<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/ X / Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended October 31, 1999, 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 No. 0-16115
IMPCO TECHNOLOGIES, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
Delaware 91-1039211
- ------------------------ --------------------
(State of Incorporation) IRS Employer I.D. No.
16804 Gridley Place, Cerritos, CA 90703
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (562) 860-6666
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
Number of shares outstanding of each of the issuer's classes of common
stock, as of November 30, 1999:
8,483,281 shares of Common Stock, $.001 par value per share
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENT
IMPCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
October 31, 1999 and April 30, 1999
ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, APRIL 30,
1999 1999
------------- -------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash............................................... $ 2,903,185 $ 2,009,208
Accounts receivable................................ 24,514,290 22,209,363
Less allowance for doubtful accounts.............. 661,089 535,824
------------ -------------
Net accounts receivable.......................... 23,853,201 21,673,539
Inventories:
Raw materials and parts............................ 11,718,356 10,694,453
Work-in-process.................................... 969,430 1,208,423
Finished goods..................................... 16,629,936 10,804,309
------------- -------------
Total inventories................................. 29,317,722 22,707,185
Deferred tax assets................................. 2,577,027 3,474,387
Other current assets................................ 2,434,266 2,255,227
------------- -------------
Total current assets............................. 61,085,401 52,119,546
Equipment and leasehold improvements:
Dies, molds and patterns........................... 5,873,913 5,746,955
Machinery and equipment............................ 8,212,834 7,793,650
Office furnishings and equipment................... 6,721,211 6,110,079
Leasehold improvements............................. 3,103,344 2,965,366
------------- -------------
23,911,302 22,616,050
Less accumulated depreciation and amortization...... 14,222,455 12,730,976
------------- -------------
Net equipment and leasehold improvements.......... 9,688,847 9,885,074
Intangibles arising from acquisitions............... 15,742,621 15,593,672
Less accumulated amortization...................... 4,942,875 4,576,369
------------- -------------
Net intangibles arising from acquisitions.......... 10,799,746 11,017,303
Other assets........................................ 579,908 540,239
------------- -------------
$ 82,153,902 $ 73,562,162
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
2
<PAGE>
IMPCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
October 31, 1999 and April 30, 1999
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
OCTOBER 31, APRIL 30,
1999 1999
------------- -------------
(UNAUDITED)
<S> <C> <C>
Current liabilities:
Accounts payable............................. 8,110,503 8,294,977
Accrued payroll obligations.................. 2,523,716 2,493,402
Income taxes payable......................... 979,663 1,261,009
Other accrued expenses....................... 1,966,783 1,356,803
Current maturities of long-term debt......... 3,418,734 3,485,376
----------- -----------
Total current liabilities................... 16,999,399 16,891,567
Lines of credit............................... 11,930,341 5,551,300
Term loans.................................... 4,185,903 5,411,326
Capital leases................................ 1,854,798 2,102,173
Deferred tax liability........................ 963,910 828,852
Minority interest............................. 1,550,383 1,327,825
Stockholders' equity:
Common stock, $.001 par value, authorized
25,000,000 shares; 8,470,681 issued and
outstanding at October 31, 1999 (8,408,481
at April 30, 1999) .......................... 8,471 8,408
Additional paid-in capital.................... 45,822,173 45,375,995
Shares held in trust.......................... (92,645) (68,946)
Retained earnings/accumulated deficit......... 658,581 (2,397,813)
Accumulated other comprehensive income(Note 4) (1,727,412) (1,468,525)
----------- ------------
Total stockholders' equity.................. 44,669,168 41,449,119
----------- -----------
$82,153,902 $73,562,162
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
3
<PAGE>
IMPCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three and six months ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
----------------------- -----------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Product sales $24,869,749 $16,901,597 $51,927,243 $34,088,744
Contract revenue 2,487,168 3,419,653 3,849,628 6,105,866
----------- ----------- ----------- -----------
Net revenue 27,356,917 20,321,250 55,776,871 40,194,610
Costs and expenses:
Cost of sales 15,845,852 11,927,339 33,660,361 22,842,473
Research and
development expense 3,617,732 3,082,321 6,632,505 5,782,505
Selling, general and
administrative expense 5,144,866 3,798,103 10,084,577 7,469,222
----------- ----------- ----------- -----------
Total costs and expenses 24,608,450 18,807,763 50,377,443 36,094,200
----------- ----------- ----------- -----------
Operating income 2,748,467 1,513,487 5,399,428 4,100,410
Interest expense 346,001 274,363 577,711 526,863
----------- ----------- ----------- -----------
Income before income taxes,
minority interest in
income of consolidated
subsidiaries and dividends 2,402,466 1,239,124 4,821,717 3,573,547
Provision for income taxes 768,789 193,060 1,542,949 893,387
Minority interest in income
of consolidated
subsidiaries 130,999 5,761 222,374 6,915
----------- ----------- ----------- -----------
Net income before dividends 1,502,678 1,040,303 3,056,394 2,673,245
Dividends on preferred stock - 147,512 - 296,262
----------- ----------- ----------- -----------
Net income applicable
to common stock $ 1,502,678 $ 892,791 $ 3,056,394 $ 2,376,983
=========== =========== =========== ===========
Net income per share
Basic $0.18 $0.12 $0.36 $0.33
Diluted $0.17 $0.11 $0.35 $0.30
=========== =========== =========== ===========
Number of shares used in
per share calculation
Basic 8,442,818 7,176,832 8,448,349 7,166,957
Diluted 8,874,640 7,870,564 8,837,840 8,970,566
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
IMPCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six months ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
SIX MONTHS ENDED
OCTOBER 31,
------------ ------------
1999 1998
------------ ------------
<S> <C> <C>
Net cash (used in) provided by operating activities $(3,008,758) $ 292,067
Cash flows from investing activities:
Investment in IMPCO BV - (692,521)
Purchase of intangible assets (25,689) -
Purchase of equipment and leasehold
improvements (1,200,323) (1,507,474)
Proceeds from sale of equipment 15,082 77,233
------------ ------------
Net cash used in investing activities (1,210,930) (2,122,762)
Cash flows from financing activities:
Net borrowings under lines of credit 6,461,408 2,929,999
Proceeds from issuance of bank term loans - 2,098,000
Proceeds from issuance of common stock 446,241 949,748
Payments to acquire shares held in trust (23,699) (17,714)
Payments on term loans (1,373,075) (2,914,775)
Payments of capital lease obligation (337,793) (431,295)
Dividends on preferred stock - (296,262)
------------ ------------
Net cash provided by financing activities 5,173,082 2,317,701
------------ ------------
Translation Adjustment (59,417) (18,463)
Net increase in cash 893,977 468,543
Cash at beginning of period 2,009,208 2,617,869
------------ ------------
Cash at end of period $ 2,903,185 $ 3,086,412
============ ============
</TABLE>
See accompanying notes.
5
<PAGE>
IMPCO TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999 and 1998
1) BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are
unaudited and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for the fair
presentation of the financial position and operating results for the interim
periods. The condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto,
together with management's discussion and analysis of financial condition and
the results of operations, contained in the Company's Annual Report on Form
10-K for the fiscal year ended April 30, 1999. Certain reclassifications have
been made to the fiscal year 1999 financial statements to conform to the
current year presentation. The condensed consolidated balance sheet of IMPCO
Technologies, Inc. (IMPCO or the Company) as of October 31, 1999 includes the
accounts of the Company and its majority owned subsidiary IMPCO-BERU
Technologies B.V. (IMPCO BV), its majority owned subsidiary Grupo I.M.P.C.O.
Mexicano, S. de R.L. de C.V. (IMPCO Mexicano), and its wholly owned
subsidiaries IMPCO Technologies, Pty. Limited (IMPCO Pty) and IMPCO Tech
Japan K.K. (IMPCO Japan). The results of operations for the three and six
months ended October 31, 1999 are not necessarily indicative of the results
that may be expected for the entire year ending April 30, 2000.
