<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1995
---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to ______________________
Commission file number 1-9511
----------------
THE COAST DISTRIBUTION SYSTEM
- -----------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-2490990
- -----------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
1982 ZANKER ROAD, SAN JOSE, CALIFORNIA 95112
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(408) 436-8611
- -----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- -----------------------------------------------------------------------------
(Former name, former address and former fiscal
year, if changed, since last year)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days. YES XX . NO .
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
5,101,088 shares of Common Stock
as of July 31, 1995
Page 1 of 89 Pages
Index to Exhibits on Sequentially Numbered Page 10
<PAGE> 2
THE COAST DISTRIBUTION SYSTEM AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30, 1995 and December 31, 1994
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- ------------
ASSETS (Unaudited) (Audited)
------ ----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 594 $ 413
Accounts receivable - net 26,534 13,277
Inventories 52,063 42,578
Other current assets 2,420 2,598
-------- --------
Total current assets 81,611 58,866
PROPERTY, PLANT, AND EQUIPMENT - NET 6,084 5,450
OTHER ASSETS 22,476 21,641
-------- --------
$110,171 $ 85,957
======== ========
LIABILITIES
-----------
CURRENT LIABILITIES
Current maturities of long-term
obligations $ 2,496 $ 3,509
Accounts payable - trade 16,288 6,954
Other current liabilities 3,129 3,264
Short-term notes payable 6,137 3,012
-------- --------
Total current liabilities 28,050 16,739
LONG-TERM OBLIGATIONS
Secured note payable to bank 33,000 21,035
Subordinated term note 7,001 9,334
Other long-term liabilities 2,431 2,456
-------- --------
42,432 32,825
REDEEMABLE PREFERRED STOCK
OF SUBSIDIARY 636 671
SHAREHOLDERS' EQUITY
Common stock, no par value;
authorized: 10,000,000;
issued and outstanding:
5,101,088 at June 30, 1995
and 5,066,848 at
December 31, 1994 19,125 18,940
Cumulative translation adjustment 102 (69)
Retained earnings 19,826 16,851
-------- --------
39,053 35,722
-------- --------
$110,171 $ 85,957
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 3
THE COAST DISTRIBUTION SYSTEM AND SUBSIDIARIES
INTERIM CONDENSED STATEMENTS OF EARNINGS
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $53,514 $57,307 $97,869 $99,664
Cost of sales, including
distribution costs 43,457 47,334 79,181 82,204
------- ------- ------- -------
Gross profit 10,057 9,973 18,688 17,460
Selling, general and
administrative expenses 5,547 6,331 12,099 12,300
------- ------- ------- -------
Operating income 4,510 3,642 6,589 5,160
Other income (expense):
Equity in net earnings
of affiliates 436 479 681 757
Interest expense (1,217) (938) (2,252) (1,737)
Other (35) 22 (14) 24
-------- ------- -------- -------
(816) (437) (1,585) (956)
-------- ------- -------- -------
Earnings before
income taxes 3,694 3,205 5,004 4,204
Income tax provision 1,470 1,177 2,008 1,535
------- ------- ------- -------
NET EARNINGS $ 2,224 $ 2,028 $ 2,996 $ 2,669
======= ======= ====== ======
Earnings per common
share (Note 3) $ .42 $ .41 $ .57 $ .55
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
THE COAST DISTRIBUTION SYSTEM AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
(Unaudited)
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,996 $ 2,669
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,324 1,578
Equity in net earnings of affiliated companies (681) (757)
Changes in assets and liabilities:
(Increase) in accounts receivable (13,257) (16,361)
(Increase) in inventories (9,485) (4,018)
Decrease in prepaids and other
current assets 178 567
Increase in accounts payable 9,334 12,143
Increase in note, accrueds, and other
current liabilities 2,990 1,508
-------- --------
Total adjustments (9,597) (5,340)
-------- --------
Net cash (used in) operating activities (6,601) (2,671)
Cash flows from investing activities:
Acquisition of businesses, net of cash
acquired (668) (3,111)
Capital expenditures (1,164) (1,323)
Decrease in other assets 5 287
-------- --------
Net cash used in investing activities (1,827) (4,147)
Cash flows from financing activities:
Net borrowings (repayments) under
line-of-credit agreement 11,965 8,156
(Repayments) of other long-term debt (3,371) (2,119)
Issuance of Common Stock pursuant to Employee
Stock Option and Stock Purchase Plans 185 187
Issuance of Common Stock in connection with
acquisition of business -- 630
Issuance of preferred stock of subsidiary in connection
with acquisition of business -- 723
Redemption of redeemable preferred stock
of subsidiary (50) --
Dividends on preferred stock of subsidiary (21) (9)
--------- ---------
Net cash provided by financing activities 8,708 7,568
-------- --------
Effect of exchange rate changes on cash (99) (53)
-------- --------
NET INCREASE (DECREASE) IN CASH 181 697
Cash beginning of period 413 654
-------- --------
Cash end of period $ 594 $ 1,351
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
THE COAST DISTRIBUTION SYSTEM AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments
necessary to present the Company's financial position as of June 30,
1995 and the results of its operations for the three and six month
periods, and cash flows for the six months, ended June 30, 1995 and
1994. The accounting policies followed by the Company are set forth
in Note A to the Company's financial statements in its Annual Report
on Form 10-K for its fiscal year ended December 31, 1994.
2. The results of operations for the three and six-month periods ended
June 30, 1995 and 1994 are not necessarily indicative of the results
to be expected for the full year.
3. Earnings per share are based upon the average number of common and
common equivalent (dilutive stock options and warrants) shares
outstanding during each period.
4. The Company leases its corporate offices, warehouse facilities and
data processing equipment. Those leases are classified as operating
leases as they do not meet the capitalization criteria of FASB
Statement No. 13. The office and warehouse leases expire over the
next seven years and the equipment leases expire over the next three
years.
The minimum future rental commitments under noncancellable operating
leases having an initial or remaining term in excess of one year as of
December 31, 1994 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
--------------------------------------------
Facilities Equipment Total
---------- --------- ---------
<S> <C> <C> <C>
Year ending December 31,
1995 $ 2,741 $54 $ 2,795
1996 2,683 11 2,694
1997 2,333 1 2,334
1998 1,925 -- 1,925
1999 1,075 -- 1,075
Later years 642 -- 642
------- --- -------
$11,399 $66 $11,465
======= === =======
</TABLE>
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
The Company is the largest wholesale distributor of replacement parts,
accessories and supplies for recreational vehicles in the United States, and
also is one of the largest wholesale distributors of boating parts, accessories
and supplies in the United States. Sales are made by the Company to retail
parts and supply stores, repair establishments and new and used recreational
vehicle and boat dealers. The Company's sales are affected primarily by (i)
usage of recreational vehicles and boats which affects the consumers' needs for
and purchases of replacement parts, repair services and supplies, and (ii)
sales of new recreational vehicles and boats, because consumers often
"accessorize" their recreational vehicles and boats at the time they purchase
them.
Net sales decreased by approximately $1,795,000 or 2% in the six
months ended June 30, 1995 as compared to the same period of 1994. Sales in
the second quarter of 1995 decreased $3,793,000 or 7% in the second quarter of
1995 as compared to the same quarter of 1994. These sales decreases were due
to (i) a softening of the economy, (ii) poor weather conditions throughout the
country, and (iii) the introduction by the Company of new private label
products and a concomitant reduction in sales of certain functionally
equivalent name-brand products. Although the Company's private label products
are sold at lower prices, it realizes higher margins on sales of such products
than it does on the functionally equivalent name-brand products.
The Company's gross margin increased to 19.1% of net sales in the six
months ended June 30, 1995 from 17.5% of the same period of 1994. For the
quarter ended June 30, 1995, the gross margin increased to 18.8% of net sales
as compared to 17.4% of net sales in 1994. These increases were due to (i)
increased sales in the Company's private label product lines, (ii) price
increases on selected products, and (iii) a shift in the mix of products sold.
Selling, general and administrative expenses decreased as a percentage
of net sales to 10.4% in the second quarter of 1995 from 11.0% for the same
quarter of 1995. This decrease was due to (i) a reduction in computer costs
and a reduction in non-competition payments as a result of the expiration of
certain non-competition agreements entered into with Sellers in acquisitions
completed in previous years, and (ii) a reduction in selling expense as a
result of the establishment of a national customer service center in San
Jose, California. In the six months ended June 30, 1995, selling, general and
administrative expenses remained unchanged as a percentage of net sales at
12.3%.
The Company maintains ownership positions of between 25% and 50% in
several companies in related industries. The Company's ownership interests in
these companies are accounted for under the equity method of accounting. Under
this method, the Company includes in its operating results its pro rata share of
the net income of these companies which is reported as "equity in net earnings
of affiliates". The Company's equity in the net earnings of these companies is
not cash, and the Company is dependent on the declaration of cash dividends by
those companies to realize any current cash from these investments.
In the six months ended June 30, 1995 interest expense increased by
$515,000, or 30%, as compared to the same period in 1994. Interest expense in
the quarter ended June 30, 1995 increased by $279,000 or 30% as compared to the
same quarter of 1994. These increases were the result of increases in
outstanding borrowings the proceeds of which were used to fund (i) a portion of
the price paid by the Company for the remaining shares of Coast Canada that
were acquired in March 1994, and (ii) increased working capital requirements as
a result the Company's expanded operations, both in Canada and the United
States, where the Company opened new distribution centers in Eau Claire,
Wisconsin, Vancouver, British Columbia, and Anchorage, Alaska.
6
<PAGE> 7
Liquidity and Capital Resources
The Company finances its working capital requirements for its domestic
operations primarily with borrowings under a long-term revolving bank credit
facility and internally generated funds. Under the credit facility, the
Company may borrow up to the lesser of (i) $40,000,000, or (ii) an amount equal
to 80% of its eligible accounts receivable and 50% of its eligible inventory
(the "borrowing base"). At July 31, 1995, outstanding borrowings under the
revolving credit facility were approximately $32,000,000. Until May 30, 1995,
the maximum sum that could be borrowed under the credit facility was
$27,000,000. Effective May 30, 1995 the Company obtained an increase in that
sum to $40,000,000 to provide funds to enable the Company to expand its
business and to provide for related increases in working capital requirements.
In addition, the Company obtained a decrease in the rate at which interest is
payable on borrowings under the credit facility to its bank lender's the prime
rate of interest and the option to have a portion of the borrowings under the
credit facility bear interest at the London Interbank Market Rate commonly
referred to as "LIBOR."
The working capital requirements for the Company's operations in
Canada are financed primarily with borrowings under a long-term revolving bank
credit facility and internally generated funds. Under that credit facility,
the Company may borrow up to the lesser of (i) US $10,000,000, or (ii) an
amount equal to 80% of the eligible accounts receivable and 50% of the eligible
inventory of Coast Canada. At July 31, 1995, outstanding borrowings under the
revolving credit facility were approximately US $4,855,000.
During the quarter ended June 30, 1995, the Company repaid $3,334,000
principal amount of subordinated term notes held by certain institutional
investors that matured during that quarter with borrowings under its credit
facility.
The Company believes that available credit under the revolving credit
facility, together with internally generated funds, will be sufficient to
enable the Company to meet its working capital requirements for the foreseeable
future.
The increases in accounts receivable, inventory, accounts payable and
bank borrowings at June 30, 1995, as compared to December 31, 1994, reflect
increases in product sales to customers and increases in inventories to meet
customer demand that typically occur in the first half of the year in
anticipation of increased consumer usage, in the spring and summer, of
recreational vehicles and boats and a concomitant demand for the repair and
replacement parts and accessories which the Company distributes.
Seasonality and Inflation
Sales of recreational vehicle and boating parts, supplies and
accessories are seasonal. The Company has significantly higher sales during
the six-month period from April through September than it does during the
remainder of the year. Because a substantial portion of the Company's expenses
are fixed, operating income declines and the Company sometimes incurs losses
and must rely more heavily on borrowings to fund operating requirements in the
months when sales are lower.
Generally, the Company has been able to pass inflationary price
increases on to its customers. However, inflation also may cause or may be
accompanied by increases in gasoline prices and interest rates. Such
increases, or even the prospect of increases in the price or shortages in the
supply of gasoline, can adversely affect the purchase and usage of recreational
vehicles, which can result in a decline in the demand for the Company's
products.
7
<PAGE> 8
PART II
ITEM 4. SUBMISSION OF MATTERS FOR VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders was held on May 25, 1995.
(b) Set forth below is the name of each director elected at the
meeting and the number of votes cast for their election and the number of votes
withheld. The election was uncontested and there were no broker non-votes in
the election.
Directors Elected at the Annual Meeting:
<TABLE>
<CAPTION>
Name of Number of Number of
Nominee/Director Votes "For" Votes "Withheld"
---------------- ----------- ----------------
<S> <C> <C>
Thomas R. McGuire 4,433,990 12,047
Louis B. Sullivan 4,433,990 12,047
John E. Turco 4,433,990 12,047
Brian P. Friedman 4,433,990 12,047
Ben A. Frydman 4,433,990 12,047
Robert S. Throop 4,433,990 12,047
</TABLE>
ITEM 5. OTHER INFORMATION
During the quarter ended June 30, 1995, the Company entered into a
Second Amended and Restated Loan and Security Agreement with Mellon Bank which,
among things, increased the maximum borrowings which the Company may obtain
from Mellon Bank under its revolving bank credit facility to $40,000,000 and
provided for new interest rate formulas which have resulted in a reduction in
the rate of interest from the rate of interest in effect under the credit
facility prior to the effective date of the Second Amendment and Restatement.
See "Management's Discussion & Analysis - Liquidity and Capital Resources".
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K AND EXHIBITS
(a) Exhibits.
Exhibit 10.1 Second Amended and Restated Loan Agreement
between the Company and Mellon Bank, together
with First Amendment thereto
Exhibit 11.1 Computations of Fully Diluted Earnings Per
Share for the Quarter and Six Months Ended
June 30, 1995
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K was filed during the quarter ended
June 30, 1994.
8
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 10, 1995 THE COAST DISTRIBUTION SYSTEM
By: /s/ SANDRA A. KNELL
----------------------------
Sandra A. Knell
Executive Vice President
and Chief Financial Officer
9
<PAGE> 10
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit Page
- ------- ------------
<S> <C> <C>
Exhibit 10.1 Second Amended and Restated Loan Agreement between
the Company and Mellon Bank, together with First Amendment
thereto. 11
Exhibit 11.1 Computations of Fully Diluted Earnings Per Share for the
Quarter and Six Months Ended June 30, 1995 87
Exhibit 27 Financial Data Schedule 89
</TABLE>
10
<PAGE> 1
EXHIBIT 10.1
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement") is made and entered into as of this 26th day of May, 1995, between
and among MELLON BANK, N.A., a national banking association ("Mellon") and
MELLON BANK CANADA, a Canadian chartered bank ("Mellon Canada", and together
with Mellon, collectively "Lender"), and THE COAST DISTRIBUTION SYSTEM, a
California corporation ("Coast"), UNITED SALES & WAREHOUSE OF TEXAS, INC., a
Texas corporation ("United Sales"), C/P PRODUCTS CORP., an Indiana corporation
("C/P"), MOHAWK TRAILER SUPPLY, INC., a New York corporation ("Mohawk") and THE
COAST DISTRIBUTION SYSTEM (CANADA) INC./LES SYSTEMES DE DISTRIBUTION COAST
(CANADA) INC., a corporation organized under the laws of the Province of Quebec
("Coast Canada"), jointly and severally (each of Coast, United Sales, C/P,
Mohawk and Coast Canada are hereinafter sometimes individually referred to as
"Borrower" and collectively referred to as the "Borrowers").
BACKGROUND
A. Coast, United Sales, C/P and Mellon Financial Corporation, a
Delaware corporation ("Mellon Financial") were parties to identical Loan and
Security Agreements, dated as of June 28, 1985, each of which was amended by a
First Amendment to Loan and Security Agreement, dated September 22, 1986, a
Second Amendment to Loan and Security Agreement, dated March 2, 1988, a Third
Amendment to Loan and Security Agreement, dated June 30, 1989, a Fourth
Amendment to Loan and Security Agreement, dated October 23, 1989, a Fifth
Amendment to Loan and Security Agreement, dated July 5,1990, a Composite
Amendment to Loan and Security Agreements, dated November 1, 1990, a Composite
Amendment Number Two to Loan and Security Agreements, dated April 12, 1991 and
a Composite Amendment Number Three to Loan and Security Agreements, dated
November 29, 1991 (collectively, the "Prior Loan Agreements"), pursuant to
which Mellon Financial made certain loans and financial accommodations
available to Borrower.
B. Mohawk and Mellon Financial are parties to that certain Loan
and Security Agreement, dated as of July 5, 1990, as amended by the Composite
Amendment to Loan and Security Agreements, dated November 1, 1990, the
Composite Amendment Number Two to Loan and Security Agreements, dated April 12,
1991, and the Composite Amendment Number Three to Loan and Security Agreements,
dated November 29, 1991 (Collectively, the "Mohawk Agreement"), pursuant to
which Mellon Financial made certain financial accommodations available to
Mohawk (the Prior Loan Agreements and the Mohawk Agreement are hereinafter
collectively referred to as the "Prior Composite Agreements").
C. Pursuant to those certain Assignment and Assumption
Agreements, dated as of May 16, 1990, between Mellon Financial and Mellon Bank
(East) PSFS National Association ("East"), Mellon Financial assigned to East
and East assumed and received all of Mellon Financial's rights, duties and
obligations under the Prior Composite Agreements.
1
<PAGE> 2
D. On January 1, 1991, East merged with and into Mellon whereupon
Mellon succeeded to all of East's rights, duties and obligations under the
Prior Composite Agreements.
E. Coast, C/P and United Sales have cross-guaranteed each others'
obligations to Mellon under the Prior Composite Agreements pursuant to
identical Continuing Guarantys, each dated June 28, 1985.
F. As of March 24, 1992, in order to permit Coast, United Sales,
C/P and Mohawk to utilize their collective bargaining power and to facilitate
the collective handling of their accounts and other matters on a consolidated
basis, Coast, United Sales, C/P and Mohawk and Mellon entered into that certain
Amended and Restated Loan and Security Agreement, as amended by that certain
First Amendment to Amended and Restated Loan and Security Agreement, dated as
of February 25, 1993, as amended by that certain Second Amendment to Amended
and Restated Loan and Security Agreement, dated as of March 8, 1993, as amended
by that certain Third Amendment to Amended and Restated Loan and Security
Agreement, dated as of January 25, 1993 (dated in error 1993 instead of 1994),
as amended by that certain Fourth Amendment to Amended and Restated Loan and
Security Agreement, dated as of March 1, 1994, as amended by that certain Fifth
Amendment to Amended and Restated Loan and Security Agreement, dated as of
December 12, 1994, and as further amended by that certain Sixth Amendment to
Amended and Restated Loan Agreement, dated as of April 11, 1995 (collectively,
the "First Amended Loan Agreement").
G. Coast now desires to add its wholly owned Canadian subsidiary,
Coast Canada, as a co-borrower to the credit facilities provided by Mellon
under the First Amended Loan Agreement to Coast, United Sales, C/P and Mohawk,
to expand the credit facilities by increasing the credit lines as hereinafter
set forth, and to provide certain Canadian Dollar priced credit facilities to
Coast Canada through Mellon's affiliate, Mellon Canada, and Lender is willing
to make such amendments and to make available additional funds and extend such
other credit accommodations pursuant to the terms and conditions set forth
below.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION
1.1 Terms Defined: All terms used herein which are
defined in Article 1 or Article 9 of the California Uniform Commercial Code
shall have the respective meanings given therein unless otherwise defined in
this Agreement. All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural. All references to
Borrowers and Lender pursuant to the definitions set forth in the recitals
hereto, or to any other person herein, shall include their respective
successors and assigns. The words "hereof", "herein", "hereunder", "this
Agreement" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not any particular provision of this Agreement
and as this Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced. The word "including"
when used in
2
<PAGE> 3
this Agreement is not limiting and, unless the context of this Agreement
clearly requires otherwise, the word "or" as used herein has the alternatively
conjunctive or disjunctive meaning represented by the phrase"and/or". An Event
of Default shall exist or continue or be continuing until such Event of Default
is waived in writing. Any accounting term used herein unless otherwise defined
in this Agreement shall have the meaning customarily given to such term in
accordance with GAAP. Accounts, Chattel Paper, Contracts, Documents,
Equipment, Fixtures, General Intangibles, Goods, Instruments and Inventory, to
the extent not defined or modified herein, and all other terms contained in
this Agreement, unless the context indicates otherwise, shall have the same
respective meanings as are given to such terms in the Uniform Commercial Code,
as enacted in the State of California. For purposes of this Agreement, the
following terms shall have the respective meanings given to them below:
Account - All presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to
Borrowers arising out of the sale or lease of goods or the rendition of
services by Borrowers, whether or not earned by performance, and any and all
credit insurance, guaranties and other security therefor.
Account Debtor - Any Person obligated on any Account of
Borrower.
Affiliate - Section 6.5.
Agreement - This Second Amended and Restated Loan and Security
Agreement and any extensions, riders, supplements, notes, amendments, or
modifications to or in connection with this Agreement.
Authorized Officers - Any officer of Borrower authorized by
specific resolution to request Advances, as set forth in the incumbency
certificate referred to in Section 4.1(d).
Availability Reserve - Section 6.18(c).
Blocked Account - Section 2.4(b).
Borrowers' Loan Account - The account on the books of Lender
in which will be recorded loans, advances, extensions of credit and guaranties
of credit made by Lender to, or for the benefit of, the Borrowers pursuant to
this Agreement or any other agreement, payments made on such loans and other
appropriate debts and credits as provided by this Agreement. Loans and
advances made by Lender to Borrowers shall be made jointly and will be charged
to Borrowers' Loan Account, along with all interest and other charges as
permitted under and pursuant to this Agreement.
Borrowing Base - Section 2.3(a).
Business Day - Any day that is not a Saturday or Sunday or a
day on which Mellon is permitted to close with respect to advances to Coast
U.S., or a day on which Mellon Canada is permitted to close with respect to
Coast Canada.
3
<PAGE> 4
Canadian Dollars, Cdn Dollars and the symbol Cdn $ - Each
means lawful money of Canada.
Canadian Prime Rate - That per annum rate of interest
announced from time to time by Mellon Canada as being its reference rate then
in effect for determining interest rates on Canadian Dollar denominated
commercial loans made by Mellon Canada in Canada, as reported by Mellon Canada
to The Bank of Canada.
Canadian Prime Rate Loans - That portion of the Revolving
Credit advanced to Coast Canada, denominated in Canadian Dollars, bearing
interest at the Canadian Prime Rate Option.
Canadian Prime Rate Option - Section 2.6(c).
Cash Collateral Account - Section 2.4(b).
Cash Flow - Shall be defined and determined as follows: Net
Income, plus depreciation, plus amortization, plus cash dividends actually
received, minus equity in earnings of Subsidiaries and other Persons, minus
unfunded capital expenditures, minus long term debt payments including
principal payments on Indebtedness subordinated to the Obligations, minus cash
investments, loans, cash advances or capital contributions to or cash payments
made to acquire any beneficial interest in (including stock, partnership
interest, or other securities of) any Person (but excluding cumulative
investments made during the Revolving Credit Term in an amount not to exceed
$700,000 to purchase up to 5% of the common stock of H. Burden Limited
("Burden") during Borrowers' fiscal year ending December 31, 1995, and in an
amount not to exceed $800,000 to purchase up to an additional 10% of the common
stock of Burden during Borrowers' fiscal year ending December 31, 1996), minus
payments under existing non-competition agreements, and minus Distributions
actually made.
Closing - Section 4.6.
Closing Date - Section 4.6.
Coast U.S. - Collectively, Coast, United Sales, C/P and
Mohawk.
Collateral - Section 3.1.
Commitment Fee - Section 2.8(a).
Default - An election by Lender to declare Borrowers in
default upon the occurrence of an Event of Default under Section 8.1 herein.
Distribution -
(1) Dividends or other distributions on capital
stock of any Borrower; and
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<PAGE> 5
(2) The redemption, repurchase or acquisition of
such stock or of warrants, rights or other options to purchase such stock.
Dollars and the symbol $ - Each means lawful money of the
United States of America.
East - Background paragraph C.
Event of Default - Section 8.1.
Existing Indebtedness - Section 2.1.
Existing Loan Documents - The Prior Loan Agreements, the Prior
Composite Agreements, the First Amended Loan Agreement and all other
instruments, agreements and documents executed in connection therewith.
