) applicable law, (B) this Agreement, (C) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of Borrower or any Subsidiary, and (D) customary restrictions on dispositions of
real property interests found in reciprocal easement agreements of Borrower or
any Subsidiary.
29
(l) Transactions with Affiliates. Neither the Borrower nor any of its
----------------------------
Subsidiaries shall enter into any transaction for the purchase, sale or exchange
of property or the rendering of any service to or by any affiliate, except in
the ordinary course of and pursuant to the reasonable requirements of the
Borrower's or its Subsidiary's business and upon fair and reasonable terms no
less favorable to the Borrower or its Subsidiary than the Borrower or its
Subsidiary would obtain in a comparable arm's length transaction with an
unaffiliated person.
(m) Books and Records. The Borrower will, and will cause each of the
-----------------
Guarantors to, keep proper books of record and account in which full, true and
correct entries in conformity with GAAP and all requirements of applicable law
shall be made of all dealings and transactions in relation to their businesses
and activities.
(n) Restructure. Make any change in the principal nature of the
-----------
Borrower's business operations (taken as a whole), or the date of its fiscal
year.
(o) No Further Negative Pledges. Except with respect to specific
---------------------------
property encumbered to secure payment of particular Indebtedness, neither the
Borrower nor any of its Subsidiaries shall enter into any agreement prohibiting
the creation or assumption of any Lien upon any of its properties or assets,
whether now owned or hereafter acquired.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1 Events of Default. If any of the following events
-----------------
("Events of Default") shall occur and be continuing:
-------------------
(a) The Borrower shall fail to pay any installment of principal or
interest or any other amount payable hereunder within five (5) Business Days of
the due date thereof; or
(b) Any representation or warranty made by the Borrower herein or by
the Borrower (or any of its officers) in connection with the Loan Documents
shall prove to have been incorrect in any material respect when made; or
(c) The Borrower shall fail to perform or observe any term, covenant
or agreement contained in this Agreement on its part to be performed or observed
other than as described in Section 7.1(a) above and such failure shall continue
for ten (10) consecutive days; provided, that such ten (10) day period shall not
-------- ----
apply in the case of: (i) any failure to observe any such term, covenant,
condition or provision which is not capable of being cured at all or within such
ten (10) day period or which has been the subject of a prior failure within a
six (6) month period, or (ii) an intentional breach by Borrower of any such
term, covenant, condition or provision; or
30
(d) The Borrower or any of its Subsidiaries shall default in the
performance of or compliance with any term contained in any Loan Document other
than this Agreement and such default shall not have been remedied or waived
within any applicable grace period; or
(e) (i) The Borrower or any of its Subsidiaries shall (A) fail to pay
any principal of, or premium or interest on, any indebtedness when due (whether
by scheduled maturity, required prepayment, acceleration, demand or otherwise)
and such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such indebtedness, or (B)
fail to perform or observe any term, covenant or condition on its part to be
performed or observed under any agreement or instrument relating to any such
indebtedness or material to the performance, business, property, assets,
condition (financing or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole, when required to be performed or observed, and
such failure shall continue after the applicable grace period, if any, specified
in such agreement or instrument; or
(f) (i) The Borrower or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or the Borrower or any
of its Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower or any of its
Subsidiaries any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unhanded for a period of sixty (60) days; or (iii) there shall be commenced
against the Borrower or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which results
in the entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within thirty (30) days from the
entry thereof; or (iv) the Borrower or any of its Subsidiaries shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii) and (iii)
above; or (v) the Borrower or any of its Subsidiaries shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its debts as
they become due; or
(g) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance or reserves) equal to or greater than
$250,000 and all such judgments or decrees shall not have been vacated,
discharged, or stayed or bonded pending appeal within thirty (30) days from the
entry thereof; or
(h) Any guaranty for any reason other than satisfaction in full of all
obligations of the Borrower under the Loan Documents, ceases to be in full force
and effect or
31
is declared null and void, or any Guarantor denies that it has any further
liability under such guaranty or gives notice to such effect and any such
cessation, declaration or denial shall not have been rescinded, and such
guarantee reaffirmed, to the satisfaction of the Bank within thirty (30) days
after the Borrower knows of such development; or
(i) The occurrence of any one or more of the following events with
respect to the Borrower or any ERISA Affiliate of the Borrower provided such
event or events could reasonably be expected, in the judgment of the Bank, to
subject the Borrower or any ERISA Affiliate of the Borrower to any tax, penalty
or liability (or any combination of the foregoing) which, in the aggregate,
could have a material adverse effect on the financial condition of the Borrower
or any ERISA Affiliate of the Borrower with respect to a Plan: (A) a reportable
event shall occur with respect to a Plan which is, in the reasonable judgment of
the Bank, likely to result in the termination of such Plan for purposes of Title
IV of ERISA, or (B) any Plan termination (or commencement of proceedings to
terminate a Plan) or the full or partial withdrawal from a Plan by the Borrower
or any ERISA Affiliate of the Borrower; or
(j) There shall be instituted against the Borrower or any Subsidiary,
or against any Guarantor, any proceeding for which forfeiture of any property is
a potential penalty and such proceeding remains undismissed, undischarged or
unbonded for a period of thirty (30) days from the date the Borrower knows of
such proceeding; or
(k) A Change of Control shall have occurred.