2) DEBT PAYABLE
a) AMENDED BANK OF AMERICA NT&SA AGREEMENT
On September 13, 1999 IMPCO amended its credit facility with Bank of
America NT&SA by increasing the revolving line of credit to $20 million and
extending the term for a twelve month period ending August 31, 2001. The
amended credit facility also added a $6,000,000 non-revolving line of credit
for possible future acquisitions, a $3,000,000 non-revolving line of credit
for future capital expenditures and a Mexican peso line of credit equivalent
to $3,000,000 for IMPCO Mexicano.
Including the revolving line of credit, the capital lease facility,
the standby letter of credit and the acquisition facilities, the total Bank
of America NT&SA credit facility was approximately $41,792,000 at October
31, 1999.
LINES OF CREDIT - At October 31, 1999, the outstanding line of credit
balance was $11,000,000 of which $2,000,000 was subject to the bank's
reference rate less .25 percent (which was 7.75 percent on October 31, 1999)
and $9,000,000 was subject to an alternative interest rate established by the
Bank (Offshore rate). The Offshore rate was 6.66 percent on October 31, 1999.
At October 31, 1999, IMPCO Mexicano's outstanding line of credit of
approximately $642,000 was subject to the Bank of America Mexico (BAMSA) cost
of funds plus 1.50 percent (23.25 percent at October 31, 1999).
TERM LOAN FOR THE ACQUISTION OF CRUSADER - At October 31, 1999, the total
outstanding balance was approximately $911,500 which was subject to a fixed
interest rate of 7.02 percent.
TERM LOAN FOR THE ACQUISITION OF MEDIA - At October 31, 1999, the
total outstanding balance was approximately $410,000 which was subject to a
fixed interest rate of 7.90 percent.
TERM LOAN FOR THE ACQUISITION OF ALGAS - At October 31, 1999, the
total outstanding balance was $2,145,000 which was subject to a fixed
interest rate of 7.74 percent.
6
<PAGE>
TERM LOAN FOR ACQUISITION OF IMPCO BV - At October 31, 1999, the total
outstanding balance was approximately $485,000 which was subject to a fixed
interest rate of 7.80 percent.
IMPCO BV TERM LOAN - At October 31, 1999, the total outstanding
balance was approximately $1,407,000 which was subject to a variable interest
rate of 4.25 percent.
CAPITAL LEASE FACILITY - At October 31, 1999, approximately $2,600,000
was outstanding, of which approximately $603,000 was fixed at 8.50 percent,
approximately $921,000 was fixed at 8.20 percent, and approximately $8,000
was fixed at 8.05 percent. The remaining balance of approximately $1,068,000
was subject to the variable rate of interest based on Bank of America's
London Branch 3-month LIBOR rate plus 2.15 percentage points (8.19 percent as
of October 31, 1999).
LOAN COVENANTS AND COLLATERAL - The Bank of America credit facility
contains certain restrictions and financial covenants, including liquidity,
tangible net worth and cash flow coverage thresholds, as well as limitations
on other indebtedness, and is secured by substantially all of the Company's
assets. At October 31, 1999, the Company was in compliance with all covenants.
b) MEES PIERSON
At October 31, 1999 there was no outstanding balance.
c) THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD.
TERM LOAN FOR THE ACQUISITION OF MIKUNI - On March 29, 1999, IMPCO Japan
secured a (Y)160,000,000 (U.S.$1,537,000) term loan facility from the Hongkong
and Shanghai Banking Corporation Ltd., Osaka Branch. This term loan bears
interest at the Euroyen London Interbank Offer Rate plus 1.60 percent. At
October 31, 1999 the outstanding loan balance of (Y)144,000,000 (approximately
U.S.$1,383,000) bore an interest rate of 1.685 percent.
LINE OF CREDIT - On March 29, 1999, IMPCO Japan secured a (Y)60,000,000
(U.S.$576,000) revolving term loan facility from the Hongkong and Shanghai
Banking Corporation Ltd., Osaka Branch. This term loan bears interest at the
Euroyen London Interbank Offer Rate plus 1.60 percent. At October 31, 1999 the
outstanding loan balance of (Y)30,000,000 (approximately U.S.$288,000) bore an
interest rate of 1.703 percent.
7
<PAGE>
3) EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
----------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Numerator:
Net income before dividends $1,502,678 $1,040,303 $3,056,394 $2,673,245
Dividends on preferred stock - (147,512) - (296,262)
---------- --------- ---------- ----------
Numerator for basic earnings per
share - income available to
common stockholders to common stock 1,502,678 892,791 3,056,394 2,376,983
Effect of dilutive securities:
Preferred stock dividends - - - 296,262
---------- --------- ---------- ---------
Numerator for diluted earnings per
share - income available to
common stockholders after
assumed conversions $1,502,678 $ 892,791 $3,056,394 $2,673,245
Denominator:
Denominator for basic earnings per
share -- weighted-average shares 8,442,818 7,176,832 8,448,349 7,166,957
Effect of dilutive securities:
Employee stock options 431,822 687,187 389,491 669,375
Warrants - 6,545 - 9,470
Convertible preferred stock - - - 1,124,764
--------- --------- --------- ---------
Dilutive potential common shares 431,822 693,732 389,491 1,803,609
Denominator for diluted earnings per
share -- adjusted weighted-average
shares and assumed conversions 8,874,640 7,870,564 8,837,840 8,970,566
--------- --------- --------- ---------
Basic earnings per share $0.18 $0.12 $0.36 $0.33
--------- --------- --------- ---------
Diluted earnings per share $0.17 $0.11 $0.35 $0.30
--------- --------- --------- ---------
</TABLE>
8
<PAGE>
4) COMPREHENSIVE INCOME
As of May 1, 1998, the Company adopted SFAS 130, "Reporting
Comprehensive Income." SFAS 130 established new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or stockholders'
equity. SFAS 130 requires foreign currency translation adjustments, which
prior to adoption were reported separately in stockholders' equity, to be
included in other comprehensive income.
The components of comprehensive income for the three month and six
month periods ended October 31, 1999, and October 31, 1998, are as follows:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED OCTOBER 31, ENDED OCTOBER 31,
---------------------- ----------------------
1999 1998 1999 1998
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income......................... $ 1,502,678 $ 892,791 $3,056,394 $2,376,983
Foreign currency translation
adjustment.................... (181,996) 285,502 (258,887) ( 90,024)
----------- ---------- ---------- ----------
Comprehensive income............... $ 1,320,682 $1,178,293 $2,797,507 $2,286,959
=========== ========== ========== ==========
</TABLE>
5) BUSINESS SEGMENT INFORMATION
IMPCO classifies its business into three operating segments: Gaseous
Fuel Products Division (GFPD), Automotive OEM Division (AOD) and Non-U.S.
Based Subsidiary Operations. These operating segments are divisions within
the Company and each division has discrete financial information prepared for
internal reporting to management. Management considered the following factors
to be significant in identifying these operating segments: technology levels,
end-use applications of products, and customer characteristics. Advanced
research and product development is funded at the corporate level and
provides new products and technology to the operating segments for use in
their markets. Each operating segment conducts its own application
engineering and technical support for the sales and market development of the
new products and technology. The Company evaluates performance based on
profit or loss from operations before interest and income taxes.