Expenses - Section 9.6.
First Amended Loan Agreement - Background paragraph F.
Fx Line - Section 2.5.
GAAP - Generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except
that, for purposes of Section 6.18 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
Good Business Day - Any Business Day when banks in
Philadelphia, Pennsylvania and London, England are open for business.
Hazardous Substances - Section 5.16.
Indebtedness - (a) All obligations of Borrowers for borrowed
money; (b) All obligations of Borrowers evidenced by bonds, debentures, notes,
or other similar instruments and all reimbursement or other obligations of
Borrowers in respect of letters of credit, letter of credit guaranties, bankers
acceptances, interest rate swaps, controlled disbursement accounts, or other
financial products; (c) All obligations under capitalized leases of Borrowers;
(d) All obligations or liabilities of others secured by a lien or security
interest on any asset owned by Borrowers, irrespective of whether such
obligation or liability is assumed; and (e) any obligation of Borrowers
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to a Borrower) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other person.
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Initial Term - Section 2.2(c).
Inventory Advance Sublimit - That amount which (i) with
respect to Coast U.S., is equal to the lesser of (A) fifty percent (50%) of
Coast U.S.'s Qualified Inventory and (B) $22,000,000 and (ii) with respect to
Coast Canada, is equal to the lesser of (A) fifty percent (50%) of Coast
Canada's Qualified Inventory and (B) $4,000,000 (or the Canadian Dollar
converted equivalent as of the date of determination).
IRS - Section 6.12.
LC Facility - Section 2.8.
Letters of Credit - Merchandise and standby letters of credit
now or hereafter issued by Lender for the benefit of Borrowers.
Letter of Credit Fees - Section 2.9(d).
Liabilities - All liabilities of every kind of Borrowers as
would be shown on a financial statement of Borrowers prepared in accordance
with GAAP.
LIBOR Based Rate - The LIBOR Rate plus one hundred and fifty
(150) basis points.
LIBOR Based Rate Loan - That portion of the Revolving Credit
advanced to Coast U.S. on which interest accrues at the LIBOR Based Rate.
LIBOR Interest Period - Section 2.6(b).
LIBOR Rate - An annual rate of interest determined by Lender
as being the rate available to Lender at approximately 11:00 a.m. London time
in the London Interbank Market, as referenced by Reuters Screen "LIBOR", in
accordance with the usual practice in such market, for the LIBOR Interest
Period elected by Coast on behalf of Coast U.S., in effect two Good Business
Days prior to the funding date for a requested LIBOR Based Rate Loan (including
those requested in connection with the conversion of a portion of the Revolving
Credit subject to the Prime Rate Option to a LIBOR Based Rate Loan in
accordance with Section 2.5(b) hereof), or for a LIBOR Based Rate Loan which
Coast on behalf of Coast U.S. has elected to continue as a LIBOR Based Rate
Loan beyond the expiration of the then current LIBOR Interest Period with
respect thereto, for deposits of Dollars in amounts equal (as nearly as may be
estimated) to the amount of the LIBOR Based Rate Loan which shall then be
loaned by Mellon to Coast U.S. as of the time of such determination, as such
rate may be adjusted by the reserve percentage applicable during the LIBOR
Interest Period in effect (or if more than one such percentage shall be
applicable, the daily average of such percentages for those days in such LIBOR
Interest Period during which any such percentage shall be so applicable) under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including without limitation, any emergency, supplemental or other
marginal reserve requirement) for the Lender with respect to liabilities or
assets
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consisting of or including "Eurocurrency Liabilities" as such term is defined
in Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time, having a term equal to such LIBOR Interest Period
("Eurocurrency Reserve Requirement"). Such adjustment shall be effectuated by
calculating, and the LIBOR Rate shall be equal to, the quotient of (i) the
offered rate divided by (ii) one minus the Eurocurrency Reserve Requirement.
LIBOR Rate Option - Section 2.5(b).
Lien - Any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including, but
not limited to, the security interest or lien arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term "Lien" shall include reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property other than those which would not materially interfere with Borrowers'
use of the Property or would not materially detract from the value of the
Property. For the purposes of this Agreement, Borrower shall be deemed to be
the owner of any Property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other person for security
purposes.
Loan Documents - This Agreement, the Revolving Credit Note and
the Existing Loan Documents except to the extent any of which are amended,
restated or replaced in connection therewith, and each other document,
instrument or agreement required to be executed and/or delivered hereby, as
each may be amended, supplemented or replaced from time to time.
Loans - means collectively, all outstanding advances made by
Lender under the Revolving Credit.
Mass Mutual - means, collectively, Massachusetts Mutual Life
Insurance Company, Mass Mutual Corporate Investors and Mass Mutual
Participation Investors.
Mass Mutual Subordinated Debt - Section 5.4.
Maximum Credit Limit - $50,000,000, with Maximum Credit
Sublimits of up to $40,000,000 of aggregate advances (including undrawn Letters
of Credit) at any one time outstanding based upon the availability of Qualified
Accounts and Qualified Inventory of Coast U.S., and up to $10,000,000 of
aggregate advances (including undrawn Letters of Credit) at any one time
outstanding based upon the availability of Qualified Accounts and Qualified
Inventory of Coast Canada ("Maximum Credit Sublimits"). In the event that the
Availability Reserve is applied pursuant to Section 6.18(c) hereof, it shall be
fully applied to reduce the Maximum Credit Sublimit available to Coast U.S.
The Maximum Credit Limit may be increased from $50,000,000 to up to $60,000,000
at any time during the first eighteen (18) months of the Revolving Credit Term,
upon the payment of a fee by Borrowers to Lender of up to $20,000, prorated to
the total amount of the increase in the Maximum
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Credit Limit, subject to Lender's approval of the increase at the time such
increase is requested, there being no commitment by Lender to increase the
Maximum Credit Limit as of the date of this Agreement. (The determination of
compliance with the foregoing shall include conversion of Canadian Dollar
denominated advances to Coast Canada outstanding as of the date of
determination, at the conversion rate then maintained by Mellon Canada.)
Mellon - means Mellon Bank, N.A.
Mellon Canada - means Mellon Bank Canada, a Canadian chartered
bank.
Mellon Financial - Background paragraph A.
Mohawk Agreement - Background paragraph B.
Net Income - means the net income after taxes of Borrowers, as
such would appear on Borrowers' consolidated financial statements, prepared in
accordance with GAAP, consistently applied.
Net Loss - means Net Income less than zero (0).
Obligations - All existing and future liabilities of Borrowers
to Lender, including, without limitation, all Loans and advances, from time to
time made by Lender to Borrowers under this Agreement, the Revolving Credit
Note and the Existing Loan Documents, and to others at the request of or for
the account of or the benefit of the Borrowers, including Revolving Credit
Advances, obligations to repay draws on Letters of Credit, contingent
obligations in respect of outstanding Letters of Credit, all fees and charges
owing by Borrowers and all other liabilities and obligations of every kind or
nature whatsoever of Borrowers to Lender, whether hereunder or otherwise,
whether now existing or hereafter incurred, joint or several, matured or
unmatured, direct or indirect, primary or secondary, related or unrelated, due
or to become due, including, but not limited to, any extensions, modifications,
substitutions, increases and renewals thereof, and substitutions therefor; the
payment of all amounts advanced by Lender to preserve, protect, defend, and
enforce its rights hereunder and in the Collateral in accordance with the terms
of this Agreement; and the payment of all Expenses incurred by Lender in
connection therewith, which amounts, whether or not matured and whether or not
disputed, may be charged to Borrowers' Loan Account hereunder, without prior
notice to Borrowers, and all obligations of Borrowers under this Agreement to
perform acts or refrain from taking any action.
Overadvance - Section 2.3(d).
PBGC - Section 6.12.
Person - An individual, partnership, corporation, trust,
incorporated association or organization, joint venture, limited liability
company or any other entity.
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Prime Based Loans - That portion of the Revolving Credit
advanced to Coast U.S. or to Coast Canada, denominated in Dollars, bearing
interest at any of the Prime Rate Option, the Canadian Prime Rate Option or the
U.S. Base Rate Option.
Prime Rate - That per annum rate designated or announced by
Mellon at its principal office from time to time as its "Prime Rate" of
interest, which may be greater or less than other interest rates charged by
Mellon to other borrowers and is not necessarily solely based or dependent upon
or equal to the interest rate which Mellon may charge any particular borrower
or class of borrowers.
Prime Rate Option - Section 2.6(a).
Prior Composite Agreements - Background paragraph B.
Prior Loan Agreements - Background paragraph A.
Property - Any interest of Borrowers in any kind of property
or asset, whether real, personal or mixed, or tangible or intangible.
Qualified Accounts - All Accounts of Borrowers, determined
separately with respect to Coast U.S. and Coast Canada, which meet all of the
following specifications: (i) it is lawfully owned by a Borrower and subject
to no lien, security interest or other assignment, except as provided in
Section 3.1 hereof, and Borrowers have the right of assignment thereof and the
power to grant a security interest therein; (ii) it is a valid and enforceable
Account, representing the undisputed indebtedness of an Account Debtor not more
than ninety (90) days past original invoice date; provided however, up to
$6,500,000 of Accounts of Coast U.S., in the aggregate, may be eligible for
advance which contain payment terms of up to two hundred forty (240) days from
date of original invoice and are not more than thirty (30) days past due; and
provided further, however, up to $6,500,000 of Accounts of Coast Canada, in the
aggregate, with respect to billings made by Coast Canada during the month of
March of each year, may be eligible for advance which contain payment terms of
up to one hundred and twenty (120) days from date of original invoice and are
not more than thirty (30) days past due; and the Borrowers will promptly
provide Lender on a monthly basis, and in all events prior to the fifth
Business Day of each month, a specific listing of all unpaid Borrowers'
invoices, including a description of material terms, due dates and other
information requested by Lender, which provide payment terms of greater than
thirty (30) days from the respective invoice date, which invoices Borrowers
intend to include under Accounts pursuant to this subparagraph; (iii) the
Account is not subject to any defense, set-off, counterclaim, deduction,
discount, credit, chargeback, freight claim, allowance or adjustment,
including, but not limited to, Accounts with respect to which a Borrower is or
may become liable to the Account Debtor for goods sold or services rendered by
the Account Debtor to a Borrower, but only to the extent of the liability of
the Account Debtor to a Borrower disputed by the Account Debtor or a claim
asserted by the Account Debtor against a Borrower; (iv) no part of any goods
the sale or lease of which has given rise to the Account has been returned,
rejected, or lost or damaged prior to acceptance by the Account Debtor; (v) if
it arises from the sale of goods by a Borrower, such sale was an absolute sale
and not on consignment or on approval or on a sale-or-return basis nor subject
to any other
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repurchase or return agreement (other than Borrowers' standard practices
regarding return of goods in the ordinary course), and such goods have been
shipped to the Account Debtor or its designee; (vi) if it arises from the
performance of services, such services have actually been performed; (vii) it
arose in the ordinary course of Borrowers' business; (viii) no notice of the
bankruptcy, receivership, reorganization or insolvency of the Account Debtor
has been received by Borrowers or Lender; (ix) the Account Debtor is not a
subsidiary or Affiliate of a Borrower, does not control a Borrower, and is not
under the control of or under common control with a Borrower, or an officer,
employee or agent of a Borrower; (x) with respect to Coast U.S., it is not an
Account of an Account Debtor having its principal place of business or
executive office outside the United States, the payment of which Account is not
guaranteed by an irrevocable letter of credit reasonably satisfactory to
Lender; (xi) with respect to Coast Canada, it is not an Account of an Account
Debtor having its principal place of business or executive office outside
Canada, the payment of which Account is not guaranteed by an irrevocable letter
of credit reasonably satisfactory to Lender; (xii) it does not represent a sale
to the government of the United States or any subdivision thereof unless
Borrower has complied, for the benefit of Lender, with the Federal Assignment
of Claims Act; (xiii) not more than 50% of the aggregate balance of all
Accounts owing from the Account Debtor obligated on the Account are outstanding
more than ninety (90) days past their respective invoice dates; and (xiv) the
Account meets such other reasonable specifications and requirements which may
from time to time be established by Lender.
Qualified Inventory - Any and all current and saleable
inventory of Borrower as determined by Lender in its sole discretion, located
at the places of business listed on Exhibit 5.2 which is not subject to any
Lien other than Lender's Lien, except as provided in Section 3.1 hereof, and
which meets such other specifications and requirements which may from time to
time be reasonably established by Lender, valued for the purposes of the
Borrowing Base (as defined in Section 2.3 below) at cost, on a FIFO basis, of
such inventory.
Revolving Credit - Section 2.2(a).
Revolving Credit Note - Section 2.2(b).
Revolving Credit Term - The period commencing on the Closing
Date and ending on the Revolving Credit Maturity Date.
Revolving Credit Maturity Date - Section 2.2(c).
Subsidiary - Any corporation more than fifty (50%) percent of
which voting stock is legally and beneficially owned by a Borrower or owned by
a corporation more than fifty (50%) percent of whose voting stock is legally
and beneficially owned by a Borrower.
Tangible Net Worth - At any time means the book value of
Borrowers' total assets (after deducting related depreciation, obsolescence,
amortization, valuation reserves, deferred assets, intangible assets and good
will) and including any Indebtedness of Borrowers subordinated to the
Obligations in a manner acceptable to Lender, minus all Liabilities (other than
subordinated Indebtedness acceptable to Lender, capital stock and any other
components
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of shareholder equity), and including all reserves (to the extent not deducted
from total assets) for contingencies and other potential liabilities as would
be shown on a balance sheet of Borrower prepared as of such date in accordance
with GAAP.
Termination Fee - Section 2.9(c).
Unused Line Fee - Section 2.9(b).
U.S. Base Rate Option - Section 2.6(d).
U.S. Base Rate Loans - That portion of the Revolving Credit
advanced to Coast Canada, denominated in Dollars, bearing interest at the U.S.
Base Rate Option.
U.S. Base Rate - That per annum rate of interest announced
from time to time by Mellon Canada as being its reference rate then in effect
for determining interest rates in Dollar denominated commercial loans in
Canada.
Voidable Transfer - Section 9.19.
1.2 Accounting Principles: Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for
the purposes of this Agreement, this shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
SECTION 2. THE LOAN
2.1 Confirmation of Existing Indebtedness: Borrowers acknowledge
and confirm that as of the close of business on May 26, 1995, they are indebted
to Lender, without defense, setoff or counterclaim under the Existing Loan
Documents, in the principal amount of $24,426,100.89, as well as for
reimbursements for draws which may hereafter be made on standby letters of
credit and/or merchandise letters of credit issued for the account of Borrowers
in the aggregate face amount of $0.00 (collectively as may be adjusted for
advances and paydowns made after May 26, 1995 and prior to the date hereof,
"Existing Indebtedness").
2.2 Revolving Line of Credit:
(a) Lender hereby establishes for the benefit of
Borrowers a revolving line of credit ("Revolving Credit") which shall include
sums advanced by Lender to or for the benefit of Borrowers from time to time
hereunder (including without limitation the face amount of all issued and
outstanding letters of credit and unreimbursed draws on letters of credit) up
to the Maximum Credit Limit and the Maximum Credit Sublimits thereto at any one
time outstanding, depending upon the requests of Borrowers, and the existence
and availability of Qualified Accounts and Qualified Inventory determined on a
separate basis for each of Coast U.S. and Coast Canada. The outstanding
balance under the Revolving Credit
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may fluctuate from time to time, to be reduced by repayments made by Borrowers,
to be increased by future advances and extensions of credit which may be made
by Lender to or for the benefit of Borrowers, and shall be due and payable on
the Revolving Credit Maturity Date. For the purposes of this Agreement, any
determination as to whether there is availability within the Borrowing Base for
advances or extensions of credit shall be made by Lender and is final and
binding upon Borrowers absent manifest error.
(b) At Closing Borrowers shall execute and deliver their
promissory note to Lender, in the form of Exhibit 2.2(b) attached hereto
("Revolving Credit Note") to evidence their unconditional joint and several
obligation to repay Lender for loans, advances, and extensions of credit made
under the Revolving Credit, with interest as herein or therein provided. The
Existing Indebtedness shall be deemed to be the first advance and extension of
credit under the Revolving Credit. Each advance and extension of credit under
the Revolving Credit shall be deemed evidenced by the Revolving Credit Note,
which is deemed incorporated herein by reference and made part hereof.
(c) The term ("Initial Term") of the Revolving Credit
shall expire on May 31, 2000 ("Revolving Credit Maturity Date"), on which date
all of the outstanding Obligations hereunder of Borrowers to Lender of every
kind whatsoever, unless having been sooner accelerated pursuant to the terms
hereof, shall be due and payable in full and as of and after which date no
further advances or extensions of credit shall be available from Lender.
2.3 Revolving Credit - Borrowing Base:
(a) Subject to the terms and conditions of this
Agreement, and so long as no Event of Default has occurred and is continuing,
Lender agrees to make revolving advances to Borrowers in an amount not to
exceed the Borrowing Base. For purposes of this Agreement "Borrowing Base"
shall mean:
(i) with respect to Coast U.S., the sum of (A) an
amount equal to eighty percent (80%) of the amount of Coast U.S.'s Qualified
Accounts; plus (B) the Inventory Advance Sublimit applicable to Coast U.S.; and
(ii) with respect to Coast Canada, the sum of (A)
an amount equal to eighty percent (80%) of the amount of Coast Canada's
Qualified Accounts; plus (B) the Inventory Advance Sublimit applicable to Coast
Canada.
(b) Lender may, in its discretion, from time to time, (i)
reduce the lending formula with respect to Borrowers' Qualified Accounts to the
extent that Lender determines in good faith that: (A) the dilution with respect
to the Accounts for any period (based on the ratio of (1) the aggregate amount
of reductions in Accounts other than as a result of payments in cash to (2) the
aggregate amount or total sales) has increased in any material respect or may
be reasonably anticipated to increase in any material respect above historical
levels, or (B) the general creditworthiness of Account Debtors has declined or
(ii) reduce the lending formula(s) with respect to Borrowers' Qualified
Inventory to the extent that Lender determines that the nature and quality of
the Inventory has deteriorated. In determining
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whether to reduce the lending formula(s), Lender may consider events,
conditions, contingencies or risks which are also considered in determining
Borrowers' Qualified Accounts or Borrowers' Qualified Inventory.
(c) Lender shall have no obligation to make advances
hereunder to the extent they would cause the outstanding Obligations to exceed
the difference between (i) the lesser of: (A) the Maximum Credit Limit
(provided that within the Maximum Credit Limit, advances shall not exceed the
Maximum Credit Sublimits and Inventory Advance Sublimits applicable to Coast
U.S. and Coast Canada) or (B) the Borrowing Base availability, and (ii), if
applicable, the Availability Reserve of $2,000,000 pursuant to the terms of
Section 6.18(c) hereof, to be fully applied to reduce the Maximum Credit
Sublimit available to Coast U.S.
(d) If, at any time or for any reason, the amount of
Obligations owed by Borrowers to Lender pursuant to Section 2.1, 2.2 and 2.3 is
greater than either the dollar or percentage limitations set forth in Section
2.2 or 2.3 (an "Overadvance"), with the exception of an Overadvance resulting
solely from a unilateral act of Lender pursuant to Section 2.3(b), pursuant to
Lender's exercise of its discretionary judgment under the definition of
Qualified Inventory under Section 1.1 above, or pursuant to clause (xiv) of the
definition of Qualified Accounts under Section 1.1 above; or if, at any time,
there is an Overadvance resulting solely from a unilateral act of Lender taken
pursuant to Section 2.3(b), pursuant to Lender's exercise of its discretionary
judgment under the definition of Qualified Inventory under Section 1.1 above,
or pursuant to clause (xiv) of the definition of Qualified Accounts under
Section 1.1 above, and the Overadvance continues for a period of thirty (30)
days following the earlier to occur of (i) any Borrower's actual knowledge of
the Overadvance or (ii) receipt by any Borrower of notice of such Overadvance;
thereupon, and without impairing any other rights of Lender hereunder,
Borrowers shall immediately repay such excess to Lender, and Borrowers' failure
to immediately repay such excess to Lender shall constitute an Event of Default
hereunder.
2.4 Advances, Conversions, Renewals and Payments:
(a) Except to the extent otherwise set forth in this
Agreement, or as may be otherwise directed (as to place of payment, in the
United States of America with respect to Coast U.S., or in Canada with respect
to Coast Canada) in writing from time to time by Lender, all payments of
principal and of interest on the Revolving Credit, the Commitment Fee, Letter
of Credit Fees, Unused Line Fee, the Expenses, the Termination Fee and all
other charges and any other Obligations of Borrower hereunder shall be made to
Lender at its main Philadelphia banking office, Mellon Bank Center, 1735 Market
Street, Philadelphia, Pennsylvania, in Dollars, in immediately available funds.
Lender shall have the unconditional right and discretion to make an Advance
under the Revolving Credit to pay, and/or to charge Borrowers' Loan Account
with Lender for, all of Borrower's Obligations as they become due from time to
time under this Agreement including without limitation, interest, fees and
reimbursement of Expenses.
(b) Borrowers shall receive all payments on Accounts and
otherwise in trust for Lender. Immediately upon receipt, Borrowers shall
deposit or transmit for deposit all such payments in kind into deposit accounts
specified by Lender which shall be under
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Lender's dominion and control (each, a "Blocked Account"). Borrowers shall
execute all documents, endorse all instruments and perform all acts necessary
for such payments to be deposited into the Blocked Account. Provided that no
Event of Default shall have occurred and be continuing, Borrowers may withdraw
any amounts deposited in the Blocked Account by transfer to their operating
accounts or may elect by instructing the Blocked Account depository to transfer
deposits by wire transfer to the cash collateral account maintained for
Borrowers' account at Lender ("Cash Collateral Account") for application in
reduction of outstanding Revolving Credit balances as provided below. Upon the
occurrence and during the continuance of an Event of Default, all amounts
deposited in the Blocked Account shall be automatically transferred on a daily
basis by wire transfer to the Cash Collateral Account. Any remittance received
by Lender in the Cash Collateral Account for the account of Borrowers will be
credited to Borrowers' Loan Account as of the same day it is deposited in the
Cash Collateral Account, providing it is received before Lender's established
cut-off time for receipts. Funds shall be applied by Lender to reduce the
outstanding Indebtedness under the Revolving Credit, with future advances to be
made by Lender under the conditions set forth in this Section 2; provided,
however, that so long as no Event of Default has occurred hereunder, in the
event such funds transferred on any date to the Cash Collateral Account exceed
the aggregate outstanding balance of Prime Based Loans, then the Prime Based
Loans will be repaid only to the extent of the amount of the outstanding Prime
Based Loans (Coast U.S. deposits shall be credited first to the Prime Based
Loans maintained by Coast U.S., and Coast Canada deposits shall be credited
first to the Prime Based Loans maintained by Coast Canada) and the excess of
such funds shall be credited to Borrowers' Loan Account with Lender (but not in
reduction of any LIBOR Based Rate Loans outstanding) or, provided such excess
exceeds $100,000, at Borrowers' option, be credited to such other investment
account with Lender as Borrowers may request. No remittance received by Lender
shall constitute payment to Lender unless and until such remittance has
actually been collected by Lender and credited to Lender's account. All funds
transferred from the Cash Collateral Account shall, upon application to
Borrowers' Obligations to Lender, reduce the Revolving Credit balance;
provided, however, for the purpose of calculating interest, all funds received
which are not deemed to be immediately available funds shall be subject to a
two (2) Business Day clearance period from the time such funds are transferred
to the Blocked Account. Borrowers shall have no right of access to or
withdrawal from the Cash Collateral Account at any time.
(c) (i) Advances which may be made by Lender from
time to time under the Revolving Credit shall be made available for the use and
benefit of Borrowers by crediting such proceeds to Borrowers' Loan Account with
Lender.