Then, (i) upon the occurrence of any Event of Default described in
clause (f) above, the Commitment shall immediately terminate and all Loans
hereunder with accrued interest thereon, and all other amounts owing under the
Loan Documents shall automatically become due and payable, and (ii) upon the
occurrence of any other Event of Default, the Bank may, by notice to the
Borrower, declare the Commitment to be terminated forthwith, whereupon the
Commitment shall immediately terminate; and, by notice to the Borrower, declare
the Loans hereunder, with accrued interest thereon, and all other amounts owing
under the Loan Documents to be due and payable forthwith, whereupon the same
shall immediately become due and payable. 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 make demand upon any or all of the
Guarantors. All rights, powers and remedies of Bank in connection with each of
the Loan Documents 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. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
Notwithstanding any other provision of this Agreement, including Section 8.2,
notices to the Borrower under this Section shall be communicated in writing
(including facsimile transmissions).
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Amendments, Etc. No amendment or waiver of any provision
---------------
of the Loan Documents nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Bank, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 8.2 Notices, Etc. Except as otherwise set forth in this
------------
Agreement, all notices and other communications provided for hereunder shall be
in writing (including facsimile communication) and mailed or sent by facsimile
or delivered, if to the Borrower, at its address set forth on the signature page
hereof; and if to the Bank, at its address set forth on the signature page
hereof; or, as to each party, at such other address as shall be designated by
such party in a written notice to the other party. All such notices and
communications shall be effective when sent by facsimile, or three days after
such notice or communication is deposited in the mails, except that notices and
communications to the Bank pursuant to Article II or VII shall not be effective
until received by the Bank.
SECTION 8.3 Right of Setoff. Upon and only after the occurrence of
---------------
any uncured Event of Default, the Bank is hereby authorized by the Borrower, at
any time and from time to time, without notice, (a) to set off against, and to
appropriate and apply to the payment of, the obligations and liabilities of the
Borrower under the Loan Documents (whether matured or unmatured, fixed or
contingent or liquidated or unliquidated) any and all amounts owing by the Bank
to the Borrower (whether payable in Dollars or any other currency, whether
matured or unmatured, and, in the case of deposits, whether general or special,
time or demand and however evidenced) and (b) pending any such action, to the
extent necessary, to hold such amounts as collateral to secure such obligations
and liabilities and to return as unpaid for insufficient funds any and all
checks and other items drawn against any deposits so held as the Bank in its
sole discretion may elect. The Bank is authorized to debit any account
maintained with it by the Borrower for any amount of principal, interest or fees
which are then due and owing to the Bank.
SECTION 8.4 No Waiver; Remedies. No failure on the part of either
-------------------
party hereto to exercise, and no delay in exercising, any right under any of the
Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under any of the Loan Documents preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
SECTION 8.5 Costs and Expenses. The Borrower shall pay to the Bank
------------------
immediately upon demand the full amount of all costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees and all allocated
costs of the Bank's in-house counsel), incurred by the Bank in connection with
(a) the negotiation and preparation of this
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Agreement and each other of the Loan Documents, and the preparation of any
amendments and waivers hereto and thereto, (b) the enforcement of the Bank's
rights and/or the collection of any amounts which become due to the Bank under
any of the Loan Documents (including, without limitation, in appellate,
bankruptcy, insolvency, liquidation, reorganization, moratorium or other similar
proceedings) or the restructuring 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.