Revenues and operating income for IMPCO's business segments for the
three and six months ended October 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Revenues
- --------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS) Three Months Ended October 31, Six Months Ended October 31,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Gaseous Fuels Products Division $20,291 $12,305 $39,832 $24,826
Automotive OEM Division 3,943 6,221 9,227 11,192
Non-U.S. Based Subsidiaries 7,373 5,040 13,818 10,588
Corporate Expenses - - - -
Advanced Research & Product Develop. - - - -
Intersegment Elimination (4,250) (3,245) (7,100) (6,411)
- --------------------------------------------------------------------------------------------------------------------------------
Total $27,357 $20,321 $55,777 $40,195
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Income/(Loss)
- ----------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS) Three Months Ended Six Months Ended
October 31, October 31,
1999 1998 1999 1998
------ ------ ------- ------
<S> <C> <C> <C> <C>
Gaseous Fuels Products Division $5,951 $3,169 $11,483 $7,303
Automotive OEM Division (805) 154 (1,292) 223
Non-U.S. Based Subsidiaries 781 665 1,444 1,172
Corporate Expenses (1,768) (1,291) (3,568) (2,624)
Advanced Research & Product Develop. (1,270) (754) (2,603) (1,472)
Intersegment Elimination (141) (430) (65) (502)
- ----------------------------------------------------------------------------------------------------------------------------------
Total $2,748 $1,513 $5,399 $4,100
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The statements contained in Management's Discussion and Analysis of
Financial Condition and Results of Operations that are not historical in
nature are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ materially
from those indicated in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to,
those identified in "Certain Factors" in the Company's April 30, 1999 Form
10-K filed July 29, 1999 and other factors identified from time to time in
the Company's reports filed with the Securities and Exchange Commission.
Overview
IMPCO Technologies, Inc. designs, manufactures and supplies fuel management
and fuel storage systems and components that allow internal combustion
engines and other propulsion systems to operate on alternative fuels such as
propane, natural gas, ethanol, methanol and hydrogen used in fuel cells. The
Company's products are sold for maintenance, aftermarket conversions and as
original equipment on motor vehicles, forklifts and small portable to large
stationary engines. IMPCO Technologies, Inc. classifies its business
interests into three operating segments: Gaseous Fuel Products Division
(GFPD), Automotive OEM Division (AOD), and Non-U.S. Based Subsidiary
Operations. Advanced research and product development is funded at the
corporate level and provides new products and technology to the operating
segments.
RESULTS OF OPERATIONS
- ---------------------
Revenues and operating income for IMPCO's business segments for the three months
and six months ended October 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
===============================================================================================================================
Revenues Operating Income/(Loss)
- -------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS) 1999 1998 1999 1998
-------- -------- -------- --------
For the three months ended: Oct. 31, Oct. 31, Oct. 31, Oct. 31,
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Gaseous Fuels Products Division $20,291 $12,305 $5,951 $3,169
Automotive OEM Division 3,943 6,221 (805) 154
Non-U.S. Based Subsidiaries 7,373 5,040 781 665
Corporate Expenses - - (1,768) (1,291)
Advanced Research & Product Develop. - - (1,270) (754)
Intersegment Elimination (4,250) (3,245) 141 (430)
- -------------------------------------------------------------------------------------------------------------------------------
Total $27,357 $20,321 $2,748 $1,513
===============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
===============================================================================================================================
Revenues Operating Income/(Loss)
- -------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS) 1999 1998 1999 1998
-------- -------- -------- --------
For the six months ended: Oct. 31, Oct. 31, Oct. 31, Oct. 31,
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Gaseous Fuels Products Division $39,832 $24,826 $11,483 $7,303
Automotive OEM Division 9,227 11,192 (1,292) 223
Non-U.S. Based Subsidiaries 13,818 10,588 1,444 1,172
Corporate Expenses - - (3,568) (2,624)
Advanced Research & Product Develop. - - (2,603) (1,472)
Intersegment Elimination (7,100) (6,411) 65 (502)
- -------------------------------------------------------------------------------------------------------------------------------
Total $55,777 $40,195 $5,399 $4,100
===============================================================================================================================
</TABLE>
GASEOUS FUELS PRODUCTS DIVISION. For the three months and six months ended
October 31, 1999, net revenues increased by approximately $7,986,000 or 65
percent and $15,006,000 or 60 percent, respectively, as compared to the same
periods in the prior fiscal year. These increases were a result of the
December 1998 acquisition of the Industrial Engine Systems Sub-Division
(IES), an increase in product sales to Mexico and an increase in small engine
sales. Management anticipates that overall revenues generated by GFPD in
11
<PAGE>
fiscal year 2000 will be higher than fiscal year 1999, primarily due to a
full year reporting of IES's sales, higher motor vehicle component sales to
the Mexico market and increased small engine sales. This is a forward-looking
statement.
During the three months and six months ended October 31, 1999, operating
income in this segment increased approximately $2,782,000 or 88 percent and
$4,180,000 or 57 percent, respectively, as compared to the same periods in
the prior fiscal year. These increases were a result of higher revenues and
gross margin percentages on GFPD product sales due to increased volumes.
These increases were partially offset by additional administrative expenses
resulting from the IES acquisition. Management anticipates that divisional
operating income will be higher in fiscal year 2000 as a result of higher
revenues and gross margin percentages associated with increased volumes. This
is a forward-looking statement.
AUTOMOTIVE OEM DIVISION. For the three months and six months ended October
31, 1999, net revenues decreased by approximately $2,278,000 and $1,965,000,
respectively, as compared to the same periods in the prior fiscal year.
Product sales in the second quarter decreased to $1.5 million, compared to
$2.8 million in the same quarter of fiscal year 1999. For the six months
ended, product sales increased approximately $342,000 over the same period in
the prior fiscal year. During the three months and six months ended October
31, 1999, the upfit revenue represented 412 units and 1,397 units,
respectively, as compared to 700 units and 1,223 units, respectively, during
the same periods of the prior year. Upfit revenue consists of mid-size
automobiles upfit with the division's bi-fuel compressed natural gas fuel
system, medium-duty dedicated Liquid Propane Gas (LPG) kits under a cross
license agreement with General Motors, and GM pick-ups upfit with the
division's bi-fuel compressed natural gas fuel system. Management expects
upfit revenues to be higher during fiscal year 2000 as compared to fiscal
year 1999 due to higher customer orders for the Company's systems on GM
vehicles. This is a forward-looking statement.
During the three months and six months ended October 31, 1999, contract
revenues for the AOD segment decreased $992,000 or 29 percent and $2,307,000
or 38 percent, respectively, as compared to the same periods in fiscal year
1999. These decreases were primarily due to lower revenues recognized during
the start up period on the new GM model year platforms. Management
anticipates, based on new contracts negotiated with GM and expected levels of
contract completion in fiscal year 2000, that contract revenue in fiscal year
2000 will be lower than levels experienced during fiscal year 1999.
Additionally, profit levels expected on the contracts during fiscal year 2000
will be substantially lower than levels realized during fiscal year 1999 due
to the new contracts. These are forward-looking statements.
During the three months and six months ended October 31, 1999 operating
losses in this segment were approximately $805,000 and $1,292,000,
respectively, as compared to operating income of approximately $154,000 and
$223,000 in the same periods of the prior fiscal year. These decreases were a
result of lower contract revenues, primarily from the GM program, and
associated higher product application development costs for new products
being commercialized. Product applications development expense is primarily
for system development and application engineering of the Company's products
under the funded General Motors contract, other funded contract work with
state and federal agencies, and for internally funded product and component
application development work. For the six month period ended October 31,
1999, expense directly related to externally funded product application
development work was approximately $2,697,000 as compared to $1,575,000 in
the same period of the prior fiscal year. Management anticipates higher
operating losses in this segment in fiscal year 2000, primarily due to lower
profits on GM contracts. This is a forward-looking statement.
Gross margins on GM product sales were higher in the first half of fiscal
year 2000 as compared to the same period in fiscal year 1999, primarily due
to lower material costs and lower per unit overhead costs. Management
anticipates higher gross margins on products in fiscal year 2000, primarily
due to the focus on cost reduction activities. This is a forward-looking
statement.