(ii) All advances subject to the Prime Rate Option
shall be requested by Coast on behalf of Coast U.S. under the Revolving Credit
and must be requested by 12:00 p.m., Philadelphia time, on the date such
advance is to be made to Mellon at its Asset Based Lending Division in
Philadelphia, Pennsylvania. All advances subject to the LIBOR Rate Option or
conversions from advances subject to the Prime Rate Option to the LIBOR Rate
Option shall be requested by Coast on behalf of Coast U.S. and must be
requested by 12:00 p.m. Philadelphia time, three Good Business Days prior to
the date of such requested advance to Mellon at its Asset Based Lending
Division in Philadelphia, Pennsylvania. All advances subject to the Canadian
Prime Rate Option or the U.S. Base Rate Option shall be
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requested by Coast Canada under the Revolving Credit and must be requested by
11:00 a.m., Toronto time on the date such advance is to be made to Mellon
Canada at its Toronto, Ontario office. Lender reserves its right to require
Borrowers to provide a borrowing base certificate contemporaneously with each
advance request provided that such requests from Lender shall not require
Borrowers to provide borrowing base certificates more frequently than once per
week. All requests or confirmation of requests for advances may be made by
telephone, unless Lender has advised Borrowers that written requests are
required, with the exception of requests or confirmation of requests for LIBOR
Based Rate Loans, including, but not limited to, initial requests for the
conversion of a Revolving Credit subject to Prime Rate Option to a LIBOR Based
Rate Loan and rollovers of LIBOR Based Rate Loans, which shall always be in
writing. Written requests or confirmation of requests may be sent by telecopy
or facsimile transmission provided, however, that Lender shall have the right
to require the receipt of such request not be effective until confirmed via
telephone with Lender. Lender may require prompt written confirmation of any
telephone request and additional back-up documentation, from time to time.
Each request or confirmation of a request for an advance shall be conclusively
presumed to be made by a person authorized by Borrower to do so.
2.5 Foreign Exchange Line: Lender hereby also establishes for the
benefit of Coast Canada a foreign exchange line of credit ("Fx Line") under
which Mellon Canada shall, at Coast Canada's request, subject to the terms and
conditions hereof and so long as no Event of Default or any event which with
the giving of notice or passage of time or both would become an Event of
Default has occurred, make purchases of foreign currency on Coast Canada's
behalf to assist Coast Canada with respect to foreign currency payments owing
from time to time for Coast Canada's purchase of Inventory, as well as the
payment of office expenses and freight expenses, all in the ordinary course of
its business subject to the following:
(a) The Dollar equivalent of all foreign exchange
contracts outstanding from time to time shall not exceed $2,000,000.
(b) No settlement date on any foreign exchange contract
shall be later than one (1) year from the date such contract is created or
later than five (5) days prior to the Revolving Credit Maturity Date.
(c) Coast Canada shall pay on demand all customary fees
and charges assessed by Lender in connection with the creation, usage,
amendment, extension, or termination of the Fx Line and any and all contracts
created thereunder.
(d) Without limiting any other rights of Lender
hereunder, a reserve under the Borrowing Base sublimits for Coast Canada shall
be created and maintained equal to twenty percent (20%) of all outstanding
foreign exchange contracts with a term of greater than three (3) months and
also ten percent (10%) of all outstanding foreign exchange contracts with a
term of three (3) months or less.
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(e) The term of the Fx Line shall be identical to the
term of the Revolving Credit and all terms and conditions of Section 2.1(c)
shall be deemed applicable to the Fx Line as well as to the Revolving Credit.
(f) Borrowers shall indemnify, defend, pay, and hold
harmless Lender for all losses, damages, obligations and liabilities suffered
or incurred at any time by Lender, including without limitation costs and
attorneys' fees, with respect to Coast Canada's failure to perform or satisfy
its obligations with respect to any or all foreign exchange contracts under the
Fx Line.
2.6 Revolving Credit Interest:
(a) Prime Rate Option - Except as set forth below, the
unpaid principal balance of cash advances under the Revolving Credit made by
Mellon to Coast U.S., unless subject to the LIBOR Rate Option, shall bear
interest, subject to the terms hereof, at the per annum rate equal to the Prime
Rate ("Prime Rate Option"). Changes in the Prime Rate shall become effective
on the same day as Mellon announces a change in its prime rate. Interest on
Prime Based Loans shall be due and payable in arrears on the first day of each
calendar month commencing the first full month following the Closing Date.
(b) LIBOR Rate Option:
(i) Subject to the terms and conditions hereof
(including without limitation the provisions of Section 2.7(b) below), the
unpaid principal balance of cash advances made by Mellon to Coast U.S. under
the Revolving Credit may, at Coast U.S.'s option, bear interest at the LIBOR
Based Rate ("LIBOR Rate Option"); provided that in no event may a LIBOR Based
Rate Loan be less than $5,000,000 and that each LIBOR Based Rate Loan shall be
requested in $100,000 increments; and provided further that no more than three
(3) LIBOR Based Rate Loans shall be outstanding at any one time.
(ii) LIBOR Based Rate Loans shall be selected for
a period of either a one (1), three (3) or six (6) months' duration, as Coast,
on behalf of Coast U.S., may elect, during which the LIBOR Based Rate is
applicable ("LIBOR Interest Period"); provided, however, that (A) if the LIBOR
Interest Period would otherwise end on a day which shall not be a Good Business
Day, such LIBOR Interest Period shall be extended to the next succeeding Good
Business Day, unless such Good Business Day falls in another calendar month, in
which case such LIBOR Interest Period shall end on the next preceding Good
Business Day subject to clause (C) below; (B) interest shall accrue from and
including the first day of each LIBOR Interest Period to, but excluding the day
on which any LIBOR Interest Period expires; and (C) with respect to any LIBOR
Interest Period which begins on the last Good Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the
calendar month at the end of such LIBOR Interest Period), the LIBOR Interest
Period shall end on the last Good Business Day of a calendar month. Interest
on a LIBOR Based Rate Loan shall be due and payable in arrears on the first day
of each calendar month commencing the first full month following the Closing
Date provided that all remaining accrued and unpaid interest on each LIBOR
Based Rate Loan must be repaid in full on the day the applicable LIBOR Interest
Period expires. No LIBOR
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Interest Period may end after the Revolving Credit Maturity Date. Subject to
all of the terms and conditions applicable to a request that a new advance be a
LIBOR Based Rate Loan, Coast U.S. may extend a LIBOR Based Rate Loan as of the
last day of the LIBOR Interest Period to a new LIBOR Based Rate Loan or may
convert all or a portion of the Revolving Credit Loans subject to the Prime
Rate Option to a LIBOR Based Rate Loan. If Coast U.S. fails to notify the
Lender of the LIBOR Interest Period for a subsequent LIBOR Based Rate Loan at
least three Good Business Days prior to the last day of the then current LIBOR
Interest Period of an outstanding LIBOR Based Rate Loan, then such outstanding
LIBOR Based Rate Loan shall become a loan subject to the Prime Rate Option at
the end of the current LIBOR Interest Period for such outstanding LIBOR Based
Rate Loan and shall accrue interest in accordance with Section 2.6(a) above.
(iii) The LIBOR Rate may be automatically adjusted
by Mellon on a prospective basis (provided that such LIBOR Rate is similarly
adjusted generally for the customers of Mellon borrowing funds with LIBOR Rate
options) to take into account the additional or increased cost actually
incurred by Mellon to maintain any necessary reserves for Eurodollar deposits
or increased costs actually incurred by Mellon due to changes in applicable law
or regulation or the interpretation thereof occurring subsequent to the
commencement of the then applicable LIBOR Interest Period, including but not
limited to changes in tax laws (except changes of general applicability in
corporate income tax laws as they affect financial institutions) and changes in
the reserve requirements imposed by the Board of Governors of the Federal
Reserve System (or any successor), excluding any such changes that have
resulted in a payment pursuant to Section 2.12 hereof, that increase the cost
to Mellon of funding the LIBOR Based Rate Loan. Mellon shall promptly give
Coast U.S. notice of such a determination and adjustment, which determination
shall be conclusive as to the correctness of the fact and the amount of such
adjustment absent manifest error.
(iv) In the event that Coast, on behalf of Coast
U.S., shall have requested the LIBOR Rate Option in accordance with Section
2.6(b) and Mellon shall have reasonably determined that Eurodollar deposits
equal to the amount of the principal of the requested LIBOR Based Rate Loan and
for the LIBOR Interest Period specified are unavailable, or that the rate based
on the LIBOR Rate will not adequately and fairly reflect the cost of the LIBOR
Based Rate applicable to the specified LIBOR Interest Period, of making or
maintaining the principal amount of the requested LIBOR Based Rate Loan
specified by Coast U.S. during the LIBOR Interest Period specified, or that by
reason of circumstances affecting Eurodollar markets, adequate and reasonable
means do not exist for ascertaining the rate based on the LIBOR Rate applicable
to the specified LIBOR Interest Period, Mellon shall promptly give notice of
such determination to Coast U.S. that the rate based on the LIBOR Rate is not
available. A determination by Mellon hereunder shall be prima facie evidence
of the correctness of the fact and amount of such additional costs or
unavailability. Upon such a determination, (A) the right of Coast U.S. to
select, convert to, or maintain a LIBOR Based Rate Loan at the rate based on
the LIBOR Rate shall be suspended until Mellon shall have notified Coast U.S.
that such conditions shall have ceased to exist, and (B) the advances under the
Revolving Credit subject to the requested LIBOR Rate Option shall accrue
interest in accordance with Section 2.6(a) above.
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(v) In the event that, as a result of any changes
in applicable law or regulation or the interpretation thereof, it becomes
unlawful or impractical for Mellon to maintain Eurodollar liabilities
sufficient to fund any LIBOR Based Rate Loan subject to the LIBOR Based Rate,
then Mellon shall immediately notify Coast U.S. thereof and Mellon obligations
to make, convert to, or maintain a LIBOR Based Rate Loan at the LIBOR Based
Rate shall be suspended until such time as Lender may again cause the LIBOR
Based Rate to be applicable to any LIBOR Based Rate Loans. During such
suspension all Loans under the Revolving Credit subject to the LIBOR Based Rate
shall accrue interest in accordance with Section 2.6(a) above. Promptly after
becoming aware that it is no longer unlawful for Mellon to maintain such
Eurodollar liabilities, Mellon shall notify Coast U.S. thereof and such
suspension shall cease to exist.
(c) Canadian Prime Rate Option. The unpaid principal
balance of cash advances under the Revolving Credit made by Mellon Canada to
Coast Canada in Canadian Dollars as requested from time to time by Coast Canada
hereunder shall bear interest, subject to the terms hereof, at the per annum
interest rate equal to the Canadian Prime Rate ("Canadian Prime Rate Option").
Changes in the Canadian Prime Rate shall become effective on the same day as
Mellon Canada announces a change in the Canadian Prime Rate. Interest on
Canadian Prime Rate Loans shall be due and payable in arrears on the first day
of each calendar month commencing the first full calendar month following the
Closing Date.
(d) U.S. Base Rate Option. The unpaid principal balance
of cash advances under the Revolving Credit made by Mellon Canada to Coast
Canada in Dollars as requested from time to time by Coast Canada hereunder
shall bear interest, subject to the terms hereof, at the per annum interest
rate equal to the U.S. Base Rate ("U.S. Base Rate Option"). Changes in the
U.S. Base Rate shall become effective on the same day as Mellon Canada
announces a change in the U.S. Base Rate. Interest on U.S. Base Rate Loans
shall become due and payable in arrears on the first day of each calendar month
commencing the first full calendar month following the Closing Date.
2.7 Additional Interest Provisions:
(a) Calculation of Interest: Interest on Prime Rate
Loans and LIBOR Rate Loans shall be based on a three hundred sixty (360) day
year and charged for the actual number of days elapsed; interest on Canadian
Prime Rate Loans and U.S. Base Rate Loans shall be based on a three hundred
sixty-five (365) day year and charged for the actual number of days elapsed.
(b) Limitation on LIBOR Based Rate Loans: Upon the
occurrence and during the continuance of an Event of Default, the LIBOR Rate
Option shall not be available and all outstanding LIBOR Based Rate Loans shall
be converted to Prime Based Loans, which right is independent of Lender's
rights under Section 2.7(c) and any other rights of Lender.
(c) Default Rate: After the occurrence and during the
continuance of an Event of Default hereunder, the per annum effective rate of
interest on all Loans, regardless of the rate option, shall be increased to a
rate equal to two (2%) percentage points in excess of the applicable interest
rate.
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(d) Continuation of Interest Charges: All contractual
rates of interest chargeable on outstanding Loans, regardless of the rate
option, shall continue to accrue and be paid even after default, maturity,
acceleration, judgment, bankruptcy, insolvency proceedings of any kind or the
happening of any event or occurrence similar or dissimilar.
(e) Applicable Interest Limitations: In no contingency
or event whatsoever shall the aggregate of all amounts deemed interest
hereunder and charged or collected pursuant to the terms of this Agreement
exceed the highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the
event that such court determines Lender has charged or received interest
hereunder in excess of the highest applicable rate, Lender shall in its sole
discretion, apply and set off such excess interest received by Lender against
other Obligations due or to become due and such rate shall automatically be
reduced to the maximum rate permitted by such law.
2.8 Letters of Credit: As a sublimit under the Revolving Credit
and subject to the Borrowing Base, Lender hereby establishes for the benefit of
Borrowers a letter of credit facility ("LC Facility") under which Lender may
extend to Coast U.S. credit in the form of standby letters of credit and/or
merchandise letters of credit, and to Coast Canada in the form of standby
letters of credit, up to a maximum aggregate principal amount of $2,000,000
outstanding at any one time, with the face amount of undrawn Letters of Credit
reducing the Borrowing Base availability attributable to Coast U.S. or Coast
Canada depending upon the Borrower requesting the Letter of Credit. No standby
letter of credit will be issued with an expiry date later than twelve months
after issuance and no merchandise letter of credit will be issued with an
expiry date later than 120 days after issuance; provided however, that unless
Lender consents otherwise in writing, no letter of credit shall be issued with
an expiry date after five (5) days prior to the Revolving Credit Maturity Date.
All amounts drawn under any letter of credit issued under the LC Facility shall
be due and payable on demand. Borrowers shall execute form time to time, all
letter of credit agreements and other documents required by Lender for such
purpose. Upon termination of this Agreement, Borrowers shall immediately
provide Lender with cash collateral in an amount equal to the aggregate amount
of any and all letters of credit which remain outstanding as of such time. Any
and all such merchandise and standby letters of credit shall be issued pursuant
to the terms and conditions of Lender's standard form Continuing Letter of
Credit Agreement, a copy of which is attached hereto as Exhibit 2.8, which the
Borrowers shall be required to execute in favor of Lender. Immediately upon
the termination of this Agreement, Borrowers agree to cause to be delivered to
Lender releases for all of Lender's obligations under the then outstanding
merchandise and standby letters of credit.
2.9 Fees:
(a) Commitment Fee: Borrowers have paid to Lender a
Commitment Fee in the amount of $100,000 upon execution of that certain
Commitment Letter dated April 11, 1995, which fee was fully earned and
non-refundable as of such date.
(b) Unused Line Fee: So long as the Revolving Credit is
outstanding and has not been terminated, Borrowers shall unconditionally pay to
Lender, a non-refundable fee
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("Unused Line Fee") equal to one eighth of one percent (.125%) per annum of the
average daily unused portion of the Maximum Credit Limit. Such fee shall be
computed based on a year of 360 days, counting the actual number of days
elapsed and paid on a monthly basis, in arrears, on the first day of each
calendar month following the month for which such computation is made,
beginning on the first day of the first calendar month after the Closing Date.
(c) Termination Fee: Borrowers may terminate the
Revolving Credit prior to the Revolving Credit Maturity Date, provided that
Borrowers may only effect such termination on at least 90 days prior written
notice to Lender, and, if such termination occurs prior to May 31, 1998,
Borrowers shall pay to Lender a prepayment premium ("Termination Fee") in an
amount equal to the greater of (i) $300,000 or (ii) one percent (1%) of the
average outstanding Obligations during the twelve (12) month period immediately
preceding the date of termination, as well as make full payment of all
outstanding Obligations, in which case any and all commitments of Lender
hereunder shall cease.
(d) Letter of Credit Fees: Borrowers shall pay to Lender
upon issuance, Letter of Credit Fees equal to one and one-half percent (1.5%)
per annum times the average daily balance of the face amount of each standby
Letter of Credit and each merchandise Letter of Credit outstanding under the LC
Facility for the prior month. In addition, Borrowers shall also pay all of
Lender's standard charges for the issuance, amendment, extension and
cancellation of such Letters of Credit. All such fees are collectively
referred to as the "Letter of Credit Fees".
(e) Audit Fee: Post-closing, Borrowers shall reimburse
Lender for all out-of-pocket costs and expenses incurred by Lender in
conducting field examinations, up to a maximum reimbursable amount of $10,000
per calendar year, provided that no Event of Default has occurred and is
continuing. If an Event of Default has occurred and is continuing, there shall
be no limitation on Borrowers' reimbursement obligation under this subsection
2.9(e).
2.10 Prepayments:
(a) LIBOR Based Rate Loans: No portion of the LIBOR
Based Rate Loans may be prepaid at any time except if the Borrowers first
satisfy in full their Obligations under Section 2.11 below arising from such
prepayment and subject to Section 2.9(b) and Section 2.9(c) above (if
applicable).
(b) Prime Based Loans: Subject to Sections 2.9(b) and
2.9(c), Prime Based Loans may be prepaid at any time and from time to time in
whole or in part without premium or penalty.
2.11 Indemnity/Loss of Margin:
(a) Borrowers shall indemnify, defend and hold harmless
Lender against any and all loss, liability, cost or expense Lender may sustain
or incur as a consequence of (i) any failure of Borrowers to obtain, convert or
extend any LIBOR Based Rate Loan after
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notice thereof has been given to Lender or (ii) any payment, prepayment,
termination or conversion of a LIBOR Based Rate Loan made for any reason on a
date other than the last day of the applicable LIBOR Interest Period.
Borrowers shall pay the full amount thereof to Lender, on demand by Lender.
(b) In the event that any present or future law, rule,
regulation, treaty or official directive or the interpretation or application
thereof by any central bank, monetary authority or governmental authority, or
the compliance with any guideline or request of any central bank, monetary
authority or governmental authority (whether or not having the force of law)
imposes, modifies or deems applicable any deposit insurance, reserve, special
deposit, or other similar requirement with respect to deposits in or for the
account of, or loans or advances or commitment to make loans or advances by,
Lender and the result of any of the foregoing is to increase the costs of
Lender, reduce the income receivable by or return on equity of Lender or impose
any expense upon Lender with respect to any advances or extensions of credit or
commitments to make advances or extensions of credit under this Agreement,
Lender shall so notify Borrowers in writing. Upon notice from Lender,
Borrowers agree to pay Lender the amount of such increase in cost, reduction in
income, reduced return on equity or capital, or additional expense after
presentation by Lender of a statement concerning such increase in cost,
reduction in income, reduced return on equity or capital, or additional
expense. Such statement shall set forth a brief explanation of the amount and
Lender's calculation of the amount (in determining such amount Lender may use
any reasonable averaging and attribution methods), which statement shall be
conclusively deemed correct absent manifest error. In the event that a
participant in this credit, other than Lender, exercises any rights it may have
under this Section 2.11(b), Borrowers shall have the option to replace such
participant with another financial institution (acceptable to Lender) who will
purchase all (but not part) of such participant's pro rata share of this credit
facility on terms acceptable to Lender. Such participant shall be required to
assign and transfer to the financial institution obtained by Borrowers,
pursuant to an agreement reasonably satisfactory to such participant and
without representation, warranty or recourse, its respective pro rata share in
this credit facility in exchange for full payment of the outstanding balance
thereof, with accrued interest and unpaid fees.
2.12 Capital Adequacy: If any present or future law, governmental
rule, regulation, policy, guideline, directive or similar requirement (whether
or not having the force of law) imposes, modifies, or deems applicable any
capital adequacy, capital maintenance or similar requirement which affects the
manner in which Lender allocates capital resources to its commitments
(including any commitments hereunder), and as a result thereof, in the opinion
of Lender, the rate of return on Lender's capital with regard to the Loans
and/or its Obligations hereunder is reduced to a level below that which Lender
could have achieved but for such circumstances taking into account Lender's
policies regarding capital adequacy, then in such case and upon notice from
Lender to Borrowers, from time to time, Borrowers shall pay Lender such
additional amount or amounts as shall compensate Lender for such reduction in
its rate of return. Such notice shall contain the statement of Lender with
regard to any such amount or amounts which shall, in the absence of manifest
error, be binding upon Borrowers. In determining such amount, Lender may use
any reasonable method of averaging and attribution that it deems applicable.
In the event that a participant in this credit, other than Lender, exercises
any rights it may have under this
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Section 2.12, Borrowers shall have the option to replace such participant with
another financial institution (acceptable to Lender) who will purchase all (but
not part) of such participant's pro rata share of this credit facility on terms
acceptable to Lender. Such participant shall be required to assign and
transfer to the financial institution obtained by Borrowers, pursuant to an
agreement reasonably satisfactory to such participant and without
representation, warranty or recourse, its respective pro rata share in this
credit facility in exchange for full payment of the outstanding balance
thereof, with accrued interest and unpaid fees.
2.13 Use of Proceeds: The proceeds of the Loans shall be used to
provide working capital and for other general corporate purposes not prohibited
by this Agreement.
2.14 Existing Loan Agreement: This Agreement and the other Loan
Documents amend and restate all notes, agreements or documents heretofore
evidencing or securing the Existing Indebtedness. The execution and delivery
of this Agreement and the other Loan Documents, however does not evidence or
represent a refinancing, repayment, accord and/or satisfaction or novation of
the Existing Indebtedness. All of Lender's obligations to Borrowers with
respect to loans or advances to be made concurrently herewith or hereafter the
date hereof are set forth in this Agreement. All liens and security interests
previously granted to Lender pursuant to the Existing Loan Documents are
acknowledged and reconfirmed, remain in full force and effect and are not
intended to be released, replaced or impaired.
SECTION 3. COLLATERAL
3.1 Description: As security for the payment of Borrowers'
Obligations to Lender, Borrowers hereby confirm the prior grant of, and assign
and grant to Lender, a continuing first (subject to any existing liens thereon,
as shown on Exhibit 5.4A hereto and liens permitted under Section 6.20(c)
below) lien on, security interest in, or mortgage lien upon the following
property (the "Collateral"):
(a) Accounts, Contract Rights, Inventory, Etc. - All of
Borrowers' existing and future Accounts, accounts receivable, notes receivable,
contract rights, Inventory (including supplies), Chattel Paper, Documents,
Instruments;
(b) General Intangibles - All of Borrowers' existing and
future general intangibles of every kind and description, including, but not
limited to, all existing and future customer lists, choses in action, claims,
books, records, patents and patent applications, copyrights, trademarks, trade
names, tradestyles, trademark applications, blueprints, drawings, designs and
plans, trade secrets, contracts, licenses, license agreements, tax and any
other types of refunds, returned and unearned insurance premiums, rights and
claims under insurance policies, and computer information, software, records
data;
(c) Equipment - All of Borrowers' existing and future
Equipment, machinery, vehicles, furniture and Fixtures (except vehicles or
equipment leased to
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Borrowers), wherever located, and all replacements, parts, accessories,
substitutions and additions thereto;
(d) Bank Accounts - All bank accounts, including without
limitation, deposit accounts;
(e) Property in Lender's Possession - All Property of
Borrowers now or hereafter in Lender's possession, including deposit and other
accounts; and
(f) Proceeds - The proceeds (including without
limitation, insurance proceeds) of all of the foregoing.
3.2 Lien Documents: At Closing and thereafter as Lender deems
necessary, Borrowers shall execute and deliver to Lender, or shall have
executed and delivered to Lender (all in form and substance satisfactory to
Lender):
(a) Financing Statements - Financing statements pursuant
to the applicable Uniform Commercial Code or comparable provisions of the laws
of Canada and its provinces, which Lender may file in any jurisdiction in the
United States or Canada where any Collateral is or may be located and in any
other jurisdiction that Lender deems appropriate; and
(b) Other Agreements - Any other agreements, documents,
instruments and writings to evidence, perfect or protect Lender's lien and
security interest in the Collateral required hereunder or as Lender may request
from time to time.
3.3 Other Actions: In addition to the foregoing, Borrowers shall
do anything further that may be reasonably and lawfully required by Lender to
secure Lender and effectuate the intentions and objects of this Agreement,
including, but not limited to, the execution and delivery of blocked account
agreements, continuation statements, amendments to financing statements, and
any other documents required hereunder. At Lender's request, Borrowers shall
also immediately deliver to Lender all notes, certificates and documents of
title, chattel paper, warehouse receipts, instruments, and any other similar
instruments constituting Collateral where perfection can be effected by or is
required for possession.