SECTION 8.6 Participations. The Bank may sell, assign, transfer,
--------------
negotiate or grant participations to other financial institutions in all or part
of the obligations of the Borrower outstanding under the Loan Documents,
provided that any such sale, assignment, transfer, negotiation or participation
shall be in compliance with the applicable federal and state securities laws;
and provided further that any assignee or transferee agrees to be bound by the
terms and conditions of this Agreement. The Bank may, in connection with any
actual or proposed assignment or participation, disclose to the actual or
proposed assignee or participant, any information relating to the Borrower or
any of its Subsidiaries.
SECTION 8.7 Effectiveness: Binding Effect. This Agreement shall
-----------------------------
become effective when it shall have been executed by the Borrower and the Bank
and thereafter shall be binding upon and inure to the benefit of the Borrower,
the Bank and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest herein
without the prior written consent of the Bank.
SECTION 8.8 Governing Law; Choice of Forum; Service of Process; Jury
--------------------------------------------------------
Trial Waiver.
------------
(a) The validity, interpretation and enforcement of this Agreement
and the other Loan Documents and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of California (without
giving effect to principles of conflicts of law).
(b) The Borrower and the Bank irrevocably consent and submit to the
non-exclusive jurisdiction of the state courts of the County of Los Angeles and
the United States District Court for the Central District of California and
waive any objection based on venue or forum non conveniens with respect to any
----- --- ----------
action instituted therein arising under this Agreement or any of the other Loan
Documents or in any way connected with or related or incidental to the dealings
of the parties hereto in respect of this Agreement or any of the other Loan
Documents or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above.
(c) The Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so
34
deposited in the U.S. mails, or, at the Bank's option, by service upon the
Borrower in any other manner provided under the rules of any such courts. Within
thirty (30) days after such service, the Borrower shall appear in answer to such
process, failing which the Borrower shall be deemed in default and judgment may
be entered by the Bank against the Borrower for the amount of the claim and
other relief requested.
(d) THE BORROWER AND THE BANK EACH HEREBY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR (2) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
IN CONTRACT, TORT, EQUITY OR OTHERWISE. THE BORROWER AND THE BANK EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE BORROWER OR THE BANK MAY
FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
(e) The Bank shall not have any liability to the Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by the Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and non-
appealable judgment or court order binding on the Bank, that the losses were the
result of acts or omissions constituting gross negligence or willful misconduct.
In any such litigation, the Bank shall be entitled to the benefit of the
rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
SECTION 8.9 Waiver of Notices. The Borrower hereby expressly waives
-----------------
demand, presentment, protest and notice of protest and notice of dishonor with
respect to any and all instruments and commercial paper, included in or
evidencing any of the obligations, and any and all other demands and notices of
any kind or nature whatsoever with respect to the obligations and this
Agreement, except such as are expressly provided for herein. No notice to or
demand on the Borrower which the Bank may elect to give shall entitle the
Borrower to any other or further notice or demand in the same, similar or other
circumstances.
SECTION 8.10 Destruction of Borrower's Documents. The Bank will not
-----------------------------------
be obligated to return any schedules, invoices, statements, budgets, forecasts,
reports or other papers delivered by the Borrower. The Bank will destroy or
otherwise dispose of such materials at such time as the Bank, in its discretion,
deems appropriate.
35
SECTION 8.11 Entire Agreement. This Agreement with Exhibits and
----------------
Schedules and the other Loan Documents embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings relating to the subject matter hereof.
SECTION 8.12 Severability of Provisions. In case any one or more of
--------------------------
the provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
SECTION 8.13 Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
MELLON BANK, N.A. KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
By:____________________________ By:_____________________________
Name:__________________________ Name:___________________________
Title:_________________________ Title:__________________________
By:_____________________________
Name:___________________________
Title:__________________________
Address: Address:
Mellon Bank ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
5th Floor Vice President and Treasurer
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President
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