12
<PAGE>
NON-U.S. BASED SUBSIDIARIES. For the three months and six months ended
October 31, 1999, net revenues increased by approximately $2,333,000 or 46
percent and $3,230,000 or 31 percent, respectively, as compared to the same
periods in the prior fiscal year. These increases were a result of the March
1999 acquisition of IMPCO Japan, which resulted in increased revenues of
approximately $1,542,000 in the first half of fiscal year 2000. During the
three months and six months ended October 31, 1999, the Company also realized
increased revenues of $624,000 and $1,016,000 from its Mexico operation. For
the three month and six month period ending October 31, 1999, the increase in
Non-U.S. Based Subsidiaries revenues would have been reduced by $549,000 and
$134,000, respectively, if not for the weakening of the U.S. Dollar. The
strengthening of foreign currencies versus the U.S. Dollar positively impacts
the conversion of foreign currency denominated sales. Management anticipates
that revenues during fiscal year 2000 will be higher than fiscal year 1999 as
a result of the acquisition of IMPCO Japan and higher motor vehicle sales in
Mexico. These are forward-looking statements.
During the three months and six months ended October 31, 1999, operating
income increased approximately $116,000 and $272,000, respectively, as
compared to the same periods in the prior year, primarily as a result of the
addition of the Japan operations. Management anticipates that operating
income levels at the Non-U.S. Based Subsidiaries will be higher in fiscal
year 2000 than the prior year due to the addition of the Japan operations and
higher revenues from Mexico. This is a forward-looking statement.
CORPORATE EXPENSES. Corporate expenses for the three months and six months
ended October 31, 1999, increased $477,000 or 37 percent and $944,000 or 36
percent, as compared to the same periods in the prior fiscal year. The
increase in corporate expenses was primarily due to the incremental costs
incurred in the creation of the Company's Stockholder Protection Rights
Agreement, increased compensation expenses and increased legal expenses.
Management anticipates that corporate expenses for the remaining half of
fiscal year 2000 will be higher than levels experienced during the same
period of fiscal 1999. This is a forward-looking statement.
ADVANCED RESEARCH AND PRODUCT DEVELOPMENT. Advanced Research and Product
Development expense for the three months and six months ended October 31,
1999, increased approximately $516,000 or 68 percent and $1,131,000 or 77
percent, respectively, as compared to the same periods in the prior fiscal
year. These increases are primarily due to increased efforts relating to the
commercialization of fuel metering, fuel storage and fuel cell products and
overall increased spending on internally funded research and development
projects. Management believes the Company's future success depends on its
ability to design, develop and market new products that interface
successfully with new engine electronic technology, and which meet mandated
emission standards and fuel storage technology. Management anticipates that
advanced research and product development expense during fiscal year 2000
will be higher than the levels experienced during fiscal year 1999. This is a
forward-looking statement.
INTEREST EXPENSE. Interest expense for the three months and six months ended
October 31, 1999, increased $72,000 or 26 percent and $51,000 or 10 percent,
as compared to the same periods in the prior fiscal year. These increases are
attributable to additional borrowings partially offset by lower interest
rates on the Company's credit facility with Bank of America. Management
anticipates that interest expense for fiscal year 2000 will be comparable to
the prior fiscal year. This is a forward-looking statement.
PROVISION FOR INCOME TAXES. The estimated effective annual tax rate of 32
percent for fiscal year 2000 is significantly higher than the previous year
due to the exhaustion of federal net operating loss carryforwards during the
previous fiscal year. The current year tax provision includes presumed
utilization of estimated research and development credits of $1,155,000. At
October 31, 1999, net deferred tax asset was approximately $2,577,000 while
the net deferred tax liability was $964,000. Management has determined, based
on the Company's history of prior operating earnings and its expectations for
the future, that operating income of the Company will more likely than not be
sufficient to recognize fully the net deferred tax assets and that the
estimated effective annual tax rate in the future years will approximate the
statutory rate. This is a forward-looking statement.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES. The Company uses cash generated from its
operations and external financing to fund capital expenditures, as well as
invest in and operate its existing operations and new businesses. These
sources are sufficient to meet all current obligations on a timely basis.
Management believes that such sources of funds will be sufficient to meet the
needs of its business for the foreseeable future. This is a forward-looking
statement.
The Company's financial condition remains strong. The ratio of current
assets to current liabilities was 3.59:1 and 3.09:1 at October 31, 1999 and
April 30, 1999, respectively. During the current year, the total amount of
working capital increased by approximately $8,858,000 to $44,086,000 at
October 31, 1999. Net cash used in operating activities was $3,009,000 for
the current six month period, compared to net cash provided by operating
activities of $292,000 for the same period in the previous year. The increase
in cash used in operating activities during the current period resulted
primarily from an increase in inventory and an increase in accounts
receivable. The increase in inventory was primarily due to inventory build to
support the AOD production transition to Mexico and increased sales volume
across all operating segments. The increase in accounts receivable is
primarily due to the increased billings associated with higher sales levels
and increased billings on the GM contracts.
Net cash used in investing activities for the current six month period
was approximately $1,211,000, a decrease of approximately $912,000 from the
same period in the previous year. This decrease is primarily from the
previous years first quarter purchase of the remaining 49 percent interest in
IMPCO BV, which resulted in a net use of cash of approximately $693,000.
Additionally, there was a decrease in capital expenditures for dies, molds
and patterns and machinery and equipment of approximately $307,000.
Management projects capital expenditures during the current year, primarily
relating to equipment enhancements and facilities for the development and
production of new products, to be comparable to expenditures during fiscal
year 1999. The Company expects to fund a major portion of these expenditures
from cash generated from operations and by use of its bank credit facility.
These are forward-looking statements.
Net cash provided by financing activities for the current six month
period was approximately $5,173,000. For the six month period ending October
31, 1999, the Company increased its borrowing under the operating lines of
credit by approximately $6,461,000 primarily for material purchases. Payments
made on term loans were approximately $1,373,000.
The Company has a $20,000,000 revolving line of credit, $3,000,000
revolving line of credit for IMPCO Mexicano, $6,000,000 of available credit
on the acquisition facility, and approximately $3,000,000 of available credit
on the capital expenditures facility with Bank of America. At October 31,
1999, approximately $11,930,000 and $2,600,000 were outstanding under the
revolving line of credit and the capital lease facility, respectively. The
revolving line of credit expires on August 31, 2001, the acquisition facility
expires on August 31, 2000, and the capital lease facility expires on August
31, 2000. In addition, the Company's subsidiary in the Netherlands has a fl.
3,000,000 (U.S.$1,436,000) credit facility with Mees Pierson, a financial
institution in the Netherlands. At October 31, 1999, there was no outstanding
balance. The Company's subsidiary in Japan has a (Y)60,000,000 (U.S.$576,000)
revolving term loan facility with the Hongkong and Shanghai Banking
Corporation Ltd., Osaka Branch. At October 31, 1999, there was an outstanding
loan balance of (Y)30,000,000 (U.S.$288,000).
DERIVATIVE FINANCIAL INSTRUMENTS
- --------------------------------
The Company uses derivative financial instruments for the purpose of
reducing its exposure to adverse fluctuations in interest and foreign exchange
rates. While these hedging instruments are subject to fluctuations in value,
such fluctuations are generally offset by the value of the underlying exposures
being hedged. The Company is not a party to leveraged derivatives and does not
hold or issue financial instruments for speculative purposes.
14
<PAGE>
FOREIGN CURRENCY MANAGEMENT - The results and financial condition of
the Company's international operations are affected by changes in exchange
rates between certain foreign currencies and the U.S. Dollar. The Company's
exposure to fluctuations in currency exchange rates has increased as a result
of the growth of its international subsidiaries. The functional currency for
all of the Company's international subsidiaries is the local currency of the
subsidiary. An increase in the value of the U.S. Dollar increases costs
incurred by the subsidiaries because most of its international subsidiaries'
inventory purchases are U.S. Dollar denominated. The Company monitors this
risk and attempts to minimize the exposure through forward currency contracts
and the management of cash disbursements in local currencies. At October 31,
1999 the Company had currency forward contracts protecting U.S.$765,000 in
inventory purchases. At October 31, 1999 the fair value of foreign currency
forward contracts was $20,000.
The Company seeks to hedge its foreign currency economic risk by
minimizing its U.S. Dollar investment in foreign operations using foreign
currency term-loans to finance the operations of its foreign subsidiaries.
The term loans are denominated in local currencies and translated to U.S.
Dollars at period end exchange rates.