3.4 Searches: Borrowers shall, prior to or at Closing, and
thereafter, all at its expense, obtain and deliver to Lender (or if obtained by
Lender, pay Lender for) the following searches against Borrowers (the results
of which are to be consistent with the warranties made by Borrowers in this
Agreement):
(a) Uniform Commercial Code or similar searches with the
Secretary of State or comparable provincial office, as the case may be, and
local filing office of each state or province where any Borrower maintains its
executive offices, a place of business or assets;
(b) Judgment, federal tax lien and corporate tax lien
searches, in each state searched under subparagraph (a) above; and
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(c) Good standing certificates showing Borrowers to be in
good standing in their state of incorporation and in each other state in which
it is doing and presently intends to do business for which qualification is
required.
3.5 Landlords' Waivers: If requested by Lender, Borrowers shall
use their best efforts to cause each owner, landlord and/or warehouseman of any
premises occupied by Borrowers to execute and deliver to Lender an instrument,
in form and substance satisfactory to Lender, under which such owner(s)
subordinate its/his/their interests in and waive its/his/their right to
distrain on or foreclose against the Collateral.
3.6 Filing Security Agreement: A carbon, photographic or other
reproduction or other copy of this Agreement or of a financing statement is
sufficient as and may be filed in lieu of a financing, statement.
3.7 Power of Attorney: Each of the officers of Lender is hereby
irrevocably made, constituted and appointed the true and lawful attorney for
Borrowers (without requiring any of them to act as such) with full power of
substitution to do the following: (1) endorse the name of any Borrower upon any
and all checks, drafts, money orders and other instruments for the payment of
monies that are payable to any Borrower and constitute collections on
Borrower's Accounts; (2) execute in the name of any Borrower any financing
statements, schedules, assignments, instruments, documents and statements that
Borrower is obligated to give Lender hereunder; and (3) do such other and
further acts and deeds in the name of Borrowers that Lender may deem necessary
or desirable to enforce any Account or other Collateral or perfect Lender's
security interest or lien in the Collateral.
3.8 Amendment to Intercreditor: The Intercreditor Agreement among
Coast, C/P, United Sales, Mellon, and Mass Mutual dated March 15, 1988, as
amended to date, shall be further amended, to the satisfaction of Lender, to
reflect the execution and delivery of this Agreement and the terms and
conditions hereof.
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
Closing under this Agreement is subject to the following conditions
precedent (all documents to be in form and substance reasonably satisfactory to
Lender and Lender's counsel):
4.1 Resolutions, Opinions, and Other Documents: Borrowers shall
have delivered to Lender or Lender shall have otherwise received the following:
(a) this Agreement and the Revolving Credit Note;
(b) each document and agreement required to be executed
by Borrowers or by any other Person under any provision of this Agreement or
any related agreement;
(c) certified copies of (i) resolutions of Borrowers'
boards of directors authorizing the execution of this Agreement, the Revolving
Credit Note and each document
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required to be delivered by any Section hereof and (ii) each Borrower's
Certificate of Incorporation and By-Laws;
(d) an incumbency certificate for each Borrower
identifying the Authorized Officers, with specimen signatures;
(e) a written opinion of Borrowers' independent counsel
addressed to Lender;
(f) such financial statements, reports, certifications
and other operational information as Lender may require including without
limitation an initial Borrowing Base certificate;
(g) all documents and agreements required with respect to
the Collateral, including without limitation, UCC financing and/or continuation
statements, if any;
(h) a collateral field examination of Coast Canada
performed by Lender, the results of which shall be satisfactory to Lender, with
that portion of the Borrowing Base to be contributed by Coast Canada supported
by such collateral field examination;
(i) the consent of Mass Mutual to the transactions
contemplated by this Agreement and an amendment to the Intercreditor Agreement
between Mass Mutual and Lender;
(j) revised tri-party agreements from Blocked Account
depositories reflecting this Agreement in form and substance, and from
depositories, acceptable to Lender;
(k) with respect to Coast Canada, the insurance
certificates and certified copies of policies required by Section 6.2(b)
hereof, along with a 438 BFU Lender's Loss Payable Endorsement, or comparable
Canadian insurance industry endorsement, naming Lender as sole loss payee, all
in form and substance acceptable to Lender;
(l) in form and substance satisfactory to Lender,
consolidated and consolidating financial projections of Borrowers for their
1995 fiscal year, including, without limitation, balance sheet, profit and loss
statement, statement of cash flows and availability projections, accompanied by
a certificate, dated as of the Closing Date, of the chief financial officer of
Borrowers, stating that the 1995 financial projections represent the
reasonable, good faith opinion of such officer as to the subject matter thereof
as of the date of such certificate; and
(m) such other documents as Lender may reasonably require.
4.2 Absence of Certain Events: At the Closing Date, (as
hereinafter defined) no Event of Default hereunder shall have occurred and be
continuing, and no event shall have occurred and be continuing which, with the
passage of time, or the giving of notice, or both, would constitute an Event of
Default hereunder.
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4.3 Material Adverse Change: At the Closing Date, no event shall
have occurred which Lender determines has or shall have a material adverse
effect on (i) the financial condition, Property, business or operations of
either of Coast U.S. or Coast Canada, or the ability of either of Coast U.S. or
Coast Canada, to perform their obligations under any of the Loan Documents to
which any Borrower is a party, or (ii) the projections for financial
performance of Coast U.S.'s and Coast Canada's business, taken as a whole, as
set forth in any of the documents or papers furnished to Lender by any Borrower
or its representatives.
4.4 Warranties and Representations at Closing: The warranties and
representations contained in Section 5, as well as any other section of this
Agreement shall be true and correct in all material respects on the Closing
Date with the same effect as though made on and as of that date. Borrower
shall not have taken any action or permitted any condition to exist which would
have been prohibited by any Section hereof.
4.5 Compliance with this Agreement: Borrower shall have performed
and complied with all agreements, covenants and conditions contained herein
which are required to be performed or complied with by Borrower before or at
the Closing Date, including, without limitation, the provisions of Section 5.1
hereof.
4.6 Officer's Certificate: Lender shall receive a certificate
dated the Closing Date and signed by the chief executive officer of Borrower
certifying that all of the conditions specified in this Section have been
fulfilled.
4.7 Closing: Subject to the conditions of this Section, the
Revolving Credit shall be made available on such date (the "Closing Date") and
at such time as may be mutually agreeable to the parties contemporaneously with
the execution hereof ("Closing") at such place as may be requested by Lender.
4.8 Waiver of Rights: By completing the Closing hereunder, or by
making advances hereunder, Lender does not thereby waive breach of any warranty
or representation made by Borrower hereunder or any other Loan Document or the
Existing Loan Documents, and all of Lender's claims and rights resulting from
any breach or misrepresentation by Borrower are specifically reserved by
Lender.
SECTION 5. REPRESENTATIONS AND WARRANTIES
Borrowers warrant, jointly and severally, and represent to Lender
that:
5.1 Corporate Organization and Validity:
(a) Each Borrower is a corporation duly organized and
validly existing under the laws of its state or province of incorporation, is
duly qualified, is validly existing and in good standing and has the requisite
corporate power and authority to engage in the business it conducts in each
state and each foreign country where the nature and extent of its business
requires qualification except where the failure to so qualify would not have a
material adverse effect on the business, Properties or financial condition of
such Borrower or
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the ability of such Borrower to perform under this Agreement. A list of its
state of incorporation and all states and other jurisdictions where each
Borrower is qualified to do business is attached hereto as Exhibit 5.1 and made
a part hereof.
(b) The making and performance of this Agreement and
related agreements, and each document required by any Section hereof will not
violate any law, government rule or regulation applicable to Borrowers, or the
charter, minutes or bylaw provisions of any Borrower or violate or result in a
default (immediately or with the passage of time) under any contract, agreement
or instrument to which any Borrower is a party, or by which it is bound. Each
Borrower is not in violation of any term of any agreement or instrument to
which it is a party or by which it may be bound or of its charter, minutes or
its bylaws which violation could have a material adverse effect on the
Collateral or on the financial condition, Property, business or operations of
Coast U.S. and Coast Canada, taken as a whole.
(c) Each Borrower has all requisite corporate power and
authority to enter into and perform this Agreement and to incur the Obligations
herein provided for, and has taken all proper and necessary corporate action to
authorize the execution, delivery and performance of this Agreement and the
other Loan Documents.
(d) This Agreement, the Revolving Credit Note and all
other Loan Documents required to be executed and delivered by the Borrowers
hereunder, when delivered, will be valid and binding upon the Borrowers and
enforceable against the Borrowers in accordance with their respective terms,
subject to bankruptcy and other laws affecting creditors' rights generally.
5.2 Place of Business: The only places of business of Borrowers,
and the places where they keep and currently intend to keep their Property and
records concerning their Property, are at the addresses listed in Exhibit 5.2
attached hereto and made part hereof.
5.3 Pending Litigation: Except as shown on Exhibit 5.3 attached
hereto and made a part hereof, there are no judgments or judicial or
administrative orders or proceedings pending, or to the knowledge of any
Borrower threatened, against or affecting any Borrower in any court or before
any governmental authority or arbitration board or tribunal, none of which may
materially and adversely affect the business, Property, or financial condition
of Coast U.S. and Coast Canada, taken as a whole, or the ability of Coast U.S.
and Coast Canada, taken as a whole, to perform under this Agreement. No
Borrower is in default with respect to any order of any court, governmental
authority, regulatory agency or arbitration board or tribunal, the effect of
which would materially and adversely affect the business, Property or financial
condition of Coast U.S. and Coast Canada, taken as a whole, or the ability of
Coast U.S. and Coast Canada, taken as a whole, to perform under this Agreement.
5.4 Title to Properties: Each Borrower has good and marketable
title in fee simple (or its equivalent under applicable law) to all the
Property it purports to own, free from Liens and free from the claims of any
other Person, except for those Liens set forth on Exhibit 5.4A attached hereto
and made part hereof. Notwithstanding the above and in order to secure up to a
$23,500,000 obligation (the "Mass Mutual Subordinated Debt"), Borrowers
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may grant a security interest in favor of Mass Mutual or other lender
reasonably acceptable to Lender in all Borrowers' personal property, whether
now existing or hereafter acquired, provided that an agreement executed by Mass
Mutual or such other lender whereby, inter alia
(a) Mass Mutual or such other lender agrees that its
security interest in any and all now existing or hereafter acquired personal or
real property of Borrowers and all proceeds therefrom is subordinate to the
security interest of Lender;
(b) Mass Mutual or such other lender agrees that Lender
shall be vested with the exclusive power to exercise rights and remedies with
respect to the Collateral and it shall refrain from exercising any such rights
or remedies except, however, it shall be entitled to exercise rights and
remedies if it does not receive periodic, scheduled payments to which it is
entitled for a period of five consecutive months and no default under this
Agreement exists upon which Lender has not waived or agreed to forebear; and
(c) The terms and conditions of the Borrowers' agreements
with Mass Mutual or such other lender are (except as provided herein) otherwise
consistent with those contained in the term sheet attached hereto as Exhibit
5.4B and made a part hereof.
5.5 Patents and Trademarks: Borrowers exclusively own or possess
all the patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, franchises, licenses and rights with
respect to the foregoing necessary for the present and planned future conduct
of its business, without any known conflict with the rights of others. A list
of all recorded patents, patent applications, trademarks, trademark
applications and copyrights owned or otherwise possessed by Borrowers
(indicating the nature of Borrowers' interest) - as well as all outstanding
franchises and licenses given by or held by Borrowers, is attached hereto as
Exhibit 5.5, and made part hereof. Borrowers are not in default in any
material respect of any obligation or undertaking with respect to such property
or rights. If requested by Lender, Borrowers shall provide collateral
assignments of any such patents, copyrights or trademarks in form and substance
acceptable to Lender and sufficient for filing with the appropriate
governmental office.
5.6 Governmental Consent: Neither the nature of any Borrower or
of any Borrower's business or Property, nor any relationship between any
Borrower and any other Person, nor any circumstance affecting any Borrower in
connection with this Agreement is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority on the part of any Borrower in conjunction with the
execution and delivery of this Agreement or other Loan Documents.
5.7 Taxes: All tax returns required to be filed by Borrowers in
any jurisdiction have in fact been filed, and all taxes, assessments, fees and
other governmental charges upon Borrowers, or upon any of their Property,
income or franchises, which are due and payable have been paid, except for
those taxes being contested in good faith with due diligence by appropriate
proceedings for which appropriate reserves have been maintained under GAAP.
Borrowers are not aware of any proposed additional tax assessment or tax to be
assessed against or applicable to any Borrower.
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<PAGE> 29
5.8 Financial Statements: The consolidated annual audited
financial statements, including balance sheet and income statement of Borrowers
as of December 31, 1994, accompanied by reports thereon from Borrowers'
independent certified public accountants and the reviewed interim financial
statements of Borrowers dated March 31, 1995 (complete copies of which have
been delivered to Lender), have been prepared in accordance with GAAP, and
present fairly the financial position of the Borrowers as of such dates and the
results of its operations for such periods. The fiscal year of all Borrowers
ends on December 31. Borrowers' federal tax identification number(s) are:
<TABLE>
<CAPTION>
Borrower Federal Tax Identification Number
-------- ---------------------------------
<S> <C>
Coast 94-2490990
United Sales 75-1457339
C/P 35-1155917
Mohawk 14-1505359
Coast Canada WCX 084690
</TABLE>
5.9 Full Disclosure: Neither the financial statements
referred to in Section 5.8, nor this Agreement or the other Loan Documents or
any written statement furnished by Borrowers to Lender in connection with the
negotiation hereof and contained in any financial statements or documents
relating to the Collateral contain any untrue statement of a material fact or
omit a material fact necessary to make the statements contained therein or
herein in light of the circumstances when made not misleading. There is no
fact known to any executive officer of any Borrower which Borrowers have not
disclosed to Lender in writing, which materially affects adversely or may
materially affect adversely the Property, business or financial condition or
the ability of Coast U.S. and Coast Canada, taken as a whole, to perform this
Agreement.
5.10 Subsidiaries: Except as set forth on Exhibit 5.10 hereto, and
except for United Sales, C/P, Mohawk and Coast Canada being wholly-owned
subsidiaries of Coast, no Borrower has Subsidiaries or corporate Affiliates.
5.11 Guarantees, Contracts, etc.:
(a) Borrowers do not own or hold any equity or long term
debt investments in, have any outstanding advances to, have any outstanding
guarantees for the obligations of, or have any outstanding borrowings from, any
Person except as described in Exhibit 5.11, attached hereto and made part
hereof.
(b) Borrowers are not a party to any contract or
agreement, or subject to any charter or other corporate restriction, which
presently materially and adversely affects the business of Coast U.S. and
Coast Canada, taken as a whole.
(c) Except as otherwise specifically provided in this
Agreement, Borrowers have not agreed or consented to cause or permit any of
their Property whether now owned or hereafter acquired to be subject in the
future (upon the happening of a contingency or otherwise), to a Lien not
permitted by this Agreement.
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<PAGE> 30
5.12 Government Regulations, etc:
(a) The use of the proceeds of the Loans and Borrowers'
issuance of the Revolving Credit Note will not directly or indirectly violate
or result in a violation of the Securities Act of 1933 or the Securities
Exchange Act of 1934, as amended, or any regulations issued pursuant thereto,
including, without limitation, Regulations U, T and X of the Board of Governors
of the Federal Reserve System, 12 C.F.R., Chapter II. Borrowers do not own or
intend to carry or purchase any "margin security" within the meaning of said
Regulations.
(b) Borrowers have obtained all licenses, permits,
franchises or other authorizations necessary to the ownership of their Property
and to the conduct of their business, which violation or failure to obtain is
reasonably likely to materially adversely affect the business, Properties or
financial condition of Coast U.S. and Coast Canada, taken as a whole, or the
ability of Coast U.S. and Coast Canada, taken as a whole, to perform under this
Agreement.
(c) As of the date hereof, no Employee Benefit Plan, as
defined in Section 3(2) of ERISA, (other than a multi-employer plan described
in Section 3(37) of ERISA) maintained by any Borrower or under which any
Borrower could have any liability under ERISA (i) has failed to meet the
minimum funding standards established in Section 302 of ERISA, (ii) has failed
to comply with all applicable requirements of ERISA and of the Internal Revenue
Code, including all applicable rulings and regulations thereunder, (iii) has
engaged in or been involved in a Prohibited Transaction under ERISA or the
Internal Revenue Code, or (iv) has been terminated. No Borrower has assumed,
or received notice of a claim asserted against any Borrower, for, withdrawal
liability (as defined in the Multiemployer Pension Plan Amendments Act of 1980,
as amended) with respect to any multiemployer pension plan and is not a member
of any Controlled Group (as defined in ERISA). Each Borrower has timely made
all contributions when due with respect to any multiemployer pension plan in
which it participates and no event has occurred triggering a claim against
borrower for withdrawal liability with respect to any multiemployer pension
plan in which such Borrower participates. The foregoing shall be read to
include comparable provisions of the laws of Canada and of British Columbia,
Alberta, Ontario and Quebec with respect to Coast Canada.
(d) No Borrower is in violation of any applicable
statute, regulation or ordinance of the United States of America, Canada, or of
any state, province, city, town, municipality, county or of any other
jurisdiction, or of any agency thereof, (including without limitation,
environmental laws and regulations), which is reasonably likely to materially
and adversely affect the business, Property, or financial condition or the
ability of Coast U.S. and Coast Canada, taken as a whole, to perform under this
Agreement.
(e) Each Borrower is current with all reports and
documents required to be filed with any state, provincial federal securities
commission or similar agency and is in full compliance in all material respects
with all applicable rules and regulations of such commissions.
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<PAGE> 31
5.13 Business Interruptions: Within five (5) years prior to the
date hereof, neither the business, Property or operations of any Borrower have
been materially and adversely affected in any way by any casualty, strike,
lockout, combination of workers, order of the United States of America or
Canada, or any state, province or local government, or any political
subdivision or agency thereof, directed against any Borrower. There are no
pending or threatened to Borrowers' knowledge labor disputes, strikes, lockouts
or similar occurrences or grievances affecting the business being operated by
any Borrower.
5.14 Names: Within five (5) years prior to the Closing Date, no
Borrower, or any predecessor into or with which any Borrower has merged or
consolidated, has conducted business under or used any other name (whether
corporate or assumed) except for the names shown on Exhibit 5.14, attached
hereto and made part hereof. Each Borrower is the sole owner of all names
listed on such Exhibit 5.14 and any and all business done and all invoices
issued in such trade names are Borrower's sales, business and invoices. Each
trade name of a Borrower represents a division or subsidiary, affiliated, or
independent entity.
5.15 Other Associations: No Borrower is engaged in any joint
venture or partnership with any other Person except as described on Exhibit
5.15 hereto and made part hereof.
5.16 Environmental Matters: No Borrower has knowledge except as
disclosed on Exhibit 5.16 attached hereto and made part hereof:
(a) of the presence of any Hazardous Substances on any of
the real property on which the Collateral is located, or
(b) of any on-site spills, releases, discharges, disposal
or storage of Hazardous Substances that have occurred or are presently
occurring on any of such real property, or
(c) of any spills, releases, discharges or disposal of
Hazardous Substances that have occurred or are presently occurring at other
real properties as a result of the activities or omissions of any Borrower or
for which any Borrower is reasonably likely to be held responsible, or
(d) of any notice, summons, citation or other written
communication sent to any Borrower from any state, provincial or federal agency
concerning any intentional or unintentional action or conduct, inaction or
omission, past or present which is or may be in violation of any state,
provincial or federal environmental law, rule or regulation.
As used herein, the term "Hazardous Substances" means any substances defined or
designated as hazardous or toxic waste, hazardous or toxic material, hazardous
or toxic substance or similar term, by any environmental statute, rule or
regulation of any governmental entity presently in effect and applicable to
such real property.
5.17 Regulation O: No director, executive officer or principal
shareholder of any Borrower is a director, executive officer or principal
shareholder of Lender. For the
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purposes hereof the terms "director" (when used with reference to Lender),
executive officer" and "principal shareholder" have the respective meanings
assigned thereto in Regulation O issued by the Board of Governors of the
Federal Reserve System.
5.18 Capital Stock: As of the date hereof, the authorized and
outstanding capital stock of each Borrower is as set forth on Exhibit 5.18
attached hereto and made part hereof. All such capital stock of each Borrower
has been duly and validly authorized and issued and is fully paid and
nonassessable and has been sold and delivered to the holders thereof in
compliance with, or under valid exemption from, all federal and state laws and
provincial and the rules and regulations of all regulatory bodies thereto
governing the sale and delivery of securities. Except for the rights,
obligations and transactions set forth in Exhibit 5.18, as of the date hereof,
there are no subscriptions, warrants, options, calls, commitments, rights or
agreements by which any Borrower is bound relating to the issuance, transfer,
voting or redemption of shares of its capital stock or any pre-emptive rights
held by any person with respect to the shares of capital stock of such
Borrower. Further, as of the date hereof, no Borrower has issued any
securities convertible into or exchangeable for shares of its capital stock or
any options, warrants or other rights to acquire such shares or securities
convertible into or exchangeable for such shares except as set forth on Exhibit
5.18.
5.19 Solvency: Each Borrower is solvent and able to pay its debts
as they become due, has sufficient capital to carry on its business operations,
and presently owns property having a fair saleable value which is greater than
the amount required to pay all of such Borrower's debts as they become due.
SECTION 6. BORROWER'S COVENANTS
Borrowers covenant, jointly and severally, that until all of
Borrowers' Obligations to Lender are paid and satisfied in full and Lender has
no further obligation to or for the benefit of Borrowers hereunder:
6.1 Payment of Taxes and Claims: Each Borrower shall pay, before
they become delinquent,
(a) all taxes, assessments and governmental charges or
levies imposed upon it or upon the Collateral, and
(b) all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons, which, if unpaid,
might result in the imposition of a Lien upon its Property;
provided, however, that Borrowers shall not be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall at the time be contested in good faith and by appropriate
proceedings by Borrowers, and if Borrowers shall have set aside on its books
adequate reserves in respect thereof, if so required in accordance with GAAP;
which deferment of payment is permissible so long as Borrowers' title to, and
its right to use, the Collateral are not materially adversely affected thereby
and Lender's lien
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<PAGE> 33
and priority on the Collateral are not materially and adversely affected,
altered or impaired thereby.
6.2 Maintenance of Properties and Corporate Existence:
(a) Property - Each Borrower shall maintain its Property
in good condition and make all necessary renewals, replacements, additions,
betterments and improvements thereto and will pay and discharge when due the
cost of repairs and maintenance to its Property, and will pay all rentals when
due for all real estate leased by such Borrower, where the failure to do any of
the foregoing would have a material adverse effect on the Borrowers' ability to
perform their obligations hereunder.
(b) Property Insurance - Each Borrower shall maintain
insurance on all insurable tangible Collateral against fire, flood, casualty
and such other hazards as may be reasonably required by Lender in such amounts,
with such deductibles and with such insurers as may be acceptable to Lender in
its reasonably judgment. The policies of all such casualty insurance shall
contain standard Lender's Loss Payable Clauses issued in favor of Lender under
which all losses thereunder shall be paid to Lender as Lender's interest may
appear. Such policies shall expressly provide that the requisite insurance
cannot be altered or canceled without thirty (30) days prior written notice to
Lender and shall insure Lender notwithstanding the act or neglect of Borrowers.
At or prior to Closing, each Borrower shall furnish Lender with certificates of
insurance, to be promptly followed by, duplicate original policies of
insurance, or such other evidence of insurance, as Lender may require. In the
event a Borrower fails to procure or cause to be procured any such insurance or
to timely pay or cause to be paid the premium(s) on any such insurance, Lender
may do so for such Borrower, but such Borrower shall continue to be liable for
the same. Each Borrower hereby appoints Lender as such Borrower's
attorney-in-fact, exercisable at Lender's option, to endorse any check which
may be payable to such Borrower in order to collect the proceeds of such
insurance and any amount or amounts received or collected by Lender pursuant to
the provision of this paragraph may be applied by Lender, in its sole
discretion, to any liabilities owing by such Borrower to Lender or to repair,
reconstruct or replace the loss of or damage to Collateral as Lender in its
sole but reasonable judgment after consultation with such Borrower, may from
time to time determine.
(c) Public and Products Liability Insurance - Each
Borrower shall maintain public liability and products liability insurance in
such amounts as is customary for companies in the same or similar businesses
located in the same or similar area.
(d) Financial Records - Each Borrower shall keep current
and accurate books of records and accounts in which full and correct entries
will be made of all of its business transactions, and will reflect in its
financial statements adequate accruals and appropriations to reserves, all in
accordance with GAAP.