INTEREST RATE MANAGEMENT - The Company uses interest rate swap
agreements with Bank of America to manage its exposure to interest rate
changes and stabilize the cost of borrowed funds. When an agreement is
executed, the swap is linked to a specific debt instrument. At October 31,
1999, the Company had approximately $4,572,000 secured under fixed interest
rate agreements at a weighted-average fixed interest rate of 7.95 percent.
Absent these fixed rate agreements, the weighted-average variable rate for
this debt at October 31, 1999 would have been 7.57 percent. At October 31,
1999 the fair value of interest rate swap agreements approximated carrying
value.
YEAR 2000
- ---------
The Company recognizes the need to ensure its operations will not be adversely
impacted by Year 2000 software failures. Software failures, due to processing
errors potentially arising from calculations using the Year 2000, could result
in miscalculations or a complete system failure causing disruptions of
operations, including, among other things, a temporary inability to process
financial transactions, update customer accounts, bill customers, plan
production, or engage in similar normal business activities. The Company has
undertaken various initiatives intended to ensure that its computer equipment
and software will function properly with respect to dates in the year 2000 and
thereafter. It has completed its assessment of the Year 2000 issue through
communication with key customers, suppliers, financial institutions and others
with which it conducts business and review of its current internal computer
systems to identify potential Year 2000 issues. Based on this assessment, the
Company is not aware of any key customer, supplier, or financial institution
with inadequate solutions. Also, it has upgraded all computer hardware to comply
with Year 2000 dates and dates thereafter. Finally, the Company has developed
plans to address system modifications required by December 31, 1999 and these
plans basically require the upgrade to new versions of packaged software. The
Company has completed all system software upgrades. In addition, the Company has
established a contingency plan to address Year 2000 risk factors outside the
Company's control.
Direct costs associated with addressing the Year 2000 issue have not been
significant and no information technology plans have been deferred due to Year
2000 efforts. The financial impact of making the required systems changes is not
expected to be material to the Company's consolidated financial position,
results of operations or cash flows. This is a forward-looking statement.
The Company's Year 2000 compliance initiatives are ongoing and its ultimate
scope, as well as the consideration of contingency plans, will continue to be
evaluated, as new information becomes available. In addition, it is important to
note that the description of the Company's efforts necessarily involves
estimates and projections with respect to activities required in the future.
These estimates and projections are subject to changes as work continues, and
such changes may be substantial.
15
<PAGE>
Part II - OTHER INFORMATION
Items 1,2,3,5 Not applicable.
Item 4. Submission of matters to a vote of security holders
(a) The annual meeting of stockholders was held on October 27, 1999.
(b) N/A
(c) The stockholders voted to elect the following nominees as
directors for a three year term:
<TABLE>
<CAPTION>
Votes Percent
For of Voted Withheld
----------- ---------- ----------
<S> <C> <C> <C>
Norman L. Bryan 6,091,397 99.57 26,135
Christopher G. Mumford 6,091,617 99.58 25,915
Don J. Simplot 6,090,517 99.56 27,015
</TABLE>
The ratification of the appointment of Ernst & Young LLP. as the
Company's independent auditors received the following votes:
<TABLE>
<CAPTION>
Votes Votes Broker
For Against Abstention non-votes
--------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Common Stock 6,085,976 26,147 5,409 -0-
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
--------
Exhibit 10.17 - Amended Loan Agreement between IMPCO Technologies,
Inc. as borrower and Bank of America N.A., as lendor, dated September
13, 1999.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed during the quarter
ended October 31, 1999.
16
<PAGE>
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.
IMPCO Technologies, Inc.
(Registrant)
Date: December 6, 1999 By /s/ William B. Olson
---------------------
William B. Olson
Chief Financial Officer
and Treasurer
[Authorized Signatory]
17
<PAGE>
EXHIBIT 10.17
BUSINESS LOAN AGREEMENT
This Agreement dated as of SEPTEMBER 13, 1999, is between Bank of
America, N.A. (the "Bank") and IMPCO Technologies, Inc. (the "Borrower").
1. FACILITY NO. 1: REVOLVING LINE OF CREDIT AMOUNT AND TERMS
1.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, the Bank
will provide a line of credit ("Facility No. 1") to the Borrower. The
amount of the line of credit (the "Facility No. 1 Commitment") is Twenty
Million Dollars ($20,000,000).
(b) This is a revolving line of credit with a within line
facility for letters of credit. During the availability period, the
Borrower may prepay principal amounts and reborrow them.
(c) The Borrower agrees not to permit the outstanding principal
balance of advances under the line of credit plus the outstanding amounts
of any letters of credit and not yet reimbursed to exceed the Facility
No. 1 Commitment.
1.2 AVAILABILITY PERIOD. The line of credit is available between the
date of this Agreement and August 31, 2001 (the "Revolving Line Expiration
Date") unless the Borrower is in default.
1.3 INTEREST RATE.
(a) Unless the Borrower elects an optional interest rate as
described below, the interest rate is the Bank's Reference Rate plus the
Applicable Amount (defined in subparagraph (c) below).
(b) The Reference Rate is the rate of interest publicly
announced from time to time by the Bank in San Francisco, California, as
its Reference Rate. The Reference Rate is set by the Bank based on
various factors, including the Bank's costs and desired return, general
economic conditions and other factors, and is used as a reference point
for pricing some loans. The Bank may price loans to its customers at,
above, or below the Reference Rate. Any change in the Reference Rate
shall take effect at the opening of business on the day specified in the
public announcement of a change in the Bank's Reference Rate.
(c) "Applicable Amount" means, for any Pricing Period, the per
annum amounts set forth below and opposite the applicable Pricing Level:
-1-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
APPLICABLE AMOUNT
PRICING LEVEL (IN BASIS POINTS PER ANNUM)
- -------------------------------------------------------------------------------------
CAYMAN RATE + AND
REFERENCE RATE + LIBOR RATE +
- -------------------------------------------------------------------------------------
<S> <C> <C>
1 -50 112.5
- -------------------------------------------------------------------------------------
2 -50 125
- -------------------------------------------------------------------------------------
3 -25 137.5
- -------------------------------------------------------------------------------------
</TABLE>
"Pricing Level" means, for the first Pricing Period, Pricing
Level 2 and, for each Pricing period thereafter, the pricing level set
forth below opposite the funded debt to EBITDA ratio, calculated as
provided in Paragraph 14.5 below, achieved by the Borrower as of the
first day of that Pricing Period:
<TABLE>
<CAPTION>
PRICING LEVEL FUNDED DEBT/EBITDA RATIO
<S> <C>
1 < 1.50 to 1.00
2 > =1.50 to 1.00 but < 2.50 to 1.00
3 > =2.50 to 1.00
</TABLE>
"Pricing Level Change Date" means, with respect to any change in the
Pricing Level which results in a change in the Applicable Amount, the
earlier of five (5) business days after the date upon which the Borrower
delivers a compliance certificate to the Bank as required under Paragraph
14.2(f) below reflecting such changed Pricing Level or five (5) business
days after the date upon which the Borrower is required by Paragraph
14.2(f) to deliver such compliance certificate; provided, however, that
if the compliance certificate is not delivered by the date required by
Paragraph 14.2(f), then, subject to the other provisions of this
Agreement, commencing on the date such compliance certificate was
required until such compliance certificate is delivered, the Applicable
Amount shall be based on the next higher level than the one previously in
effect, and from and after the date such compliance certificate is
thereafter received, the Applicable Amount shall be as determined from
such compliance certificate.
"Pricing Period" means (a) the period commencing on the date of execution
of this Agreement and ending on the first Pricing level Change Date to
occur thereafter and (b) each subsequent period commencing on each
Pricing Level Change Date and ending on the day prior to the next Pricing
Level Change Date.
1.4 REPAYMENT TERMS.
(a) The Borrower will pay interest on September 30, 1999, and
then monthly thereafter until payment in full of any principal
outstanding under this line of credit.
(b) The Borrower will repay in full all principal and any
unpaid interest or other charges outstanding under this line of credit no
later than the Revolving Line Expiration Date. Any amount bearing
interest at an optional interest rate (as described below) may be repaid
at the end of the applicable interest period, which shall be no later
than the Expiration Date.
-2-
<PAGE>
1.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on
the Bank's Reference Rate, the Borrower may elect the optional interest rates
listed below for this Facility No. 1 during interest periods agreed to by the
Bank and the Borrower. The optional interest rate shall be subject to the terms
and conditions described later in this Agreement. Any principal amount bearing
interest at an optional rate under this Agreement is referred to as a "Portion."
The following optional interest rates are available:
(a) the Cayman Rate plus the Applicable Amount.
(b) the LIBOR Rate plus the Applicable Amount.
1.6 LETTERS OF CREDIT. This line of credit may be used for financing:
(i) commercial letters of credit with a maximum maturity of 180
days but not to extend more than 90 days beyond the Revolving Line
Expiration Date. Each commercial letter of credit will require drafts
payable at sight.
(ii) standby letters of credit with a maximum maturity of one
(1) year but not to extend beyond the Revolving Line Expiration Date.
(iii) The amount of the letters of credit outstanding at any one
time (including amounts drawn on letters of credit and not yet
reimbursed) may not exceed One Million Dollars ($1,000,000) for
commercial letters of credit and Seven Hundred Fifty Thousand Dollars
($750,000) for standby letters of credit.
(iv) The following letter of credit is outstanding from the Bank
for the account of the Borrower:
<TABLE>
<CAPTION>
LETTER OF CREDIT NUMBER AMOUNT
<S> <C>
LASB #227940 $375,000
</TABLE>
As of the date of this Agreement, this letter of credit shall be deemed
to be outstanding under this Agreement, and shall be subject to all the
terms and conditions stated in this Agreement, except that this letter of
credit may expire no later than February 28, 2001.
The Borrower agrees:
(a) any sum drawn under a letter of credit may, at the option
of the Bank, be added to the principal amount outstanding under this
Agreement. The amount will bear interest and be due as described
elsewhere in this Agreement.
(b) if there is a default under this Agreement, to immediately
prepay and make the Bank whole for any outstanding letters of credit.
(c) the issuance of any letter of credit and any amendment to a
letter of credit is subject to the Bank's written approval and must be in
form and content satisfactory to the Bank and in favor of a beneficiary
acceptable to the Bank.
(d) to sign the Bank's form Application and Agreement for
Commercial Letter of Credit or Application and Agreement for Standby
Letter of Credit.
-3-
<PAGE>
(e) to pay any issuance and/or other fees that the Bank
notifies the Borrower will be charged for issuing and processing letters
of credit for the Borrower.
(f) to allow the Bank to automatically charge its checking
account for applicable fees, discounts, and other charges.
(g) to pay the Bank a non-refundable fee equal to 1.25% per
annum of the outstanding undrawn amount of each standby letter of credit,
payable annually in advance, calculated on the basis of the face amount
outstanding on the day the fee is calculated.
2. FACILITY NO. 2: EXISTING TERM LOAN A
2.1 OUTSTANDING TERM LOAN A. There is outstanding from the Bank to
the Borrower a term loan in the original principal amount of Two Million Fifty
Thousand Dollars ($2,050,000). This term loan is currently subject to the terms
and conditions of Facility No. 2 of the Business Loan Agreement dated as of
September 11, 1998. As of the date of this Agreement, the term loan shall be
deemed to be outstanding as Facility No. 2 under this Agreement, and shall be
subject to all the terms and conditions stated in this Agreement.
2.2 INTEREST RATE. Unless the Borrower elects an optional interest
rate as described below, the interest rate is the Bank's Reference Rate.
2.3 REPAYMENT TERMS.
(a) The Borrower will pay all accrued but unpaid interest on
September 30, 1998 and then monthly thereafter until payment in full of
the principal of this loan.
(b) The Borrower will repay the principal amount of Facility
No. 2 in four (4) equal successive quarterly installments of One
Hundred Two Thousand Five Hundred Dollars ($102,500) each, starting
November 30, 1999. On August 31, 2000, the Borrower will repay the
remaining principal balance plus any interest then due.
(c) The Borrower may prepay the loan in full or in part at any
time. The prepayment will be applied to the most remote installment of
principal due under this Agreement.
2.4 OPTIONAL INTEREST RATES. Instead of the interest rate based on
the Bank's Reference Rate, the Borrower may elect the optional interest rates
listed below for this Facility No. 2 during interest periods agreed to by the
Bank and the Borrower. The optional interest rates shall be subject to the
terms and conditions described later in this Agreement. Any principal amount
bearing interest at an optional rate under this Agreement is referred to as a
"Portion." The following optional interest rates are available:
(a) the Cayman Rate plus 1.50 percentage points.
(b) the LIBOR Rate plus 1.50 percentage points.
-4-
<PAGE>
3. FACILITY NO. 3: EXISTING TERM LOAN B
3.1 OUTSTANDING TERM LOAN B. There is outstanding from the Bank to
the Borrower a term loan in the original principal amount of Four Million
Dollars ($4,000,000), which was funded in two disbursements. The first
disbursement was for Three Million Three Hundred Thousand Dollars ($3,300,000)
(the "First Disbursement"), and the second disbursement was for Six Hundred
Ninety Two Thousand Five Hundred Twenty and 78/100 Dollars ($692,520.78) (the
"Second Disbursement"). This loan is currently subject to the terms and
conditions of Facility No. 3 of the Business Loan Agreement dated as of
September 11, 1998. As of the date of this Agreement, the term loan shall be
deemed to be outstanding as Facility No. 3 under this Agreement, and shall be
subject to all the terms and conditions stated in this Agreement.
3.2 INTEREST RATE.
(a) Unless the Borrower elects an optional interest rate as
described below, the interest rate is the Bank's Reference Rate.
(b) The Borrower may prepay the loan in full or in part at any
time. The prepayment will be applied to the most remote installment of
principal due under this Agreement.
3.3 REPAYMENT TERMS.
(a) The Borrower will pay all accrued but unpaid interest on
the last day of the first month after funding and then monthly thereafter
and upon payment in full of the principal of the loan.
(b) The Borrower will repay principal as follows:
(i) The Borrower will repay principal of the First
Disbursement in eight (8) successive quarterly installments of One
Hundred Sixty Five Thousand Dollars ($165,000) starting December
5,1999. On December 5, 2002, the Borrower will repay the
remaining principal balance plus any interest then due under the
First Disbursement.
(ii) The Borrower will repay the principal of the Second
Disbursement in fourteen (14 ); successive quarterly installments
of Thirty Four Thousand Six Hundred Twenty-Six Dollars ($34,626)
on the 15th day of each quarter starting October 15, 1999. On
April 15, 2003, the Borrower will repay the remaining principal
balance plus any interest then due under the Second Disbursement.
3.4 OPTIONAL INTEREST RATES. Instead of the interest rate based on
the Bank's Reference Rate, the Borrower may elect the optional interest rates
listed below for this Facility No. 3 during interest periods agreed to by the
Bank and the Borrower. The optional interest rate shall be subject to the terms
and conditions described later in this Agreement. Any principal amount bearing
interest at an optional rate under this Agreement is referred to as a "Portion."
The following optional interests rate are available:
(a) the Cayman Rate plus 1.75 percentage points.
-5-
<PAGE>
(b) the LIBOR Rate plus 1.75 percentage points.
4. FACILITY NO. 4: EXISTING TERM LOAN C
4.1 OUTSTANDING TERM LOAN C. There is outstanding from the Bank to
the Borrower a term loan in the original principal amount of Three Million One
Hundred Ninety Thousand Dollars ($3,190,000). This term loan is currently
subject to the terms and conditions of Facility No. 2 of the Business Loan
Agreement dated as of September 11, 1998. As of the date of this Agreement, the
term loan shall be deemed to be outstanding as Facility No. 4 under this
Agreement, and shall be subject to all the terms and conditions stated in this
Agreement.