(e) Corporate Existence and Rights - Except for mergers
permitted pursuant to Section 6.4(b) hereof, each Borrower shall do (or cause
to be done) all things necessary to preserve and keep in full force and effect
its existence, good standing, rights and franchises.
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<PAGE> 34
(f) Compliance with Law - No Borrower shall be in
violation of any laws, ordinances, governmental rules and regulations to which
it is subject, or fail to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its Property or to
the conduct of its businesses, which violation or failure to obtain is
reasonably likely to materially adversely affect the business, Property or
financial condition or the ability of Coast U.S. and Coast Canada, taken as a
whole, to perform under this Agreement.
(g) Collection of Accounts - Each Borrower shall continue
to collect its Accounts in the ordinary course of its business subject to the
provisions hereof.
6.3 Places of Business: Borrowers shall not, without the prior
written consent of Lender, change the location of any of their places of
business, the places where their records concerning their Accounts are kept,
the places where the Collateral is kept, or establish any new, or discontinue
any, existing places of business.
6.4 Merger, Consolidation, Dissolution or Liquidation:
(a) No Borrower shall without Lender's prior written
consent sell, lease, license, transfer or otherwise dispose of its Property,
other than (i) inventory sold or cash expended (which is not otherwise
prohibited hereunder) in the ordinary course of such Borrower's business, (ii)
obsolete, unused or unneeded Equipment sold to bona fide purchasers for fair
value up to a limit of $200,000 in the aggregate for Borrowers during any
twelve month period provided all cash proceeds shall be immediately paid to
Lender
(b) No Borrower shall merge, amalgamate or consolidate
with any other person, or commence a dissolution or liquidation without the
prior written consent of Lender (except for (i) a merger between or among
Borrowers, or (ii) any other merger otherwise in compliance with Section 6.5
hereof, provided Coast is the surviving entity if involved in the merger and
Lender is given prior notice thereof).
(c) No Borrower shall permit its name to be changed
without at least thirty (30) days prior written notice to Lender.
6.5 Acquisitions; Transaction With Affiliates or Subsidiaries:
Borrower may, from time to time, directly or indirectly, make or own beneficial
interests in (including stock, partnership interests, or other securities of),
or make loans, advances, or capital contributions to, any Person as agreed upon
from time to time among Borrowers and Lender, with the consent of Lender not
being unreasonably withheld or delayed, or enter into transactions including,
without limitation the purchase, sale, or exchange of Property, or the loaning
or giving of funds to any Affiliate or any Subsidiary (each, an "Investment")
provided that (i) Cash Flow, as defined in Section 6.18(c) below, is greater
than zero, (ii) no Event of Default has occurred, (iii) Borrowers will maintain
during the ninety (90) day period following any such Investment, and after
giving effect to the Investment, a minimum average Borrowing Base availability
of at least $2,000,000 and a minimum Borrowing Base availability of at least
$1,000,000, and (iv) Mass Mutual consents to the transaction if such consent is
required by the terms of any agreement between any Borrower and Mass Mutual;
and provided
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<PAGE> 35
further, however, that the Borrowers provide Lender with at least thirty (30)
days prior written notice of any such acquisition. (An "Affiliate" means any
entity which directly or indirectly through one or more intermediaries controls
or is controlled by or is under common control with a Borrower. Control may be
by ownership, contract, or otherwise).
6.6 Liens and Encumbrances: Borrowers shall not (i) cause or
permit or (ii) agree or consent to cause or permit in the future (upon the
happening of a contingency or otherwise), their Property (including, without
limitation, the Collateral) whether now owned or hereafter acquired, to be
subject to a Lien or be subject to any claim except:
(a) Liens securing taxes, assessments or governmental
charges or levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords, and other like persons, provided the payment thereof
is not at the time required by Section 6.1;
(b) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation unemployment
insurance, social security and other like laws and in connection with leases or
trade contracts;
(c) Existing liens described in Section 5.4 or on Exhibit
5.4A hereto; and
(d) Liens permitted under Section 6.20(c) below.
6.7 Business Conducted: Borrowers shall continue in the business
presently operated by them using their best efforts to maintain their customers
and goodwill. Borrowers shall not engage, directly or indirectly, in any line
of business substantially different from the business conducted by them
immediately prior to the Closing Date, or engage in business or lines of
business which are not reasonably related thereto.
6.8 Guarantees, Prepayments: Excepting the endorsement in the
ordinary course of business of negotiable instruments for deposit or
collection, Borrowers shall not become or be liable, directly or indirectly,
primary or secondary, matured or contingent, in any manner, whether as
guarantor, surety, accommodation maker, or otherwise, for the existing or
future indebtedness of any kind of any Person. Except as permitted by Section
6.20 hereof, Borrowers shall not make any prepayments on any present or future
Indebtedness to any Person, without Lender's prior written consent.
6.9 Litigation: Borrowers shall give immediate notice to Lender
of any litigation affecting any Borrower if the amount claimed is not covered
by insurance and is more than $100,000, and of any attachment, judgment, lien
or levy or order which may be placed on or assessed against or threatened
against a Borrower, the Collateral or any other property of a Borrower which,
on an individual basis, is in excess of $100,000 or, in the aggregate, exceeds
$200,000.
6.10 Use of Lender's Name: Borrowers shall not use Lender's name
(or the name of any of Lender's affiliates) in connection with any of its
business operations. Nothing herein contained is intended to permit or
authorize Borrowers to make any contract on behalf of Lender.
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6.11 Issue Taxes: Borrowers shall pay all taxes (other than taxes
based upon or measured by Lender's income or revenues or any personal property
tax), if any, in connection with the Loans, and the recording of any lien
documents. The Obligations of Borrowers under this Section shall survive the
payment of Borrowers' Obligations under this Agreement and the termination of
this Agreement.
6.12 Employee Benefit Plans: Borrowers will (a) fund all their
Employee Benefit Plans in a manner that will satisfy the minimum funding
standards of Section 302 of ERISA, or will promptly satisfy any accumulated
funding deficiency that arises under Section 302 of ERISA, (b) furnish Lender,
promptly after the filing of the same, with copies of all reports or other
statements filed with the United States Department of Labor, the Pension
Benefit Guaranty Corporation ("PBGC") or the Internal Revenue Service ("IRS")
with respect to all Employee Benefit Plans, or which Borrower, or any member of
a Controlled Group, may receive from the United States Department of Labor, the
IRS or the PBGC, with respect to all such Employee Benefit Plans, and (3)
promptly advise Lender of the occurrence of any Reportable Event (as defined in
Section 4043 of ERISA) - Prohibited Transaction with respect to any such
Employee Benefit Plan(s) and the action which Borrowers propose to take with
respect thereto. Borrowers will make all contributions when due with respect
to any multiemployer pension plan in which they participates and will promptly
advise Lender (i) upon their receipt of notice of the assertion against a
Borrower of a claim for withdrawal liability, (ii) upon the occurrence of any
event which, to the best of Borrowers' knowledge, would trigger the assertion
of a claim for withdrawal liability against a Borrower, and (iii) upon the
occurrence of any event which, to the best of Borrowers' knowledge, would place
a Borrower in a Controlled Group as a result of which any member (including a
Borrower) thereof may be subject to a claim for withdrawal liability, whether
liquidated or contingent. The foregoing shall be read to include comparable
provisions of the laws of Canada and of British Columbia, Alberta, Ontario and
Quebec with respect to Coast Canada.
6.13 Submission of Collateral Documents: Borrowers will, on
demand, make available to Lender shipping and delivery receipts evidencing the
shipment of the goods that gave rise to an Account, completion certificates or
other proof of the satisfactory performance of services that gave rise to an
Account, a copy of the invoice for each Account and copies of any written
contract or order from which an Account arose. Borrowers shall promptly notify
Lender if an Account becomes evidenced or secured by an Instrument or Chattel
Paper and upon request of Lender, will promptly deliver any such instrument or
Chattel Paper to Lender.
6.14 Returned Goods: Borrowers will promptly advise Lender
whenever an Account Debtor refuses to retain or returns any goods exceeding
$25,000 in value from the sale of which an Account arose and will comply with
any reasonable instructions that Lender may give regarding the sale or other
disposition of such returns.
6.15 Governmental Contracts: Borrowers will immediately notify
Lender if any Account in excess of $10,000 arises out of contracts with the
United States or any department, agency or instrumentality thereof, and will
execute any instruments and take any steps required by Lender so that all
monies due and to become due under such Contract shall
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be assigned to Lender and notice thereof given to the government under the
Federal Assignment of Claims Act.
6.16 Warranties for future Advances: Each request by a Borrower
for an advance under the Revolving Credit in any form, including without
limitation, issuance of letters of credit, shall constitute an automatic
representation and warranty by all Borrowers, jointly and severally, to the
effect that:
(a) No Event of Default, or event or condition which with
the giving of notice or passage of time, or both, would constitute an Event of
Default, then exists;
(b) Each advance is within and complies with the terms
and conditions of this Agreement; and
(c) Each representation and warranty set forth in Section
5 of this Agreement is then true and correct in all material respects, except
for changes in the ordinary course of business not inconsistent with the terms
of the Loan Documents.
6.17 Miscellaneous Covenants:
(a) Borrowers shall not become or be a party to any
contract or agreement which impairs Borrowers' ability to perform under this
Agreement, or under any other instrument, agreement or document to which a
Borrower is a party or by which it is or may be bound.
(b) Borrowers shall not carry or purchase any "margin
security" within the meaning of Regulations U, G, T or X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter II.
6.18 Financial Covenants: Borrowers shall comply, on a
consolidated basis, with the following financial covenants:
(a) Net Income: (i) Commencing with Borrowers' fiscal
year ending December 31, 1996, during the Revolving Credit Term no two (2)
consecutive fiscal years shall show a Net Loss; provided, however, that the Net
Loss in any fiscal year shall not exceed $3,000,000; and (ii) Borrowers Net
Income for their fiscal year ending December 31, 1995 shall not be less than
$2,000,000.
(b) Senior Debt to Tangible Net Worth: The ratio of
Borrowers' total Indebtedness (less subordinated Indebtedness of Mass Mutual
and other Indebtedness subordinated to the Obligations in a manner acceptable
to Lender) to Borrowers' Tangible Net Worth, measured on a quarterly basis,
shall not exceed:
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<TABLE>
<CAPTION>
Fiscal Quarter Ending Ratio
--------------------- -----
<S> <C>
March 31 and June 30
of each fiscal year 1.75:1
September 30 and December 31
of each fiscal year 1.25:1
</TABLE>
(c) Cash Flow: Borrowers shall at all times achieve a
Cash Flow, measured on a fiscal year basis beginning with their fiscal year
ending December 31, 1995, of not less than zero; provided, however, that the
determination of Cash Flow for a given fiscal year shall be determined by
Lender as of the earlier to occur of: (i) two (2) Business Days after Lender's
receipt of Borrowers' annual audited financial statements for the fiscal year
then ended, (ii) the date on which Borrowers' have reasonable cause to believe
that Cash Flow shall be less than zero for the fiscal year, or (iii) March 31
(the "Measurement Date"); provided further, however, in the event that
Borrowers' Cash Flow is between zero and a negative $3,300,000 effective as of
the applicable Measurement Date on a cumulative basis throughout the Revolving
Credit Term, no Event of Default shall result therefrom and Lender's sole
remedy as a result thereof shall be to institute an availability reserve of
$2,000,000 (the "Availability Reserve") as a reduction in availability until
the next succeeding Measurement Date at which time Borrowers' cumulative Cash
Flow is zero or greater; and provided further, however, it shall be an Event of
Default hereunder if Borrowers' negative cumulative Cash Flow is greater than a
negative $3,300,000.
6.19 Change in Management: So long as any Obligations remain
outstanding, Borrowers shall at all times cause Thomas R. McGuire to be the
Chairman and Chief Executive officer (or such positions shall be filled with
person(s) acceptable to Lender).
6.20 Indebtedness. Borrowers shall not create, incur, assume,
permit, guarantee, or otherwise become or remain, directly or indirectly,
liable with respect to any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness set forth in the latest financial
statements of Borrowers submitted to Lender on or prior to the Closing Date;
(c) Indebtedness for capital expenditures in an amount
not to exceed $500,000 during any fiscal year;
(d) refinancing, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 6.20 so long as: (i) the
terms and conditions of such refinancing, renewals, or extensions do not
materially impair the prospects of repayment of the Obligations by Borrowers,
(ii) the net cash proceeds of such refinancing, renewals, or extensions do not
result in an increase in the aggregate principal amount of the Indebtedness so
refinanced, renewed, or extended, and (iii) such refinancing, renewals,
refundings, or extensions do not result in a shortening of the average weighted
maturity of the Indebtedness
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<PAGE> 39
so refinanced, renewed, or extended. Notwithstanding the foregoing, (i)
Borrowers may only repay up to $500,000 of the outstanding principal amount of
Indebtedness owed by Borrowers to HWH Corporation but then only with the prior
written consent of Lender; (ii) provided that no Event of Default shall have
occurred and is continuing, Borrowers may make regularly scheduled principal
payments on their permitted Indebtedness to Mass Mutual outstanding from time
to time, but only in an amount not to exceed $3,333,333 during calendar year
1995, and $2,333,333 during any calendar year thereafter, in each case with
interest thereon; and (iii) provided that no Event of Default shall have
occurred and is continuing, Borrowers may increase the principal amount of the
Mass Mutual Subordinated Debt, whether owed to Mass Mutual or to another lender
reasonably acceptable to Lender, to $23,500,000 on terms acceptable to Lender.
6.21 End of Fiscal Year; Fiscal Quarters. Borrowers will not
change from that in effect as of the date hereof the date on which any of their
fiscal quarters or fiscal years shall end.
6.22 Loans to Officers. Borrowers will not make, or have
outstanding, loans or advances to officers, shareholders, directors or
employees in excess of $100,000 in the aggregate.
6.23 Intercompany Transfers. Without the prior written consent of
Lender, there shall be no intercompany transfers between any other Borrower and
Coast Canada or between Coast Canada and any other Borrower with the exception
of (i) management fees and assessments for the cost and expenses of centralized
management and administration charged by Coast from time to time to any
Borrower, and (ii) sales of goods among the Borrowers in the ordinary course of
business on terms and conditions no less favorable to a Borrower than such
Borrower would charge to unaffiliated third parties.
6.24 Keyman Insurance. Borrowers shall, within ninety (90) days of
the date of this Agreement, obtain a life insurance policy of no less than Two
Million Five Hundred Thousand Dollars ($2,500,000) on the life of Thomas R.
McGuire to be assigned to Lender as additional security for the payment and
performance of Borrowers' Obligations hereunder. The Borrowers agree to
maintain in force said policy(ies) and to pay all premiums and other charges
when due and perform and comply with all obligations under said policy(ies).
Borrowers further agree to furnish Lender with an "absolute assignment" of the
proceeds of the policy(ies) as further Collateral and to record the "absolute
assignment" with the company issuing said policy(ies) and to furnish Lender
with evidence of acceptance thereof by the issuing company. If the Borrowers
fail to provide and pay for such insurance, Lender may procure such insurance
and charge Borrowers' Loan Account for all costs and expenses incurred.
SECTION 7. ADDITIONAL COVENANTS; INFORMATION AS TO BORROWER
7.1 Financial and Business Information: So long as Borrowers are
indebted to Lender or Lender is obligated to or for the benefit of Borrowers
hereunder, Borrowers shall deliver to Lender the following:
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<PAGE> 40
(a) such data, reports, statements and information,
financial or otherwise, as Lender from time to time may request, including,
without limitation, (i) a borrowing base certificate on a form acceptable to
Lender on the first business day of every week, which also summarizes the prior
week's changes in such numbers; (ii) reports of sales on the first business day
of every week, including credits issued and collections received and
summarizing the prior week's changes in all such numbers; (iii) monthly, such
internally prepared reports as Lender requires, including accounts receivable
and payable aging schedules and an inventory report with a breakdown by
location within twenty (20) days of the end of each calendar month; (iv)
internally prepared monthly financial statements for Borrower within thirty
(30) days of the end of each calendar month, (with the exception of the month
of January of each fiscal year, for which the reporting period shall be sixty
(60) days), all in reasonable detail; (v) annual projections, profit and loss
statements, balance sheets, availability projections and cash flow reports
(prepared on a monthly basis) for the succeeding fiscal year on or before the
end of each of Borrowers' fiscal years, in form and substance satisfactory to
Lender; and (vi) annual audited financial statements for Borrowers from their
independent certified public accountants acceptable to Lender and a management
letter from Borrowers (all within ninety (90) days after the end of each of
Borrowers' fiscal years). Annual statements shall set forth in comparative
form figures for the corresponding periods in the prior fiscal year. All
financial statements shall be consolidated and consolidating and shall include
a balance sheet, income statement and statement of cash flow and shall be
prepared in accordance with GAAP;
(b) Notice of Event of Default - immediately upon
becoming aware of the existence of any condition or event which constitutes a
default or an Event of Default under this Agreement, or which with the passage
of time or the giving of notice, or both, could become an Event of Default
hereunder, a written notice specifying the nature and period of existence
thereof and what action Borrowers have taken or propose to take with respect
thereto;
(c) Notice of Claimed Default - immediately upon receipt
by a Borrower, a copy of any notice of default given to such Borrower by any
creditor for borrowed money of such Borrower for an amount in excess of
$100,000 individually, or for all such defaults if such defaults exceed
$500,000 in the aggregate during any fiscal year;
(d) Securities and Other Reports - For as long as any
Borrower is a public company, promptly upon its becoming available, one copy of
each financial statement, report, notice or proxy statement sent by such
Borrower to stockholders generally, and, a copy of each regular or periodic
report, and any registration statement, or prospectus in respect thereof filed
by such Borrower with any securities exchange or with all federal or state
securities and exchange commissions or any successor agency;
(e) U.S. Dollar - all reports provided by Borrowers to
Lender pursuant to this Agreement shall be denominated in Dollars, with
Canadian Dollar conversion if such reports pertain to Coast Canada and such
reports are originally stated in Canadian Dollars.
7.2 Officer's Certificates: Within thirty (30) days of the end of
each calendar month (with the exception of the month of January of each fiscal
year, for which the
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reporting period shall be sixty (60) days) and along with the set of financial
statements delivered to Lender at the end of each fiscal year pursuant to
Section 7.1(a) hereof, Borrowers shall deliver to Lender a certificate from the
Chief Financial Officer of Borrower in the form attached hereto as Exhibit 7.2
and made a part hereof, and otherwise satisfactory to Lender setting forth:
(a) Covenant Compliance - the information (including
detailed calculations) required in order to establish whether Borrowers are in
compliance with the requirements of Section 6 as of the end of the period
covered by the financial statements then being furnished and any exhibits
appended thereto under Section 7.1; and
(b) Event of Default - that the signer has reviewed the
relevant terms of this Agreement, and has made (or caused to be made under his
supervision) a review of the transactions and conditions of Borrowers from the
beginning of the accounting period covered by the income statements being
delivered therewith to the date of the certificate, and that such review has
not disclosed the existence during such period of any condition or event which
constitutes an Event of Default or which is then, or with the passage of time
or giving of notice, or both, could become an Event of Default hereunder or if
any such condition or event existed or exists, specifying the nature and period
of existence thereof and what action Borrowers have taken or propose to take
with respect thereto.
7.3 Inspection: So long as Borrowers are indebted to Lender,
Borrowers will permit any of Lender's officers or other representatives to
visit and inspect during business hours any of the Collateral of Borrowers, to
examine and audit all of Borrowers' books of account, records, reports and
other papers, to make copies and extracts therefrom and to discuss its affairs,
finances and accounts with its officers, employees and independent public
accountants. Lender shall also have the right, at any time, in Lender's name
or in the name of a nominee of the Lender, to verify the validity, amount or
other matter relating to the Accounts or other Collateral, by mail, telephone
or otherwise.
7.4 Tax Returns and Reports: At Lender's request from time to
time, Borrowers shall immediately furnish Lender with copies of the annual
United States and Canada federal and state and provincial income tax returns of
Borrowers. Borrowers further agree that if requested by Lender, they shall
immediately furnish Lender with copies of all reports filed with any federal,
state or local governmental authority or agency, board or commission.
7.5 Information to Participant: Lender may divulge to any
participant or prospective participant it may obtain in the Loans, or any
portion thereof, all financial and other information concerning Borrowers, and
furnish to such participant copies of reports, financial statements,
certificates, and documents obtained under any provision of this Agreement, or
related agreements and documents; provided however that any potential
participant agrees to hold in confidence all confidential information or
proprietary information provided to it by Borrowers or Lender except (a) to the
extent that the production of such information is required pursuant to any
statute, ordinance, regulation, rule or order or any subpoena or any
governmental inquiry or by reason of any bank regulation in connection with any
bank examination, and (b) such potential participant shall not be
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<PAGE> 42
prohibited from disclosing any such information to any of its agents, officers,
employees, attorneys, accountants, or consultants, who shall be informed of
this provision.
7.6 Material Adverse Developments: Borrowers agree that
immediately upon becoming aware of any development or other information outside
the ordinary course of business and excluding matters of a general economic,
financial or political nature which is reasonably likely to materially and
adversely affect the Property, businesses, prospects, or financial condition of
Coast U.S. and Coast Canada, taken as a whole, or the Collateral, or the
ability of Coast U.S. and Coast Canada, taken as a whole, to perform under this
Agreement, they shall give to Lender telephonic or telegraphic notice
specifying the nature of such development or information and such anticipated
effect. In addition, such verbal communication shall be confirmed by written
notice thereof transmitted to Lender on the same day such verbal communication
is made.
SECTION 8. DEFAULT
8.1 Events of Default: Each of the following events shall
constitute an event of default ("Event of Default") and Lender shall thereupon
have the option to declare all Obligations immediately due and payable,
including, but not limited to, interest, principal, Expenses, advances to
protect Lender's position and counsel fees to enforce this Agreement, and
exercise all of Lender's rights hereunder and thereunder, all without demand,
notice, presentment or protest or further action of any kind (it also being
understood that the occurrence of any of the events or conditions set forth in
subparagraphs (j), (k) or (l) shall automatically cause an acceleration of
Borrowers' Obligations to Lender and termination of Lender's obligations
hereunder).