4.2 INTEREST RATE.
(a) Unless the Borrower elects an optional interest rate as
described below, the interest rate is the Bank's Reference Rate plus the
Applicable Amount.
(b) The Borrower may prepay the loan in full or in part at any
time. The prepayment will be applied to the most remote installment of
principal due under this Agreement.
4.3 REPAYMENT TERMS.
(a) The Borrower will pay all accrued but unpaid interest on
September 30, 1999 and then monthly thereafter until payment in full of
the principal of this loan.
(b) The Borrower will repay the principal amount of Facility
No. 4 in five (5) successive quarterly installments of One Hundred Fifty
Nine Thousand Five Hundred Dollars ($159,500) each, starting November 30,
1999. On August 31, 2000, the Borrower will repay the remaining
principal balance plus any interest then due.
4.4 OPTIONAL INTEREST RATES. Instead of the interest rate based on
the Bank's Reference Rate, the Borrower may elect the optional interest rates
listed below for this Facility No. 4 during interest periods agreed to by the
Bank and the Borrower. The optional interest rates shall be subject to the
terms and conditions described later in this Agreement. Any principal amount
bearing interest at an optional rate under this Agreement is referred to as a
"Portion." The following optional interest rates are available:
(a) the Cayman Rate plus the Applicable Amount.
(b) the LIBOR Rate the Applicable Amount.
5. FACILITY NO.5: NON-REVOLVING ACQUISITION LINE OF CREDIT AMOUNT AND TERMS
5.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, the Bank
will provide a line of credit ("Facility No. 5") to the Borrower. The
amount of the line of credit (the "Facility No. 5 Commitment") is Six
Million Dollars ($6,000,000).
-6-
<PAGE>
(b) This is a non-revolving line of credit with a term
repayment option. Any amount borrowed, even if repaid before the
expiration date of this line of credit permanently reduces the remaining
available line of credit.
(c) The Borrower agrees not to permit the outstanding principal
balance of advances under the line of credit to exceed the Facility No. 5
Commitment.
5.2 AVAILABILITY PERIOD. The line of credit is available between the
date of this Agreement and August 31, 2000 unless the Borrower is in default.
5.3 INTEREST RATE. Unless the Borrower elects an optional
interest rate as described below, the interest rate is the Bank's Reference Rate
plus the Applicable Amount.
5.4 REPAYMENT TERMS.
(a) The Borrower will pay interest on September 30, 1999, and
then monthly thereafter until payment in full of any principal
outstanding under this line of credit.
(b) The Borrower will repay principal of each separate advance
in 20 successive quarterly installments, each equal to 1/20 of the amount
of the advance, payable commencing on the last day of the third month
after the funding of such advance.
5.5 OPTIONAL INTEREST RATES. Instead of the interest rates based on
the Bank's Reference Rate, the Borrower may elect the optional interest rate
listed below for this Facility No. 5 during interest periods agreed to by the
Bank and the Borrower. The optional interest rate shall be subject to the terms
and conditions described later in this Agreement. Any principal amount bearing
interest at an optional rate under this Agreement is referred to as a "Portion."
The following optional interest rates are available:
(a) the Cayman Rate plus the Applicable Amount.
(b) the LIBOR Rate plus the Applicable Amount.
6. FACILITY NO. 6: NON-REVOLVING CAP EX LINE OF CREDIT AMOUNT AND TERMS
6.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, the Bank
will provide a line of credit ("Facility No. 6") to the Borrower. The
amount of the line of credit (the "Facility No. 6 Commitment") is Three
Million Dollars ($3,000,000).
(b) This is a non-revolving line of credit with a term
repayment option. Any amount borrowed, even if repaid before the
expiration date of this line of credit permanently reduces the remaining
available line of credit.
(c) The Borrower agrees not to permit the outstanding principal
balance of advances under the line of credit to exceed the Facility No. 6
Commitment.
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6.2 AVAILABILITY PERIOD. The line of credit is available between the
date of this Agreement and August 31, 2000 unless the Borrower is in default.
6.3 INTEREST RATE. Unless the Borrower elects an optional interest
rate as described below, the interest rate is the Bank's Reference Rate plus the
Applicable Amount.
6.4 REPAYMENT TERMS.
(a) The Borrower will pay interest on September 30, 1999, and
then monthly thereafter until payment in full of any principal
outstanding under this line of credit.
(b) The Borrower will repay principal of each separate advance
in 20 successive quarterly installments, each equal to 1/20 of the amount
of the advance, payable commencing on the last day of the third month
after the funding of such advance.
6.5 OPTIONAL INTEREST RATES. Instead of the interest rates based on
the Bank's Reference Rate, the Borrower may elect the optional interest rate
listed below for this Facility No. 5 during interest periods agreed to by the
Bank and the Borrower. The optional interest rate shall be subject to the terms
and conditions described later in this Agreement. Any principal amount bearing
interest at an optional rate under this Agreement is referred to as a "Portion."
The following optional interest rates are available:
(a) the Cayman Rate plus the Applicable Amount.
(b) the LIBOR Rate plus the Applicable Amount.
7. FACILITY NO. 7: STANDBY LETTER OF CREDIT
7.1 LETTER OF CREDIT. There is outstanding a standby letter of credit
issued by the Bank for the benefit of Hong Kong Shanghai Banking Corp. with an
initial maturity of April 30, 2000. This standby letter of credit includes a
provision providing that the maturity date will be automatically extended each
year for an additional year unless the Bank gives written notice to the
contrary. This letter of credit includes a final maturity date of April 30,
2004, which will not be subject to automatic extension. As of the date of this
Agreement, this letter of credit shall be deemed to be outstanding as Facility
No. 7 under this Agreement, and shall be subject to all the terms and conditions
stated in this Agreement.
7.2 AMOUNT. The amount of the letter of credit (including the drawn
and unreimbursed amounts of the letter of credit) may not exceed One Million
Eight Hundred Thirty Three Thousand Dollars ($1,833,000).
7.3 OTHER TERMS. The Borrower agrees:
(a) if there is a default under this Agreement, to
immediately prepay and make the Bank whole for the outstanding letter of
credit.
(b) the issuance of the letter of credit and any amendment
to the letter of credit is subject to the Bank's written approval and
must be in form and content satisfactory to the Bank and in favor of a
beneficiary acceptable to the Bank.
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(c) to sign the Bank's form Application and Agreement for
Standby Letter of Credit.
(d) to pay any issuance and/or other fees that the Bank
notifies the Borrower will be charged for issuing and processing the
letter of credit for the Borrower.
(e) to allow the Bank to automatically charge its checking
account for applicable fees, discounts, and other charges.
(f) to pay the Bank a non-refundable fee equal to 1.00%
per annum of the outstanding undrawn amount of the letter of credit,
payable annually in advance, calculated on the basis of the face
amount outstanding on the day the fee is calculated. If there is a
default under this Agreement, at the Bank's option, the amount of the
fee shall be increased to 1.5% per annum, effective starting on the
day the Bank provides notice of the increase to the Borrower."
8. OPTIONAL INTEREST RATES
8.1 OPTIONAL RATES. Each optional interest rate is a rate per year.
Interest will be paid on the last day of each interest period, and on the last
day of each month during the interest period. At the end of any interest
period, the interest rate will revert to the rate based on the Reference Rate,
unless the Borrower has designated another optional interest rate for the
Portion. No Portion will be converted to a different interest rate during the
applicable interest period. Upon the occurrence of an event of default under
this Agreement, the Bank may terminate the availability of optional interest
rates for interest periods commencing after the default occurs.
8.2 CAYMAN RATE. The election of Cayman Rates shall be subject to the
following terms and requirements:
(a) The interest period during which the Cayman Rate will be in
effect will be no shorter than 30 days and no longer than one year. The
last day of the interest period will be determined by the Bank using the
practices of the offshore dollar inter-bank market.