(a) Payments - if a Borrower fails to make any payment of
principal or interest under the Revolving Credit, or to make payment of any fee
described in Section 2.8 hereof, when such payment is due and payable; or
(b) Other Charges - if a Borrower fails to pay any other
charges, fees or other monetary obligations owing to Lender arising out of or
incurred in connection with this Agreement (other than those obligations
described in Subsection 8.1(a) above) within ten (10) Business Days following
Lender's request for such payment; or
(c) Particular Covenant Defaults - if a Borrower fails to
perform or observe any covenant contained in this Agreement, or in any other
instrument or document between Lender and any Borrower or any endorser,
guarantor or surety for any Obligation and the result of such failure to
perform or observe such covenants would be a material adverse effect on the
business, Property or financial condition of Coast U.S. and Coast Canada, taken
as a whole, or on the Collateral; provided, however, an Event of Default shall
not be deemed to have occurred under this Section 8.1(c) if Borrowers cure a
breach of Sections 6.1, 6.6, 6.9, 6.14, 6.15, 6.19, 6.20 or 6.22 within ten
(10) days after such default; or
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<PAGE> 43
(d) Financial Information - if any statement, report,
financial statement, or certificate made or delivered by Borrowers or any of
their officers, employees or agents in connection with the Loan Documents, to
Lender is not true and correct, in all material respects; or
(e) Uninsured Loss - if there shall occur any material
uninsured damage to or loss, theft, or destruction of any material portion of
the Collateral; or
(f) Warranties or Representations - if any warranty,
representation or other statement by or on behalf of Borrowers contained in
this Agreement, or in any document, agreement or instrument furnished in
compliance with or in reference to this Agreement, or in any other existing or
future agreement between any Borrower and Lender, is false, erroneous, or
misleading in any material respect when made; or
(g) Agreements with Others - if any Borrower shall
default beyond any grace period of any agreement(s) with any creditor for
borrowed money of such Borrower, including, but not limited to, any
Indebtedness to Mass Mutual, which in the aggregate with respect to such
creditor exceeds $250,000, and (i) such default is a payment default or (ii)
such default is a non-payment default and the effect of such default is to
cause the holder of a Borrower's Obligations to declare any such Obligation of
such Borrower to become due prior to its maturity date or prior to its
regularly scheduled date of payment; or
(h) Other Agreements with Lender - if a Borrower breaches
or violates the terms of, or if a default or an Event of Default, occurs under,
any other existing or future agreement (related or unrelated) between any
Borrower and Lender; or
(i) Judgments - if any levy, seizure, attachment or
judgment, which individually is in excess of $100,000 or in the aggregate
involve disputes in excess of $300,000, shall be rendered by a court of record
upon or against any Borrower, the Collateral, or the assets of any Borrower,
which is not removed, stayed or bonded within thirty (30) days after the
occurrence of such event, or the issuance of an injunction which has a material
adverse effect on the business, Property or financial condition of Coast U.S.
and Coast Canada, taken as a whole, or on the Collateral; or
(j) Assignment for Benefit of Creditors, etc. - if any
Borrower makes an assignment for the benefit of creditors generally, offers a
composition or extension to creditors, or makes or sends notice of an intended
bulk sale of any business or assets now or hereafter conducted by any Borrower;
or
(k) Bankruptcy, Dissolution, etc. - upon the commencement
of proceedings for the dissolution, or liquidation of, any Borrower or the
commencement or reopening of any proceedings for reorganization or liquidation
of any Borrower's debts under the United States Bankruptcy Code, the Canadian
Bankruptcy and Insolvency Act, or any other state, provincial or federal law,
now or hereafter enacted for the relief of debtors, whether instituted by or
against any Borrower; provided however that such Borrower shall have sixty (60)
days to obtain the dismissal or discharge of involuntary proceedings filed
against it, it being understood that during such sixty (60) day period, Lender
shall not be obligated to
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<PAGE> 44
make advances hereunder and Lender may seek adequate protection in any
bankruptcy proceeding or
(l) Receiver - upon the application by or against any
Borrower for the appointment of a receiver, liquidator, custodian, trustee or
similar official or fiduciary for Borrower or for any of such Borrower's
Property, provided however, that such Borrower shall have sixty (60) days to
obtain the dismissal or discharge of involuntary proceedings filed against it,
it being understood that during such sixty (60) day period, Lender shall not be
obliged to make advances hereunder; or
(m) Execution Process, etc. - the issuance of any
execution or distraint process against any Borrower, or its Property which has
a material adverse effect on the business, Property or financial condition of
Coast U.S., and Coast Canada, taken as a whole, or on the Collateral; or
(n) Termination of Business - except as permitted by
Section 6.4(b) hereof, if any Borrower ceases any material portion of its
business operations as presently conducted and the result of such cessation of
business is a material adverse effect on the business, Property or financial
condition of Coast U.S. and Coast Canada, taken as a whole, or on the
Collateral; or
(o) Pension Benefits, etc. - if any Borrower fails to
comply with ERISA, so that grounds exist to permit the appointment of a trustee
under ERISA to administer a Borrower's employee plans or to allow the Pension
Benefit Guaranty Corporation to institute proceedings to appoint a trustee to
administer such plan(s), or to permit the entry of a Lien to secure any
deficiency or claim (the foregoing shall include comparable provisions of the
laws of Canada and of British Columbia, Alberta, Ontario and Quebec with
respect to Coast Canada);
(p) Investigations - any indication or evidence received
by Lender that reasonably leads it to believe that any Borrower may have
directly or indirectly been engaged in any type of activity which would be
reasonably be likely to result in the forfeiture of any material portion of
such Borrower's Property to any governmental entity, federal, provincial, state
or local; or
(q) Cash Flow - if Borrowers' negative cumulative Cash
Flow, measured on a fiscal year basis beginning with their fiscal year ending
December 31, 1995, is greater than a negative $3,300,000.
8.2 Cure - Nothing contained in this Agreement or the Loan
Documents shall be deemed to compel Lender to accept a cure or grant a waiver
of any Event of Default hereunder.
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8.3 Rights and Remedies on Default:
(a) In addition to all other rights, options and remedies
granted to Lender under this Agreement, Lender may, upon the occurrence of an
Event of Default, which has not been expressly cured or waived in writing by
Lender in its sole discretion, terminate any obligations of Lender hereunder to
make advances or extensions of credit under the Revolving Credit, declare all
Obligations, whether evidenced by this Agreement, under any of the Loan
Documents, or under any other agreement between any Borrower and Lender,
immediately due and payable, exercise all other rights granted to it hereunder
and all rights under the Uniform Commercial Code and any other applicable law,
and under all related agreements with Borrower referred to herein or hereafter
executed, permitted to be exercised after the occurrence of an Event of
Default, including, without limitation, the following rights and remedies:
(i) The right to take possession of, send notices
and collect directly the Collateral, with or without judicial process
(including without limitation the right to redirect mail addressed to Borrowers
to an address designated by Lender) and settle or adjust disputes and claims
directly with Account Debtors for amounts and upon terms which Lender considers
advisable, and in such cases, Lender will credit Borrowers' Loan Account with
only the net amounts received by Lender in payment of such disputed Accounts
after deducting all Lender Expenses incurred or expended in connection
therewith;
(ii) By its own means or with judicial assistance,
enter any of Borrowers' premises and take possession of the Collateral, or
render it unusable, or dispose of the Collateral on such premises without any
liability for rent, storage, utilities or other sums, and Borrowers shall not
resist or interfere with such action, and, without notice to or demand upon any
Borrower or any guarantor, Lender may make such payments and do such acts as
Lender considers necessary or reasonable to protect its security interest in
the Collateral. Borrowers' authorize Lender to pay, purchase, contest, or
compromise any encumbrance, charge, or lien that in Lender's determination
appears to be prior or superior to its security interest and to pay all
expenses incurred in connection therewith. With respect to any of Borrowers'
owned premises, Borrowers hereby grant Lender a license to enter into
possession of such premises and to occupy the same, without charge, for up to
one hundred twenty (120) days in order to exercise any of Lender's rights or
remedies provided herein, at law, in equity, or otherwise;
(iii) Require Borrowers at Borrowers' expense to
assemble all or any part of the Collateral and make it available to Lender at
any place designated by Lender in reasonable proximity to its prior Borrower
location;
(iv) The right to reduce the Revolving Credit,
Borrowing Base or any portion thereof or the advance rates, or to modify the
terms and conditions upon which Lender is willing to consider making advances
under the Revolving Credit or to take additional reserves in the Borrowing Base
for any reason;
(v) Require Borrowers to deposit with Lender cash
collateral in an amount equal to the outstanding face value of undrawn Letters
of Credit;
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(vi) ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Lender is hereby granted a license or
other right to use, without charge, Borrowers' labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in completing production of, advertising for sale,
and selling any Collateral and Borrowers' rights under all licenses and all
franchise agreements shall inure to Lender's benefit; and
(vii) sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including Borrowers'
premises) as Lender determines is commercially reasonable. It is not necessary
that the Collateral be present at any such sale and Lender may credit bid and
purchase at any public sale.
(b) Lender shall have the right, if available under
applicable law, to appoint by instrument any person or persons to be a Receiver
of all or any portion of the undertaking, property and assets hereby charged,
to fix the Receiver's remuneration and to remove any Receiver so appointed and
appoint another or others in his stead. Any Receiver so appointed shall have
all the powers of Lender set out in this Section 8.3 and, in addition, shall
have the following powers: (i) to carry on the business of any Borrower and to
enter into any compromise or arrangement on behalf of such Borrower; and (ii)
with the prior written consent of Lender to borrow money in its name or in any
Borrower's name, for the purpose of carrying on the business of the Borrower
and for the preservation and realization of the undertaking, property and
assets of the Borrower including, without limitation, the right to pay Persons
having prior charges or encumbrances on properties on which the Borrower may
hold charges or encumbrances, with any amount so borrowed and any interest
thereon to be a charge upon the Collateral in priority to this Agreement. Any
Receiver appointed pursuant to the provisions hereof shall be deemed to be an
agent of the Borrowers for the purposes of: (i) carrying on and managing the
business and affairs of the Borrowers, and (ii) establishing liability for all
of the acts or omissions of the Receiver while acting in any capacity hereunder
and Lender shall not be liable for such acts or omissions, provided that,
without restricting the generality of the foregoing, the Borrowers irrevocably
authorize Lender to give instructions to the Receiver relating to the
performance of its duties as set out herein.
(c) Borrowers expressly waive presentment for payment,
demand, notice of dishonor, protest, notice of protest, diligence of
collection, and any other notice of any kind.
(d) Borrower hereby agrees that a notice received by it
at least ten (10) days before the time of any intended public sale or of the
time after which any private sale or other disposition of the Collateral is to
be made, shall be deemed to be reasonable notice of such sale or other
disposition. If permitted by law, any perishable inventory may be sold
immediately by Lender without prior notice to Borrowers.
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8.4 Nature of Remedies: Lender shall have the right to proceed
against all or any portion of the Collateral in any order and may apply such
Collateral to the liabilities and Obligations of Borrowers to Lender in any
order. All rights and remedies granted Lender hereunder and under any
agreement referred to herein, or otherwise available at law or in equity, shall
be deemed concurrent and cumulative, and not alternative remedies, and Lender
may proceed with any number of remedies at the same time until the Obligations
of Borrowers to Lender, are satisfied in full. The exercise of any one right
or remedy shall not be deemed a waiver or release of any other right or remedy,
and Lender, upon the occurrence of an Event of Default, may proceed against
Borrowers, and/or the Collateral, at any time, under any agreement, with any
available remedy and in any order.
8.5 Set-Off: If any bank account of Borrowers with Lender or with
any participant is attached or otherwise liened or levied upon by any third
party, Lender (and any participant) need not await the running of any
applicable grace period hereunder, but Lender (and such participant as agent
for Lender) shall have and be deemed to have the immediate right of set-off and
may apply the funds or amount thus set-off against any of Borrowers'
liabilities hereunder.
SECTION 9. MISCELLANEOUS
9.1 CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER: THE VALIDITY
OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND
THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED
AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF LENDER, IN ANY OTHER
COURT IN WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF THE
BORROWERS AND LENDER WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 9.1. BORROWERS AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
OR STATUTORY CLAIMS. BORROWERS AND LENDER REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY
OF THIS
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AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
9.2 Severability of Provisions: The provisions of this Agreement
and all other agreements and documents referred to herein are to be deemed
severable, and the invalidity or unenforceability of any provision shall not
affect or impair the remaining provisions which shall continue in full force
and effect.
9.3 Integrated Agreement. The Revolving Credit Note, this
Agreement and all other Loan Documents shall be construed as integrated and
complementary of each other, and as augmenting and not restricting Lender's
rights, remedies and security. If, after applying the foregoing, an
inconsistency still exists, the provisions of this Agreement shall constitute
an amendment thereto and shall control.
9.4 Waiver:
(a) No omission or delay by Lender in exercising any
right or power under this Agreement or any related agreements and documents
will impair such right or power or be construed to be a waiver of any default,
or Event of Default or an acquiescence therein, and any single or partial
exercise of any such right or power will not preclude other or further exercise
thereof or the exercise of any other right, and no waiver will be valid unless
in writing and signed by Lender, and then only to the extent specified.
(b) Borrowers expressly waive presentment for payment,
demand, notice of dishonor, protest, notice of protest, diligence of
collection, and any other notice of any kind, and hereby consent to any number
of renewals and extensions of time of payment hereof, which renewals and
extensions shall not affect the liability of any party hereto. Borrowers
further agree that Lender may accept, by way of compromise or settlement, from
any one or more of the parties liable for the Obligations a sum or sums less
than the amount of the Obligations, and may give releases to such parties
without affecting the liability of any other party for the unpaid balance. Any
such renewals or extensions may be made and any such partial payments accepted
or releases given without notice to any such party.
(c) Borrowers, to the extent permitted by applicable law,
hereby waive and release all errors, defects and imperfections in any
proceedings instituted by Lender under the terms of this Agreement, or of any
of the other Loan Documents, as well as all benefit that might accrue to
Borrowers by virtue of any present or future laws exempting the Property, or
any other property, real, personal or mixed, or any part of the proceeds
arising from any sale of such property, from attachment, levy or sale under
execution, or providing for any stay of execution, exemption from civil
process, or extension of time for payment. Borrowers agree that any real
estate that may be levied upon pursuant to a judgment obtained by virtue
hereof, or upon any writ of execution issued thereon, may be sold upon any such
writ in whole or in part in any order desired by Lender.
(d) Borrowers release and shall indemnify, defend and
hold harmless Lender, its officers, employees and agents, of and from any
claims for liability, loss or damage (including costs and expenses) resulting
from (i) acts or conduct of any or all of
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them arising through the date of Closing, or arising after the Closing as a
result of its or their carrying out its rights and options contained in this
Agreement unless it results from Lender's willful misconduct or gross
negligence; and (ii) acts or conduct of Borrowers (including any breach or
violation of any representation, warranty, covenant or undertaking of
Borrowers) under, pursuant or related to this Agreement, including without
limitation, Borrowers' failure to comply with any laws, statutes, ordinances or
governmental rules and regulations.
(e) So long as Lender complies with its obligations, if
any, under Section 9207 of the Uniform Commercial Code, Lender shall not in any
way or manner be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner
or fashion from any cause; (c) any diminution in the value thereof; or (d) any
act or default of any carrier, warehouseman, bailee, forwarding agency, or
other person whomsoever. All risk of loss, damage, or destruction of the
Collateral shall be borne by Borrowers.
9.5 Time: Whenever Borrower shall be required to make any
payment, or perform any act on a Saturday, Sunday or a legal holiday under the
Laws of the Commonwealth of Pennsylvania or such other jurisdiction where
Borrower may be required to make any payment or perform any act, such payment
may be made, or such act may be performed, on the next succeeding business day.
Time is of the essence in Borrower's performance under all provisions of this
Agreement and all related agreements and documents.
9.6 Expenses of Lender:
(a) At Closing and from time to time thereafter,
Borrowers will pay all reasonable expenses ("Expenses") (including the fees and
expenses of legal counsel for Lender) relating to this Agreement, and all
related agreements and documents, including, without limitation, expenses
incurred in the analysis, negotiation, preparation, closing, administration and
enforcement of this Agreement (subject to the limitation set forth in the
Commitment Letter among Borrowers and Lender dated April 11, 1995) and all
related agreements and documents, the enforcement, protection and defense of
the rights of Lender in and to the Collateral or otherwise hereunder, including
the right to take possession of any Collateral and the proceeds thereof and to
hold, collect, prepare for sale, sell and dispose of any Collateral, expenses
relating to any suit instituted against Lender involving or pertaining to this
Agreement or any related document, and any expenses relating to extensions,
amendments, waivers or consents pursuant to the provisions hereof, or any
related agreements and documents or relating to agreements with other
creditors, or termination of this Agreement.
(b) Expenses shall also include but not be limited to (i)
cost of reproducing this Agreement and related agreements and documents; (ii)
filing and recording fees; and (iii) searches.
9.7 Brokerage: This transaction was brought about and entered
into by Lender and Borrowers acting as principals and without any brokers,
agents or finders being the
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effective procuring cause hereof. Borrowers represent that they have not
committed Lender to the payment of any brokerage fee, commission or charge in
connection with this transaction. If any such claim is made on Lender by any
broker, finder or agent or other person, Borrowers will indemnify, defend and
save Lender harmless against such claim and further will defend any action or
actions to recover on such claim, at Borrowers' own cost and expense, including
Lender's counsel fees. Lender shall notify Borrowers of any claims which may
be sought under such indemnity. Borrowers further agree that until any such
claim or demand is adjudicated in Lender's favor, the amount demanded shall be
deemed an Obligation of Borrowers under this Agreement, secured by the
Collateral. Notwithstanding the foregoing, Borrowers shall not be liable under
this Section for a successful claim made by a purported broker, finder or
agent, if such claim against Lender was based an assertion that such person was
hired or engaged by Lender.
9.8 Notices:
(a) Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed given if delivered in person,
sent via telecopy or via nationally recognized overnight courier service or
sent by certified or registered mail postage prepaid, return receipt requested,
as follows, unless such address is changed by written notice hereunder:
If to Mellon to:
Mellon Bank, N.A.
Mellon Bank Center
Asset Based Lending Dept.
1735 Market Street, 6th Floor
Philadelphia, PA 19101
Attn: Senior Credit Officer
Telecopy: 215-553-0201
If to Mellon Canada to:
Mellon Bank Canada
77 King Street West
P.O. Box 3200
Royal Trust Tower
Toronto Dominion Centre
Toronto, Ontario M5K 1K2 Canada
Attn: Head of Corporate Banking
Telecopy: 416-860-2409
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With a copy to:
Kelley Drye & Warren
515 South Flower Street, 11th Floor
Los Angeles, California 90071
Attn: James D. Prendergast, Esq.
Telecopy: 213-688-8150
If to Borrowers:
The Coast Distribution System
1982 Zander Road
San Jose, CA 95112
Attn: Sandra Knell, Executive Vice President
and Chief Financial Officer
Telecopy: (408) 436-0670
With a copy to:
Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attn: Ben A. Frydman, Esq.
Telecopy: (714) 725-4100
(b) Any notice sent by Lender or Borrowers by registered
or certified mail shall be deemed to be given when so received.
9.9 Headings: The headings of any paragraph or Section of this
Agreement are for convenience only and shall not be used to interpret any
provision of this Agreement.
9.10 Survival: All warranties, representations, and covenants made
by Borrowers herein, or in any agreement referred to herein or on any
certificate, document or other instrument delivered by it or on its behalf
under this Agreement, shall be considered to have been relied upon by Lender,
and shall survive the delivery to Lender of the Revolving Credit Note and this
Agreement, regardless of any investigation made by Lender or on its behalf.
All statements in any such certificate or other instrument prepared and/or
delivered for the benefit of Lender shall constitute warranties and
representations by Borrowers hereunder. Except as otherwise expressly provided
herein, all covenants made by Borrowers hereunder or under any other agreement
or instrument shall be deemed continuing until all liabilities and Obligations
of Borrowers to Lender are satisfied in full.
9.11 Termination of Security Interests: After Borrowers'
Obligations to Lender have been unconditionally paid and satisfied in full and
after a written request from Borrowers to Lender, Lender shall terminate its
security interest in the Collateral. After termination and at such time as
Lender has received payment and performance in full of all
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of Borrowers' Obligations, Lender shall, as promptly as practicable, execute a
termination of all liens given by the Borrowers to Lender pursuant to this
Agreement.
9.12 Successors and Assigns: This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties. Lender may sell, assign, transfer or participate any or all of its
rights or Obligations hereunder without notice to or consent of Borrowers, and,
if Lender elects to participate or sell any or all of its rights or the
Obligations hereunder, Lender agrees to use commercially reasonable efforts to
include Bank of America, N.T. & S.A. in any such participation or sale.
Borrowers may not transfer, assign or delegate any of its duties or Obligations
hereunder.
9.13 Duplicate Originals: Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.
9.14 Modification: No modification hereof or any agreement
referred to herein shall be binding or enforceable unless in writing and signed
on behalf of the party against whom enforcement is sought.
9.15 Signatories: Each individual signatory hereto represents and
warrants that he or she is duly authorized to execute this Agreement on behalf
of his or her principal and that he or she executes the Agreement in such
capacity and not as a party.
9.16 Third Parties: No rights are intended to be created
hereunder, or under any related agreements or documents for the benefit of any
third party donee, creditor or incidental beneficiary of any Borrower. Nothing
contained in this Agreement shall be construed as a delegation to Lender of any
Borrower's duty of performance, including, without limitation Borrower's duties
under any account or contract in which Lender has a security interest.
9.17 Discharge of Taxes, Borrower's Obligations, Etc.: Lender, in
its sole discretion, shall have the right at any time, and from time to time,
without prior notice to Borrowers if any Borrower fails to do so, to (a) obtain
insurance covering any of the Collateral as required hereunder, (b) pay for the
performance of any of any Borrower's Obligations hereunder, (c) discharge
taxes, liens, security interests or other encumbrances at any time levied or
placed on any of the Collateral in violation of this Agreement unless Borrowers
are in good faith with due diligence by appropriate proceedings contesting such
taxes, liens, etc., and (d) pay for the maintenance and preservation of any of
the Collateral. Expenses and advances shall be added to the Revolving Credit,
bear interest at the same rate applied to the Revolving Credit, until
reimbursed to Lender and shall be secured by the Collateral. Such payments and
advances made by Lender shall not be construed as a waiver by Lender of an
Event of Default under this Agreement.
9.18 Withholding and Other Tax Liabilities: Lender shall have the
right to refuse to make any advances from time to time unless Borrowers shall,
at Lender's request, have given to Lender evidence, reasonably satisfactory to
Lender, that Borrowers have properly deposited or paid, as required by law, all
withholding taxes and all federal, provincial, state,
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city, county or other taxes due up to and including the date of the requested
advance. Until all of Borrowers' Obligation to Lender have been paid in full,
Lender shall be entitled to continue to hold any and all of the Collateral
until Borrowers have given to Lender evidence, reasonably satisfactory to
Lender, that Borrowers have properly deposited or paid, as required by law, all
withholding taxes due up to and including the date of such expiration or
termination. Copies of deposit slips showing payment shall likewise constitute
satisfactory evidence for such purpose. In the event that any lien, assessment
or tax liability against any Borrower shall arise in favor of any taxing
authority, whether or not notice thereof shall be filed or recorded as may be
required by law, Lender shall have the right (but shall not be obligated, nor
shall Lender hereby assume the duty) to pay any such liens assessment or tax
liability by virtue of which such charge shall have arisen; provided, however,
that Lender shall not pay any such tax, assessment or lien if the amount,
applicability or validity thereof is being contested in good faith and by
appropriate proceedings by a Borrower and further provided that such Borrower's
title to and its right to use the Collateral are not materially adversely
affected, and Lender's lien and priority in the Collateral are not affected,
altered or impaired thereby. In order to pay any such lien, assessment or tax
liability, Lender shall not be obliged to wait until said lien, assessment or
tax liability is filed before taking such action as hereinabove set forth. Any
sum or sums which Lender shall have paid for the discharge of any such lien
shall be added to the Revolving Credit and shall be paid by Borrowers to Lender
with interest thereon, upon demand, and Lender shall be subrogated to all
rights of such taxing authority against Borrowers.
9.19 Revival and Reinstatement of Obligations. If the incurrence
or payment of the Obligations by Borrowers or any guarantor of the Obligations
or the transfer by either or both of such parties to Lender of any property of
either or both of such parties should for any reason subsequently be declared
to be improper under any state, provincial or federal law relating to
creditors' rights, including, without limitation, provisions of the United
States Bankruptcy Code or the Canadian Bankruptcy and Insolvency Act, which may
be applicable from time to time relating to fraudulent conveyances,
preferences, and other voidable or recoverable payments of money or transfers
of property (collectively, a "Voidable Transfer"), and if Lender is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Lender is required to repay or restore,
and as to all reasonable costs, expenses and attorneys' fees of Lender related
thereto, the liability of Borrowers or such guarantor shall automatically be
revived, reinstated and restored and shall exist as though such Voidable
Transfer had never been made.
9.20 Choice of Language. The parties hereto have requested that
the present Agreement be drafted in English. Les parties aux presentes ont
requis que la presente entente soit redigee en anglais.
9.21 Confidentiality.
(a) Lender shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by Borrowers pursuant to this Agreement which by its
nature confidential at the time such information is furnished by
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Borrowers to Lender, provided, that, nothing contained herein shall limit the
disclosure of any such information: (i) to the extent required by statute,
contract, rule, regulation, subpoena or court order, (ii) to bank examiners and
other regulators, auditors and/or accountants, (iii) in connection with any
litigation between any Borrower and Lender or any other litigation to which
Lender is a party, provided in the latter case that Lender gives Borrowers
prior notice of Lender's intention to disclose such information and Borrowers
do not object to such disclosure, (iv) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant
(or prospective assignee or participant) shall have first agreed in writing to
treat such information as confidential in accordance with this Section 9.19, or
(v) to counsel for Lender or any participant or assignee (or prospective
participant or assignee) if the client of such counsel has previously agreed in
writing to treat such information as confidential in accordance with this
Section 9.19.
(b) In no event shall this Section 9.19 or any other
provision of this Agreement or applicable law be deemed: (i) to apply to or
restrict disclosure of information that has been or is made public by any
Borrower or any third party without breach of this Section 9.19 or otherwise
become generally available to the public other than as a result of a disclosure
in violation hereof, (ii) to apply to or restrict disclosure of information
that was or becomes available to Lender on a non-confidential basis from a
person other than a Borrower, (iii) require Lender to return any materials
furnished by Borrowers to Lender or (iv) prevent Lender from responding to
routine informational requests in accordance with the Code of Ethics for the
Exchange of Credit Information promulgated by The Robert Morris Associates or
other applicable industry standards relating to the exchange of credit
information. The obligations of Lender under this Section 9.19 shall supersede
and replace the obligations of Lender under any confidentiality letter signed
prior to the date hereof.
SECTION 10. SURETYSHIP WAIVERS
10.1 Independent Obligations; Subrogation. The Obligations of each
of Coast, United Sales, C/P, Mohawk and Coast Canada (for the purposes of this
Section 10 only, each a "Borrower" and collectively, "Borrowers") hereunder are
joint and several, except as any payment reduces the amount of the Obligations,
and shall not be reduced by, but shall survive as if the same had not been
made, any and all payments by any other Borrower and/or the application of any
proceeds from any Collateral until the Obligations are fully paid and finally
discharged.
To the maximum extent permitted by law, each Borrower hereby
waives any claim, right or remedy which either may now have or hereafter
acquire against the other Borrower that arises hereunder including, without
limitation, any claim, remedy or right of subrogation, reimbursement,
exoneration, contribution, indemnification, or participation in any claim,
right or remedy of Lender against any Borrower or any Collateral which Lender
now has or hereafter acquires, whether or not such claim, right or remedy
arises in equity, under contract, by statute, under common law or otherwise
until the Obligations are fully paid and finally discharged. In addition, each
Borrower hereby waives any right to proceed against the other Borrower, now or
hereafter, for contribution, indemnity, reimbursement, and any other suretyship
rights and claims, whether direct or indirect, liquidated or
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contingent, whether arising under express or implied contract or by operation
of law, which any Borrower may now have or hereafter have as against the other
Borrower with respect to the Obligations until the Obligations are fully paid
and finally discharged. Each Borrower also hereby waives any rights of
recourse to or with respect to any asset of the other Borrower until the
Obligations are fully paid and finally discharged.
10.2 Authority to Modify Obligations and Security. Each Borrower
authorizes Lender, without notice or demand and without affecting any
Borrower's liability hereunder, from time to time, whether before or after any
notice of termination hereof or before or after any default in respect of the
Obligations, to: (i) renew, extend, accelerate, or otherwise change the time
for payment of, or otherwise change any other term or condition of, any
document or agreement evidencing or relating to any Obligations as such
Obligations relate to the other Borrower, including, without limitation, to
increase or decrease the rate of interest thereon; (ii) accept, substitute,
waive, defease, increase, release, exchange or otherwise alter any Collateral,
in whole or in part, securing the other Borrower's Obligations; (iii) apply any
and all such Collateral and direct the order or manner of sale thereof as
Lender, in its sole discretion, may determine; (iv) deal with the other
Borrower as Lender may elect; (v) in Lender's sole discretion, settle, release
on terms satisfactory to Lender, or by operation of law or otherwise, compound,
compromise, collect or otherwise liquidate any of the other Borrower's
Obligations and/or any of the Collateral in any manner, and bid and purchase
any of the collateral at any sale thereof; (vi) apply any and all payments or
recoveries from the other Borrower as Lender, in its sole discretion, may
determine, whether or not such indebtedness relates to the Obligations; all
whether such Obligations are secured or unsecured or guaranteed or not
guaranteed by others; and (vii) apply any sums realized from Collateral
furnished by the other Borrower upon any of its indebtedness or obligations to
Lender as Lender, in its sole discretion, may determine, whether or not such
indebtedness relates to the Obligations; all without in any way diminishing,
releasing or discharging the liability of any Borrower hereunder.
10.3 Waiver of Defenses. Upon an Event of Default by any Borrower
in respect of any Obligations, Lender may, at its option and without notice to
the Borrowers, proceed directly against any Borrower to collect and recover the
full amount of the liability hereunder, or any portion thereof, and each
Borrower waives any right to require Lender to: (i) proceed against the other
Borrower or any other person whomsoever; (ii) proceed against or exhaust any
Collateral given to or held by Lender in connection with the Obligations; (iii)
give notice of the terms, time and place of any public or private sale of any
of the Collateral except as otherwise provided herein; or (iv) pursue any other
remedy in Lender's power whatsoever. A separate action or actions may be
brought and prosecuted against any Borrower whether or not action is brought
against the other Borrower and whether the other Borrower be joined in any such
action or actions; and each Borrower waives the benefit of any statute of
limitations affecting the liability hereunder or the enforcement hereof, and
agrees that any payment of any Obligations or other act which shall toll any
statute of limitations applicable thereto shall similarly operate to toll such
statute of limitations applicable to the liability hereunder.
10.4 Right to Dispose of Security; Impairment of Rights. Each
Borrower hereby authorizes and empowers Lender in its sole discretion, without
any notice or demand to such
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Borrower whatsoever and without affecting the liability of such Borrower
hereunder, to exercise any right or remedy which Lender may have available to
it against the other Borrower, including, but not limited to, judicial
foreclosure, exercise of rights of power of sale without judicial action, or
taking a deed or an assignment in lieu of foreclosure as to any Collateral, and
such Borrower hereby waives any defense to the recovery by Lender against such
Borrower of any deficiency after such action notwithstanding any impairment or
loss of any right of reimbursement or subrogation or other right or remedy
against the other Borrower or against any Collateral for the Obligations. Each
Borrower expressly waives any defense or benefits that may be available from
California Code of Civil Procedure, Section 580 and its subdivisions or Section
726, or comparable provisions of the laws of any other jurisdiction, as well as
all suretyship defenses such Borrower would otherwise have under California law
or the laws of any other jurisdiction. Without limiting the foregoing, such
Borrower specifically agrees that action maintained by Lender for the
appointment of any receiver, trustee or custodian to collect rents, issues or
profits or to obtain possession of any property shall not constitute an
"action" within the meaning of Section 726 of the California Code of Civil
Procedure or comparable provisions of the laws of any other jurisdiction.
10.5 Additional Waivers. Each Borrower waives any defense arising
by reason of any disability or other defense of the other Borrower or by reason
of the cessation from any cause whatsoever of the liability of the other
Borrower or by reason of any act or omission of Lender or others which directly
or indirectly results in or aids the discharge or release of the other Borrower
or any Obligations or any Collateral by operation of law or otherwise. The
Obligations shall be enforceable against each Borrower without regard to the
validity, regularity or enforceability of any of the Obligations with respect
to any of the other Borrower or any of the documents related thereto or any
collateral security documents securing any of the Obligations. No exercise by
Lender of, and no omission of Lender to exercise, any power or authority
recognized herein and no impairment or suspension of any right or remedy of
Lender against any Borrower or any Collateral shall in any way suspend,
discharge, release, exonerate or otherwise affect any of the Obligations or any
Collateral furnished by the Borrowers or give to the Borrowers any right of
recourse against Lender. The Borrowers specifically agree that the failure of
Lender: (i) to perfect any lien on or security interest in any property
heretofore or hereafter given by Borrowers to secure payment of the
Obligations, or to record or file any document relating thereto or (ii) to file
or enforce a claim against the estate (either in administration, bankruptcy or
other proceeding) of any Borrower shall not in any manner whatsoever terminate,
diminish, exonerate or otherwise affect the liability of any Borrower
hereunder.
10.6 Additional Indebtedness. Additional Obligations may be
created from time to time at the request of any Borrower and without further
authorization from or notice to any other Borrower even though the borrowing
Borrower's financial condition may deteriorate since the date hereof. Each
Borrower waives the right, if any, to require Lender to disclose to such
Borrower any information it may now have or hereafter acquire concerning the
other Borrower's character, credit, Collateral, financial condition or other
matters. Each Borrower has established adequate means to obtain from the other
Borrower on a continuing basis financial and other information pertaining to
such Borrower's business and affairs, and assumes the responsibility for being
and keeping informed of the financial and other conditions of the other
Borrower and of all circumstances bearing upon the risk of
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nonpayment of the Obligations which diligent inquiry would reveal. Lender need
not inquire into the powers of any of the Borrowers or the authority of any of
their respective officers, directors, partners or agents acting or purporting
to act in their behalf, and any obligations created in reliance upon the
purported exercise of such power or authority is hereby guaranteed. All
Obligations of Borrowers to Lender heretofore, now or hereafter created shall
be deemed to have been granted at Borrowers' special insistence and request and
in consideration of and in reliance upon this Agreement.
10.7 Notices, Demands, Etc. Except as expressly provided by this
Agreement, Lender shall be under no obligation whatsoever to make or give to
any Borrower, and each Borrower hereby waives diligence, all rights of setoff
and counterclaim against Lender, all demands, presentments, protests, notices
of protests, notices of nonperformance, notices of dishonor, and all other
notices of every kind or nature, including notice of the existence, creation or
incurring of any new or additional Obligations.
10.8 Subordination. Except as otherwise provided in this Section
10.8, any Indebtedness of any Borrower now or hereafter owing to any other
Borrower is hereby subordinated to the Obligations, whether heretofore, now or
hereafter created, and whether before or after notice of termination hereof,
and, following the occurrence and during the continuation of an Event of
Default, no Borrower shall, without the prior consent of Lender, pay in whole
or in part any of such Indebtedness nor will any such Borrower accept any
payment of or on account of any such Indebtedness at any time while such
Borrower remains liable hereunder. At the request of Lender, after the
occurrence and during the continuance of an Event of Default, each Borrower
shall pay to Lender all or any part of such subordinated Indebtedness and any
amount so paid to Lender at its request shall be applied to payment of the
Obligations. Each payment on the Indebtedness of any Borrower to the other
Borrower received in violation of any of the provisions hereof shall be deemed
to have been received by any other Borrower as trustee for Lender and shall be
paid over to Lender immediately on account of the Obligations, but without
otherwise affecting in any manner any such Borrower's liability under any of
the provisions of this Agreement. Each Borrower agrees to file all claims
against the other Borrower in any bankruptcy or other proceeding in which the
filing of claims is required by law in respect of any indebtedness of the other
Borrower to such Borrower, and Lender shall be entitled to all of any such
Borrower's rights thereunder. If for any reason any such Borrower fails to
file such claim at least thirty (30) days prior to the last date on which such
claim should be filed, Lender, as such Borrower's attorney-in-fact, is hereby
authorized to do so in Borrowers' name or, in Lender's discretion, to assign
such claim to, and cause a proof of claim to be filed in the name of, Lender's
nominee. In all such cases, whether in administration, bankruptcy or
otherwise, the person or persons authorized to pay such claim shall pay to
Lender the full amount payable on the claim in the proceeding, and to the full
extent necessary for that purpose any such Borrower hereby assigns to Lender
all such Borrower's rights to any payments or distributions to which such
Borrower otherwise would be entitled. If the amount so paid is greater than
any such Borrower's liability hereunder, Lender will pay the excess amount to
the party entitled thereto.
10.9 Revival. If any payments of money or transfers of property
made to Lender by any Borrower should for any reason subsequently be declared
to be, or in Lender's
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counsel's good faith opinion be determined to be, fraudulent (within the
meaning of any state or federal law relating to fraudulent conveyances),
preferential or otherwise voidable or recoverable in whole or in part for any
reason (hereinafter collectively called "voidable transfers") under the United
States Bankruptcy Code, the Canadian Bankruptcy and Insolvency Act, or any
other federal, provincial or state law and Lender is required to repay or
restore, or in Lender's counsel's opinion may be so liable to repay or restore,
any such voidable transfer, or the amount or any portion thereof, then as to
any such voidable transfer or the amount repaid or restored and all costs and
expenses (including attorneys' fees) of Lender related thereto, such Borrower's
liability hereunder shall automatically be revived, reinstated and restored and
shall exist as though such voidable transfer had never been made to Lender.
10.10 Understanding of Waivers. Each Borrower warrants and agrees
that the waivers set forth in this Section 10 are made with full knowledge of
their significance and consequences. If any of such waivers are determined to
be contrary to any applicable law or public policy, such waivers shall be
effective only to the maximum extent permitted by law.
10.11 Unlimited Liability. The Obligations of the Borrowers
hereunder shall be in addition to any obligations of Borrowers to Lender
heretofore given or hereafter to be given to Lender unless such other
obligations are expressly modified or terminated in writing. The liability of
Borrowers to Lender shall at all times be deemed to be the aggregate liability
of Borrowers under the terms of this Agreement and of any other obligations
heretofore or hereafter incurred by Borrowers to Lender and not expressly
terminated or modified in writing.
IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement the day and year first above written.
LENDER
------
MELLON BANK, N.A.,
a national banking association
By: DAVID S. OPPENHEIMER
------------------------------------
Name: David S. Oppenheimer
Title: Vice President
MELLON BANK CANADA,
a Canadian chartered bank
By: DENISE C. GAUDY
------------------------------------
Name: Denise C. Gaudy
Title: Vice President
58
<PAGE> 59
BORROWERS
---------
THE COAST DISTRIBUTION SYSTEM,
a California corporation
By: SANDRA KNELL
------------------------------
Name: Sandra Knell
Title: Executive Vice President
UNITED SALES & WAREHOUSE OF
TEXAS, INC.,
a Texas corporation
By: SANDRA KNELL
------------------------------
Name: Sandra Knell
Title: Executive Vice President
C/P PRODUCTS CORP.,
an Indiana corporation
By: SANDRA KNELL
------------------------------
Name: Sandra Knell
Title: Executive Vice President
MOHAWK TRAILER SUPPLY, INC.,
a New York corporation
By: SANDRA KNELL
------------------------------
Name: Sandra Knell
Title: Executive Vice President
59
<PAGE> 60
THE COAST DISTRIBUTION SYSTEM
(CANADA) INC./LES SYSTEMES DE
DISTRIBUTION COAST (CANADA) INC.,
a Quebec corporation
By: SANDRA KNELL
------------------------------
Name: Sandra Knell
Title: Secretary
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FIRST AMENDMENT TO SECOND AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (this "Amendment"), dated as of June 15, 1995, is entered into by and
among MELLON BANK, N.A., a national banking association ("Mellon") and MELLON
BANK CANADA, a Canadian chartered bank ("Mellon Canada", and together with
Mellon, "Lender"), and THE COAST DISTRIBUTION SYSTEM, a California corporation
("Coast"), UNITED SALES & WAREHOUSE OF TEXAS, INC., a Texas corporation
("United Sales"), C/P PRODUCTS CORP., an Indiana corporation ("C/P") MOHAWK
TRAILER SUPPLY, INC., a New York corporation ("Mohawk") and THE COAST
DISTRIBUTION SYSTEM (CANADA)/LES SYSTEMES DE DISTRIBUTION COAST (CANADA) INC.,
a corporation organized under the laws of the Province of Quebec ("Coast
Canada") (Coast, United Sales, C/P, Mohawk and Coast Canada are hereinafter
sometimes individually referred to as "Borrower" and collectively referred to
as "Borrowers"), in light of the following facts:
RECITALS
A. Borrowers and Lender are parties to that certain Second Amended and
Restated Loan and Security Agreement, dated as of May 26, 1995 (the "Loan
Agreement"), pursuant to which Lender has extended certain loans and financial
accommodations to Borrowers.
B. At Borrowers' request that Mellon Canada provide Coast Canada
Bankers' Acceptances and Canadian LIBOR Rate Options, Borrowers and Lender have
agreed to amend the Loan Agreement in certain respects as expressly provided
herein.
NOW, THEREFORE, the parties hereby agree as follows:
1. Defined Terms. Any and all initially capitalized terms used in
this Amendment without definition shall have the meaning ascribed thereto in
the Loan Agreement.
2. Amendment to Defined Terms. Section 1.1 of the Loan Agreement is
hereby amended to add the following definitions in alphabetical order:
"Canadian Bankers' Acceptances - Those Drafts, denominated in
Canadian Dollars, drawn by Coast Canada and accepted by Mellon
Canada pursuant to the terms hereof."
<PAGE> 62
"Canadian Bankers' Acceptances Option - Section 2.6(e)".
"Canadian Bankers' Acceptances Loans - That portion of the
Revolving Credit utilized by Coast Canada by way of the issuance of
Canadian Bankers' Acceptances".
"Canadian Bankers' Acceptances Rate - At any time, the fluctuating
fee rate expressed as a percentage per annum determined by Mellon
Canada from time to time as a reference rate for determining fees
to be charged to corporate borrowers of Mellon Canada for the
acceptance of Bankers' Acceptances by Mellon Canada at the main
branch of Mellon Canada as determined from time to time by Mellon
Canada."
"Conversion Notice - Notice by Coast Canada of an intended
conversion of all or any portion of the Face Amount of a Canadian
Bankers' Acceptance or Draft to a Canadian Prime Rate Loan or a
U.S. Base Rate Loan, which notice shall specify (i) the principal
amount to be converted; and (ii) the proposed date of the
conversion and such notice shall be received by Mellon Canada no
later than 11:00 p.m., Toronto time on the date (which shall be a
Business Day) of such proposed conversions."
"Draft - At any time a blank bill of exchange, within the meaning
of the Bill of Exchange Act (Canada), drawn by Coast Canada on
Mellon Canada or any other person and bearing such distinguishing
letters and numbers as Mellon Canada or such person may determine,
but which at such time has not been completed or accepted by Mellon
Canada or such person."
"Drawing" means (i) the creation of Canadian Bankers' Acceptances
by Mellon Canada or any other person hereunder; (ii) the creation
and purchase of Canadian Bankers' Acceptances by Mellon Canada or
by any other person hereunder; or (iii) the purchase of completed
Drafts by any person hereunder.
"Drawing Date - Any Business Day fixed pursuant to a Drawing Notice
for a Drawing."
"Drawing Fee - With respect to each Draft drawn by Coast Canada
hereunder and accepted, purchased or accepted and purchased by any
person on any Drawing Date, an amount equal to the Canadian
Bankers' Acceptances Rate plus one and one-half percentage points
(one hundred fifty (150) basis points) per annum of the aggregate
Face Amount of such Draft, calculated
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<PAGE> 63
on the basis of the term to maturity of such Draft and a year of
365 days."
"Drawing Notice - A notice of Drawing given by Coast Canada not
later than 12:00 p.m. (Toronto time) on two Business Days' prior
notice."
"Drawing Purchase Price - In respect of Canadian Bankers'
Acceptances or Drafts to be purchased by Mellon Canada or any other
person, the difference bteween (i) the result (rounded to the
nearest whole cent, with one-half of one cent being rounded up)
obtained by dividing the aggregate Face Amount of such Canadian
Bankers' Acceptances or Drafts by the sum of one plus the product
of (x) the Reference Discount Rate multiplied by (y) a fraction the
numerator of which is the number of days in the term of maturity of
such Canadian Bankers' Acceptances or Drafts, as the case may be,
and the denominator of which is 365 days; and (ii) the applicable
aggregate Drawing Fee."
"Face Amount - In respect of a Draft or a Canadian Bankers'
Acceptance, as the case may be, the amount payable to the holder
thereof on its maturity."
"Prime Rate Loans - That portion of the Revolving Credit advanced
to Coast U.S. by Mellon, denominated in Dollars, being interest at
the Prime Rate."
"Reference Discount Rate - In respect of Canadian Bankers'
Acceptances or Drafts to be purchased by Mellon Canada or any other
person hereunder, the discount rate (calculated on an annual basis
and rounded to the nearest one-hundredth of one percent (0.01%),
with five-thousandths of one percent (0.005%) of being rounded up)
quoted by Mellon Canada at 9:30 a.m. (Toronto time) as the discount
rate at which Mellon Canada would purchase, on the relevant Drawing
Date, its own bankers' acceptances having an aggregate Face Amount
equal to and with a term to maturity the same as the Canadian
Bankers' Acceptances or Drafts to be acquired by Mellon Canada or
such other person on such Drawing Date."
3. Change of Definition of Canadian Prime Rate. The definition of
"Canadian Prime Rate" in Section 1.1 of the Loan Agreement is hereby amended to
read in its entirety as follows:
"Canadian Prime Rate - That prime lending rate of interest
expressed as a per annum rate of interest announced from time to
time by Mellon Canada as being its reference rate then in
3
<PAGE> 64
effect for determining interest rates on Canadian Dollar
denominated commercial loans made by Mellon Canada in Canada, as
reported by Mellon Canada to the Bank of Canada."
4. Change of Definition of Prime Based Loans. The definition of
"Prime Based on Loans" in Section 1.1 of the Loan Agreement is hereby amended
to read in its entirety as follows:
"Price Based Loans -- means collectively, that portion of the
Revolving Credit consisting of Prime Rate Loans advanced by Mellon
to Coast U.S., and U.S. Base Rate Loans and Canadian Prime Rate
Loans advanced by Mellon Canada to Coast Canada."
5. Change of Definition of LIBOR Based Rate Loan. The definition of
"LIBOR Based Rate Loan" in Section 1.1 of the Loan Agreement is hereby
amended to read in its entirety a follows:
"LIBOR Based Rate Loan -- That portion of the Revolving Credit
advanced either to Coast U.S. by Mellon or to Coast Canada by
Mellon Canada on which interest accrues at the LIBOR Rate."
6. Change of Definition of LIBOR Rate. The definition of "LIBOR
Rate" in Section 1.1 of the Loan Agreement is hereby amended in its entirety
as follows:
"LIBOR Rate -- An annual rate of interest determined by either
Mellon, with respect to LIBOR Based Rate Loans advanced to Coast
U.S., or by Mellon Canada, with respect to LIBOR Based Rate Loans
advanced to Coast Canada, as being the rate available to Mellon or
Mellon Canada, as the case may be, at approximately 11:00 a.m.
London time in the London Interbank Market, as referenced by
Reuters Screen "LIBOR", in accordance with the usual practice in
such market, for the LIBOR Interest Period elected by Coast on
behalf of Coast U.S., or by Coast Canada, as the case may be, in
effect two Good Business Days prior to the funding date for a
requested LIBOR Based Rate Loan (including those requested in
connection with a conversion of a portion of the Revolving Credit
subject to a Prime Rate Option, with respect to Coast U.S., or a
U.S. Base Rate Option or Canadian Prime Rate Option, with respect
to Coast Canada, to a LIBOR Based Rate Loan in accordance with
Section 2.6(b) hereof), or for a LIBOR Based Rate Loan which Coast
on behalf of Coast U.S., or Coast Canada, as the case may be, has
elected to continue as a LIBOR Based Rate Loan beyond the expiration
of the then current LIBOR Interest Period with respect thereto, for
deposits of
4
<PAGE> 65
Dollars in amounts equal (as nearly as may be estimated) to the
amount of the LIBOR Based Rate Loan which shall then be loaned by
Mellon U.S. to Coast U.S., or by Mellon Canada to Coast Canada, as
the case may be, as of the time of such determination, as such
rate may be adjusted by the reserve percentage applicable during
the LIBOR Interest Period in effect (or if more than one such
percentage shall be applicable, the daily average of such
percentages for those days in such LIBOR Interest Period during
which any such percentage shall be so applicable) under regulations
issued from time to time, with respect to Mellon by the Board of
Governors of the Federal Reserve System (or any successor), or with
respect to Mellon Canada by The Bank of Canada (or any successor),
for determining the maximum reserve requirement (including without
limitation, any emergency, supplemental or other marginal reserve
requirement) for the Lender with respect to liabilities or assets
consisting of or including "Eurocurrency Liabilities" as such term
is defined in Regulation D of the Board of Governors of the Federal
Reserve System and comparable regulations of The Bank of Canada, as
in effect from time to time, having a term equal to such LIBOR
Interest Period ("Eurocurrency Reserve Requirement"). Such
adjustment shall be effectuated by calculating, and the LIBOR Rate
shall be equal to, the (i) the offered rate divided by (i) one minus
the Eurocurrency Reserve Requirement."
7. Definition of U.S. Base Rate. The definition of "U.S. Base Rate" in
Section 1.1 of the Loan Agreement is hereby amended to read in its entirety as
follows:
"U.S. Base Rate -- That rate of interest announced from time to
time by Mellon Canada as being its reference rate then in effect
for determining interest rates in Dollars denominated commercial
loans made by Mellon Canada in Canada."
8. Amendment to Advances, Conversions, Renewals and Payments. Section
2.4(c)(ii) of the Loan Agreement is hereby amended to read in its entirety as
follows:
"(ii) All advances subject to Prime Rate Option shall be requested
by Coast on behalf of Coast U.S. under the Revolving Credit and
must be requested by 12:00 p.m., Philadelphia time, on the date
such advance is to be made by Mellon at its Asset Based Lending
Division of Philadelphia, Pennsylvania. All advances to Coast U.S.
subject to the LIBOR Rate Option or conversion from advances under
the Prime Rate Option to the LIBOR Rate Option shall be requested by
Coast on behalf of Coast U.S. under the Revolving Credit and must
be requested by 12:00 P.M., Philadelphia time, three Good Business
Days
5
<PAGE> 66
prior to the date of such requested advance to Mellon at its Asset
Based Landing Division in Philadelphia, Pennsylvania. All advances
to Coast Canada subject to the LIBOR Rate Option or conversions from
advances subject to the U.S. Base Rate Option or the Canadian Prime
Rate Option to the LIBOR Rate Option shall be requested by Coast
Canada under the Revolving Credit and must be requested by 11:00
a.m., Toronto time, three Good Business Days prior to the date of
such requested advances to Mellon Canada at its Toronto, Ontario
office. All advances subject to the Canadian Prime Rate Option or
the U.S. Base Rate Option shall be requested by Coast Canada under
the Revolving Credit and must be requested by 11:00 a.m., Toronto
time, on the date of such requested advance to Mellon Canada at its
Toronto, Ontario office. All advances subject to the Canadian
Bankers' Acceptances Option or conversions from advances subject to
the Canadian Prime Rate Option or the U.S. Base Rate Option to the
Bankers' Acceptances Rate Option shall be requested by Coast Canada
under the Revolving Credit and must be requested by 12:00 p.m.,
Toronto time, two Business Days prior to the date requested by Coast
Canada for the creation of acceptances hereunder to Mellon Canada
at its Tortonto, Ontario office. Lender reserves its right to
require Borrowers to provide a borrowing based certificate
contemporaneously with each advance request provided that such
request from Lender shall not require Borrowers to provide
borrowing based certificates more frequently than once per week.
All requests or confirmation of requests for advances may be made
by telephone, unless Lender has advised Borrowers that written
requests are required, with the exception of requests or
confirmation of request for LIBOR Based Rate Loans or Canadian
Bankers' Acceptances Loans, including, but not limited to, initial
requests for a conversion of a Prime Based Loan to a LIBOR Based
Rate Loan or to a Canadian Bankers' Acceptances Loan and rollovers
of LIBOR Based Rate Loans or Canadian Bankers' Acceptances Loans,
which shall always be in writing. Written requests or confirmation
of requests may be sent by telecopy or facsimile transmission
provided, however, that Lender shall have the right to require the
receipt of such request not be effective until confirmed via
telephone with Lender. Lender may require prompt written
confirmation of any telephone request and additional back-up
documentation, from time to time. Each request or confirmation of
a request for an advance shall be conclusively presumed to be made
by a person authorized by Borrowers to do so."
6
<PAGE> 67
9. Amendment to Prime Rate Option. The last sentence of Section
2.6(a) of the Loan Agreement of the Loan Agreement is hereby amended to read in
its entirety as follows:
"Interest on Prime Rate Loans shall be due and payable in
arrears on the first day of each calendar month commencing
the first full month following the Closing Date."
10. Amendment to LIBOR Rate Option. Section 2.6(b) of the Loan
Agreement is hereby amended to read in its entirety as follows:
(b) LIBOR Rate Option:
(i) Subject to the terms and conditions hereof (including
without limitation the provisions of Section 2.7(b) below),
the unpaid principal balance of cash advances made by Mellon
to Coast U.S., or by Mellon Canada to Coast Canada, under the
Revolving Credit may, at Coast U.S.'s or Coast Canada's option,
as the case may be, bear interest at the LIBOR Based
Rate ("LIBOR Rate Option"); provided that in no event may a
LIBOR Based Rate Loan be less than $5,000,000 and that each
LIBOR Based Rate Loan shall be requested in $100,000
increments; and provided further that no more than three (3)
LIBOR Based Rate Loans or Canadian Bankers' Acceptances Loans
shall be outstanding under this Agreement at any one time.
(ii) LIBOR Based Rate Loans shall be selected for a period
of either a one (1), three (3) or six (6) months' duration,
as Coast, on behalf of Coast U.S., or Coast Canada, as the
case may be, may elect, during which the LIBOR Based Rate is
applicable ("LIBOR Interest Period"); provided, however, that
(A) if the LIBOR Interest Period would otherwise end on a day
which shall not be a Good Business Day, such LIBOR Interest
Period shall be extended to the next succeeding Good Business
Day, unless such Good Business Day falls in another calendar
month, in which case such LIBOR Interest Period shall end on
the next preceding Good Business Day subject to clause (C)
below: (B) interest shall accrue from and including the first
day of each LIBOR Interest Period to, but excluding the day on
which any LIBOR Interest Period expires; and (C) with respect
to any LIBOR Interest Period which begins on the last Good
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such LIBOR Interest Period), the LIBOR Interest
Period shall end on the last Good Business Day of a calendar
month. Interest on a LIBOR Based Rate Loan shall be due and
payable in arrears on the first day of each calendar month
commencing
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<PAGE> 68
the first full month following the Closing Date provided that
all remaining accrued and unpaid interest on each LIBOR Based
Rate Loan must be repaid in full on the day the applicable
LIBOR Interest Period expires. No LIBOR Interest Period may
end after the Revolving Credit Maturity Date. Subject to all
of the terms and conditions applicable to a request that a
new advance be a LIBOR Based Rate Loan, Coast U.S. or Coast
Canada, as the case may be, may extend a LIBOR Based Rate Loan
as of the last day of the LIBOR Interest Period to a new LIBOR
Based Rate Loan or may convert all or a portion of the Revolving
Credit Loans subject to the Prime Rate Option with respect to
Coast U.S., or U.S. Base Rate Loans or Canadian Prime Rate
Loans with respect to Coast Canada, to a LIBOR Based Rate Loan.
If Coast U.S. fails to notify Mellon or Coast Canada fails to
notify Mellon Canada, as the case may be, of the LIBOR Interest
Period for a subsequent LIBOR Based Rate Loan at least three
Good Business Days prior to the last day of the then current
LIBOR Interest Period of an outstanding LIBOR Based Rate Loan,
then such outstanding LIBOR Based Rate Loan shall become a
loan subject to the Prime Rate Option if a LIBOR Based Rate Loan
to Coast U.S., or a loan subject to the U.S. Base Rate Option
if a LIBOR Base Rate Loan to Coast Canada, at the end of the
current LIBOR Interest Period for such oustanding LIBOR Based
Rate loan and shall accrue interest in accordance with
Section 2.6(a) above with respect to loans to Coast U.S.
subject to the Prime Rate Option, and Section 2.6(d) above
with respect to loans to Coast Canada subject to the U.S. Base
Rate Option.
(iii) The LIBOR Rate may be automatically adjusted by Mellon
or Mellon Canada, as the case may be, on a prospective basis
(provided that such LIBOR Rate is similarly adjusted generally
for the customers of Mellon or Mellon Canada, as the case may
be, borrowing funds with LIBOR Rate options) to take into
account the additional or increased cost actually incurred by
Mellon or Mellon Canada, as the case may be, to maintain any
necessary reserves for Eurodollar deposits or increased costs
actually incurred by Mellon or Mellon Canada, as the case may
be, due to changes in applicabe law or regulation or the
interpretation thereof occurring subsequent to the
commencement of the then applicable LIBOR Interest Period,
including but not limited to changes in tax laws (except
changes of general applicability in corporate income tax laws as
they affect financial institutions) and changes in the reserve
requirements imposed by the Board of Governors of the Federal
Reserve System (or any successor) with respect ot Mellon and
The Bank of Canada (or any successor) with respect to Mellon
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<PAGE> 69
Canada, excluding any such changes that have resulted in a
payment pursuant to Section 2.12 hereof, that increase the
cost to Mellon or Mellon Canada, as the case may be, of
funding the LIBOR Based Rate Loan. Mellon or Mellon Canada,
as the case may be, shall promptly give Coast U.S. or Coast
Canada, as the case may be, notice of such a determination and
adjustment, which determination shall be conclusive as to the
correctness of the fact and the amount of such adjustment
absent manifest error.
(iv) In the event that Coast, on behalf of Coast U.S., or
Coast Canada shall have requested the LIBOR Rate Option in
accordance with this Section 2.6(b) and Mellon or Mellon
Canada, as the case may be, shall have reasonably determined
that Eurodollar deposits equal to the amount of the principal
of the requested LIBOR Based Rate Loan and for the LIBOR
Interest Period specified are unavailable, or that the rate
based on the LIBOR Rate will not adequately and fairly reflect
the cost of the LIBOR Based Rate applicable to the specified
LIBOR Interest Period, of making or maintaining the principal
amount of the requested LIBOR Based Rate Loan specified by
Coast U.S. or Coast Canada, as the case may be, during the
LIBOR Interest Period specified, or that by reason of
circumstances affecting Eurodollar markets, adequate and
reasonable means do not exist for ascertaining the rate based
on the LIBOR Rate applicable to the specified LIBOR Interest
Period, Mellon or Mellon Canada, as the case may be, shall
promptly give notice of such determintion to Coast U.S. or
Coast Canada, as the case may be, that the rate based on the
LIBOR Rate is not available. A determination by Mellon or
Mellon Canada, as the case may be, hereunder shall be prima
facie evidence of the correctness of the fact and amount of
such additional costs or unavailability. Upon such a
determination, (A) the right of Coast U.S. or Coast Canada, as
the case may be, to select, convert to, or maintain a LIBOR
Based Rate Loan at the rate based on the Libor Rate shall be
suspended until Mellon shall have notified Coast U.S. or Mellon
Canada shall have notified Coast Canada that such conditions
shall have ceased to exist, and (B)(i) the advances by Mellon
to Coast U.S. under the Revolving Credit subject to the
requested LIBOR Rate Option shall accrue interest in
accordance with Section 2.6(a) above, and (ii) the advances
by Mellon Canada to Coast Canada under the Revolving Credit
subject to the requested LIBOR Rate Option shall accrue
interest in accordance with Section 2.6(d) above.
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(v) In the event that, as a result of any changes in applicable
law or regulation or the interpretation thereof, it becomes
unlawful or impractical for Mellon or Mellon Canada to maintain
Eurodollar liabilities sufficient to fund any LIBOR Based Rate Loan
subject to the LIBOR Based Rate, then Mellon shall immediately
notify Coast U.S. or Mellon Canada shall immediately notify Coast
Canada thereof and Mellon's or Mellon Canada's obligations to make,
convert to, or maintain a LIBOR Based Rate Loan at the LIBOR Based
Rate shall be suspended until such time as Mellon or Mellon Canada
may again cause the LIBOR Based Rate to be applicable to any LIBOR
Based Rate Loans. During such suspension all Loans by Mellon to
Coast U.S. under the Revolving Credit subject to the LIBOR Based
Rate shall accrue interest in accordance with Section 2.6(a) above,
and all Loans by Mellon Canada to Coast Canada under the Revolving
Credit subject to the LIBOR Based Rate shall accrue interest in
accordance with Section 2.6(d) above. Promptly after becoming
aware that it is no longer unlawful for Mellon or Mellon Canada to
maintain such Eurodollar liabilities, Mellon shall notify Coast
U.S. or Mellon Canada shall notify Coast Canada thereof and such
suspension shall cease to exist."
11. Canadian Bankers' Acceptances Option. The following shall be added
as a new subsection 2.6(e) to the Loan Agreement:
"(e) Subject to the terms and conditions hereof (including without
limitation the provisions of Section 2.7(b) below, he unpaid
principal balance of cash advances made by Mellon Canada to Coast
Canada under the Revolving Credit may, at Coast Canada's option,
bear interest at the Canadian Bankers' Acceptance Rate (the
"Canadian Bankers' Acceptances Option") subject to the following:
(i) Acceptances and Drafts. Each Drawing shall be in a minimum
aggregate Face Amount of Cdn$5,000,000 and in an integral multiple
of Cdn$100,000, and shall consist of (i) the creation of Canadian
Bankers' Acceptances upon payment of the Drawing Fee by Coast
Canada, and (ii) the creation and purchase of Canadian Bankers'
Acceptances or the purchase of Drafts on the same day, in each case
for the Drawing Purchase Price effected or arranged by Mellon
Canada.
(ii) Loans Outstanding. No more than three (3) LIBOR Based Rate
Loans or Canada Bankers' Acceptances Loans shall be outstanding
under this Agreement at any one time.
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(iii) Form of Drafts. Each Draft presented by Coast Canada (i)
shall be in the minimum aggregate Face Amount of Cdn$5,000,000 and
in an integral multiple of Cdn$100,000; (ii) shall be dated the
date of the Drawing; and (iii) shall mature and be payable by Coast
Canada (in common with all other Drafts presented in connection
with such Drawing) on a Business Day which occurs approximately 30,
90 or 180 days after the Drawing Date and on or prior to the last
day of the term of this Agreement.
(iv) Procedure for Drawing. Each Drawing shall be made pursuant
to a Drawing Notice. Each Drawing Notice shall be irrevocable and
binding on Coast Canada and shall specify (i) the Drawing Date;
(ii) the aggregate Face Amount of Drafts to be created; and (iii)
the contract maturity date for such Drafts. Not later than 2:00
p.m. (Toronto time) on an applicable Drawing Date, Mellon Canada
shall complete one or more Drafts in accordance with the Drawing
Notice, accept such Drafts and, at its option, Drafts purchased by
Mellon Canada hereunder may be held by it for its own account until
the contract maturity date or sold by it at any time prior thereto
in relevant market therefor in Canada, in Mellon Canada's sole
discretion.
(v) Presigned Draft Forms. To enable Mellon Canada to make
Drawings in the manner specified herein, Coast Canada shall supply
Mellon Canada with such number of Drafts as Mellon Canada may
request, duly endorsed and executed on behalf of Coast Canada. The
signature of any duly authorized officer of Coast Canada on a Draft
may be mechanically reproduced in facsimile and Drafts and Canadian
Bankers' Acceptances bearing such facsimile signature shall be
binding upon Coast Canada as if they had been manually signed by
such officers. Notwithstanding that any of the individuals whose
manual or facsimile signature appears on any Draft as one of such
officers may no longer hold office at the date thereof or at the
date of its acceptance by Mellon Canada hereunder or at any time
thereafter, any Draft or Canadian Bankers' Acceptance so signed
shall be valid and binding upon Coast Canada (unless Coast Canada
shall have previously given notice to Mellon Canada that any such
individual no longer holds office and has delivered to Mellon
Canada duly executed Drafts in replacement of all Drafts bearing
such individual's signature.)
(vi) Payment, Conversion or Renewal. Upon the maturity of a
Canadian Bankers' Acceptance or Draft, Coast Canada may (i) elect
to issue a replacement Canadian Bankers' Acceptance or
11
<PAGE> 72
Draft by giving a Drawing Notice; (ii) elect to have all or a
portion of the Face Amount of such Canadian Bankers'
Acceptance or Draft converted to a Canadian Prime Rate loan or
U.S. Base Rate Loan in accordance with the terms of this
Agreement by giving a conversion Notice to Mellon Canada; or
(iii) pay, on or before 12:00 p.m. (Toronto time) on the
maturity date for such Canadian Bankers' Acceptance of Draft,
(notwithstanding that Mellon Canada may be the holder thereof
at maturity). Any such payment shall satisfy Coast Canada's
obligations under the Canadian Bankers' Acceptance to which it
relates and Mellon Canada shall thereafter be solely
responsible for the payment of such Canadian Bankers'
Acceptance. If Coast Canada fails to pay any Canadian Bankers'
Acceptance when due, or to issue a replacement Canadian
Bankers' Acceptance or Draft in the Face Amount of such
Canadian Bankers' Acceptance or Draft, the unpaid amount due
and payable in respect thereof shall be converted, as of such
date, and without any necessity for notice thereof by Coast
Canada, to a Canadian Prime Rate Loan made by Mellon Canada
and shall bear interest calculated and payable as provided in
this Agreement.
(vii) Circumstances Making Canadian Bankers' Acceptances
Unavailable. If Mellon Canada determines in good faith, which
determination shall be final, conclusive and binding upon
Coast Canada, and notifies Coast Canada that, by reason of
circumstances affecting the money market, there is no
market for Canadian Bankers' Acceptances, then,
(a) Coast Canada's right to request a Drawing shall
be suspeneded until Mellon Canada determines that the
circumstances causing such suspension no longer exist, and
Mellon Canada so notifies Coast Canada; and
(b) any Drawing Notice which is outstanding shall
be cancelled and the Drawing requested therein shall not be
made.
Mellon Canada shall promptly notify Coast Canada of the
suspension of Coast Canada's right to request a Drawing and of
the termination of any such suspension.
(viii) Coast Canada shall compensate Mellon Canada from time
to time for any costs, paid or payable by Mellon Canada, of
making or maintaining any Canadian Bankers' Acceptances as a
result of the compliance by Mellon Canada with any law, rule,
treaty or regulation of, or any interpretation or change
thereof by, any government, agency, court or other
administrative
12
<PAGE> 73
authority (whether or not having the force of law), or for new or
increased taxes (other than taxes on the general income of Mellon
Canada) or for reserve costs applicable to the assets or
liabiliies of Mellon Canada, or any cost which arises as a result
of Mellon Canada complying with requirements (whether or not having
the force of law) or any government, agency or administrative
authority as to the appropriate amount of capital to be maintained
by it. Coast Canada shall indemnify Mellon Canada for all costs,
losses and expenses incurred by Mellon Canada under or in
connection with any Canadian Bankers' Acceptance other than on
account of Mellon Canada's gross negliance or wilful misconduct.
Any certificate of Mellon Canada in respect of the foregoing will
be conclusive and binding upon Coast Canada."
12. Amendment to Additional Interest Provisions. Section 2.7(a) and
(b) of the Loan Agreement are hereby amended to read in their entirety as
follows:
"(a) Calculation of Interest. Interest on Prime Rate Loans and
LIBOR Based Rate Loans shall be based on a three hundred and sixty
(360) day year and charged for the actual number of days elapsed;
interest on Canadian Prime Rate Loans, U.S. Base Rate Loans and
Canadian Bankers' Acceptances Loans shall be based on a three
hundred and sixy-five (365) day year and charged for the actual
number od days elapsed.
(b) Limitation on LIBOR Based Rate Loans and Canadian Bankers'
Acceptances Loans. Upon the occurrence and during the continuance
of an Event of Default, the LIBOR Based Rate Option and the
Canadian Bankers' Acceptances Option will not be available and all
LIBOR Based Rate Loans outstanding to Coast U.S. shall be converted
to Prime Rate Loans, all LIBOR Based Rate Loans outstanding to Coast
Canada shall be converted to U.S. Base Rate Loans, and all Canadian
Bankers' Acceptances Loans outstanding to Coast Canada shall be
converted to Canadian Prime Rate Loans, which right is independent
of Lender's rights under Section 2.7(c) and any other rights of
Lender."
13. Amendment to Provision on Prepayments. Section 2.10(a) of the Loan
Agreement is hereby amended to read in its entirety as follows:
"(a) LIBOR Based Rate Loans and Canadian Bankers' Acceptances
Loans. No portion of the LIBOR Based Rate Loans or Canadian
Bankers' Acceptances Loans may be repaid at anytime except if the
Borrowers first satisfy in full their Obligations under Sectin 2.11
below arising from such
13
<PAGE> 74
prepayment and subject to Section 2.9(b) and Section 2.9(c)
above (if applicable), and only if such prepayment is in
immediately available funds."
14. Amendment to Provision on Indemnity. Section 2.11(a) of the
Loan Agreement is hereby amended to read in its entirety as follows:
"(a) Borrowers shall indemnify, defend and hold harmless Lender
against any and all loss, liability, cost or expense Lender may
sustain or incur as a consequence of (i) any failure of
Borrowers to obtain, convert or extend any LIBOR Based Rate
Loan or Canadian Bankers' Acceptances Loan after notice thereof
has been given to Lender or (ii) any payment, prepayment,
termination or conversion of a LIBOR Based Rate Loan or
Canadian Bankers' Acceptances Loan made for any reason on a
date other than the last day of the applicable LIBOR Interest
Period or before the termination of the term of the Canadian
Bankers' Acceptance. Borrowers shall pay the full amount
thereof to Lender, on demand by Lender."
15. Choice of Law. The validity of this Amendment, its
construction, interpretation and enforcement, and the rights of the parties
hereunder, shall be determined under, governed by, and construed in accordance
with the laws of the State of California governing contracts wholly to be
performed in that State.
16. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, each of which
when so executed and delivered, shall be deemed an original, and all of which,
when taken together, shall constitute but one and the same instrument.
17. Due Execution. The execution, delivery and performance of this
Amendment are within the powers of the Debtors, have been duly authorized by
all necessary corporate action, have received all necessary governmental
approval, if any, and do not contravene any law or any contractual restrictions
binding on Debtors.
18. Otherwise Not Effected. In the event of any conflict or
inconsistency between the Loan Agreement and the provisions of this Amendment,
the provisions of this Amendment shall govern. Except to the extent set forth
herein, the Loan Agreement shall remain in full force and effect.
14
<PAGE> 75
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the day and year first above written.
DEBTORS:
THE COAST DISTRIBUTION SYSTEM,
a California corporation
By: Sandra Knell
-----------------------------
Title: Executive Vice President
UNITED SALES & WAREHOUSE OF TEXAS, INC.,
a Texas corporation
By: Sandra Knell
-----------------------------
Title: Executive Vice President
C/P PRODUCTS CORP.,
an Indiana corporation
By: Sandra Knell
-----------------------------
Title: Executive Vice President
15
<PAGE> 76
MOHAWK TRAILER SUPPLY, INC.,
a New York corporation
By: SANDRA KNELL
-----------------------------
Title: Executive Vice President
THE COAST DISTRIBUTION SYSTEM
(CANADA) INC./LES SYSTEMES DE
DISTRIBUTION COAST (CANADA) INC.,
a Quebec corporation
By: SANDRA KNELL
-----------------------------
Title: Secretary
MELLON BANK, N.A.,
a national banking association
By: DAVID S. OPPENHEIMER
-----------------------------
Title: Vice President
MELLON BANK CANADA,
a Canadian Chartered Bank
By: (SIG)
-----------------------------
Title: Vice President
16
<PAGE> 1
EXHIBIT 11.1
THE COAST DISTRIBUTION SYSTEM
Computation of Fully Diluted Earnings Per Share
Quarter Ended June 30, 1995
<TABLE>
<CAPTION>
Weighted Average
Number of Shares
----------------
<S> <C> <C> <C>
I. Weighted Average Shares Outstanding 5,096,616
II. Common Stock Equivalents 103,729
III. Other Dilutive Securities 83,791
---------
Average Number of Common and Common
Equivalent Shares 5,284,136
==========
Net Earnings $2,224,000
After-tax interest on
convertible debt 11,000
Dividend paid on preferred stock
of subsidiary (9,000)
----------
Earnings available to
common shareholders $2,226,000
Divided by Shares 5,284,136
----------
$0.42
=====
</TABLE>
<PAGE> 2
EXHIBIT 11.1 (Cont'd.)
THE COAST DISTRIBUTION SYSTEM
Computation of Fully Diluted Earnings Per Share
Six Months Ended June 30, 1995
<TABLE>
<CAPTION>
Weighted Average
Number of Shares
----------------
<S> <C> <C> <C>
I. Weighted Average Shares Outstanding 5,081,891
II. Common Stock Equivalents 100,723
III. Other Dilutive Securities 104,282
---------
Average Number of Common and Common
Equivalent Shares 5,286,896
=========
Net Earnings $2,996,000
After-tax interest on
convertible debt 27,000
Dividend paid on preferred stock
of subsidiary (21,000)
----------
Earnings available to
common shareholders $3,002,000
Divided by Shares 5,286,896
----------
$0.57
=====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF, AND THE STATEMENT OF INCOME FOR THE PERIOD ENDED JUNE 30, 1995
INCLUDED IN REGISTRANT'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH BALANCE
SHEET AND STATEMENT OF INCOME AND THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 594
<SECURITIES> 0
<RECEIVABLES> 26,534
<ALLOWANCES> 0
<INVENTORY> 52,063
<CURRENT-ASSETS> 81,611
<PP&E> 6,084
<DEPRECIATION> 0
<TOTAL-ASSETS> 110,171
<CURRENT-LIABILITIES> 28,050
<BONDS> 42,432
<COMMON> 19,125
636
0
<OTHER-SE> 19,928
<TOTAL-LIABILITY-AND-EQUITY> 110,171
<SALES> 97,869
<TOTAL-REVENUES> 97,869
<CGS> 79,181
<TOTAL-COSTS> 91,280
<OTHER-EXPENSES> 1,585
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,252
<INCOME-PRETAX> 5,004
<INCOME-TAX> 2,008
<INCOME-CONTINUING> 2,996
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,996
<EPS-PRIMARY> .57
<EPS-DILUTED> .57
</TABLE>