(b) Each Cayman Rate Portion will be for an amount not less
than Five Hundred Thousand Dollars ($500,000).
(c) The Borrower may not elect a Cayman Rate with respect to
any principal amount which is scheduled to be repaid before the last day
of the applicable interest period.
(d) The "Cayman Rate" means the interest rate determined by the
following formula, rounded upward to the nearest 1/100 of one percent.
(All amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
Cayman Rate = Cayman Base Rate
---------------------------
(1.00 - Reserve Percentage)
Where,
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(i) "Cayman Base Rate" means the interest rate at which
the Bank's Grand Cayman Branch, Grand Cayman, British West Indies,
would offer U.S. dollar deposits for the applicable interest
period to other major banks in the offshore dollar inter-bank
market.
(ii) "Reserve Percentage" means the total of the maximum
reserve percentages for determining the reserves to be maintained
by member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve Board Regulation D,
rounded upward to the nearest 1/100 of one percent. The
percentage will be expressed as a decimal, and will include, but
not be limited to, marginal, emergency, supplemental, special, and
other reserve percentages.
(e) Each prepayment of a Cayman Rate Portion, whether
voluntary, by reason of acceleration or otherwise, will be accompanied by
the amount of accrued interest on the amount prepaid, and a prepayment
fee as described below. A "prepayment" is a payment of an amount on a
date earlier than the scheduled payment date for such amount as required
by this Agreement. The prepayment fee shall be equal to the amount (if
any) by which:
(i) the additional interest which would have been
payable during the interest period on the amount prepaid had it
not been prepaid, exceeds
(ii) the interest which would have been recoverable by
the Bank by placing the amount prepaid on deposit in the domestic
certificate of deposit market, the eurodollar deposit market, or
other appropriate money market selected by the Bank for a period
starting on the date on which it was prepaid and ending on the
last day of the interest period for such Portion (or the scheduled
payment date for the amount prepaid, if earlier).
(f) The Bank will have no obligation to accept an election for
a Cayman Rate Portion if any of the following described events has
occurred and is continuing:
(i) Dollar deposits in the principal amount, and for
periods equal to the interest period, of a Cayman Rate Portion are
not available in the offshore Dollar inter-bank market; or
(ii) the Cayman Rate does not accurately reflect the cost
of a Cayman Rate Portion.
8.3 LIBOR RATE. The election of LIBOR Rates shall be subject to the
following terms and requirements:
(a) The interest period during which the LIBOR Rate will be in
effect will be one, two, three, four, five, six, seven, eight, nine, ten,
eleven, or twelve months. The first day of the interest period must be a
day other than a Saturday or a Sunday on which the Bank is open for
business in California, New York and London and dealing in offshore
dollars (a "LIBOR Banking Day"). The last day of the interest period and
the actual number of days during the interest period will be determined
by the Bank using the practices of the London inter-bank market.
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(b) Each LIBOR Rate portion will be for an amount not less than
Five Hundred Thousand Dollars ($500,000).
(c) The "LIBOR Rate" means the interest rate determined by the
following formula, rounded upward to the nearest 1/100 of one percent.
(All amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
LIBOR Rate = London Inter-Bank Offered Rate
------------------------------
(1.00 - Reserve Percentage)
Where,
(i) "London Inter-Bank Offered Rate" means the interest
rate at which the Bank's London Branch, London, Great Britain,
would offer U.S. dollar deposits for the applicable interest
period to other major banks in the London inter-bank market at
approximately 11:00 a.m. London time two (2) London Banking Days
before the commencement of the interest period. A "London Banking
Day" is a day on which the Bank's London Branch is open for
business and dealing in offshore dollars.
(ii) "Reserve Percentage" means the total of the maximum
reserve percentages for determining the reserves to be maintained
by member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve Board Regulation D,
rounded upward to the nearest 1/100 of one percent. The
percentage will be expressed as a decimal, and will include, but
not be limited to, marginal, emergency, supplemental, special, and
other reserve percentages.
(d) The Borrower shall irrevocably request a LIBOR Rate portion
no later than 12:00 noon San Francisco time on the LIBOR Banking Day
preceding the day on which the London Inter-Bank Offered Rate will be
set, as specified above.
(e) The Borrower may not elect a LIBOR Rate with respect to any
principal amount which is scheduled to be repaid before the last day of
the applicable interest period.
(f) Any portion of the principal balance already bearing
interest at the LIBOR Rate will not be converted to a different rate
during its interest period.
(g) Each prepayment of a LIBOR Rate portion, whether voluntary,
by reason of acceleration or otherwise, will be accompanied by the amount
of accrued interest on the amount prepaid and a prepayment fee as
described below. A "prepayment" is a payment of an amount on a date
earlier than the scheduled payment date for such amount as required by
this Agreement. The prepayment fee shall be equal to the amount (if any)
by which:
(i) the additional interest which would have been
payable during the interest period on the amount prepaid had it
not been prepaid, exceeds
(ii) the interest which would have been recoverable by
the Bank by placing the amount prepaid on deposit in the domestic
certificate of deposit market, the eurodollar deposit market, or
other appropriate money market
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selected by the Bank, for a period starting on the date on which
it was prepaid and ending on the last day of the interest period
for such portion (or the scheduled payment date for the amount
prepaid, if earlier).
(h) The Bank will have no obligation to accept an election for
a LIBOR Rate portion if any of the following described events has
occurred and is continuing:
(i) Dollar deposits in the principal amount, and for
periods equal to the interest period, of a LIBOR Rate portion are
not available in the London inter-bank market; or
(ii) the LIBOR Rate does not accurately reflect the cost
of a LIBOR Rate portion.
9. FEES, EXPENSES AND COSTS
9.1 UNUSED COMMITMENT FEE. The Borrower agrees to pay a fee on any
difference between the Facility No. 1 Commitment, the Facility No. 5 Commitment,
and the Facility No. 6 Commitment, and the amount of credit it actually uses
under such facilities, determined by the weighted average credit outstanding
during the specified period. The fee will be calculated at 0.125% per year.
This fee is due on November 30, 1999, and on the last day of each following
quarter until the expiration date of the applicable facility.
9.2 EXPENSES. The Borrower agrees to immediately repay the Bank for
expenses that include, but are not limited to, filing, recording and search
fees, appraisal fees, title report fees, and documentation fees.
9.3 REIMBURSEMENT COSTS.
(a) The Borrower agrees to reimburse the Bank for any expenses
it incurs in the preparation of this Agreement and any agreement or
instrument required by this Agreement. Expenses include, but are not
limited to, reasonable attorneys' fees, including any allocated costs of
the Bank's in-house counsel.
(b) The Borrower agrees to reimburse the Bank for the cost of
periodic audits and appraisals of the personal property collateral
securing this Agreement, at such intervals as the Bank may reasonably
require. The audits and appraisals may be performed by employees of the
Bank or by independent appraisers.
10. COLLATERAL
10.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank under
this Agreement will be secured by personal property the Borrower now owns or
will own in the future as listed below. The collateral is further defined in
security agreement(s) executed by the Borrower. In addition, all personal
property collateral securing this Agreement shall also secure all other present
and future obligations of the Borrower to the Bank (excluding any consumer
credit covered by the federal Truth in Lending law, unless the Borrower has
otherwise agreed in writing). All personal property collateral securing any
other present or future obligations of the Borrower to the Bank shall also
secure this Agreement.
(a) Machinery, equipment, and fixtures.
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(b) Inventory.
(c) Receivables.
(d) Patents, trademarks and other general intangibles.
11. DISBURSEMENTS, PAYMENTS AND COSTS
11.1 REQUESTS FOR CREDIT. Each request for an extension of credit will
be made in writing in a manner acceptable to the Bank, or by another means
acceptable to the Bank.
11.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and
each payment by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by
the Bank from time to time;
(b) made for the account of the Bank's branch selected by the
Bank from time to time;
(c) made in immediately available funds, or such other type of
funds selected by the Bank;
(d) evidenced by records kept by the Bank. In addition, the
Bank may, at its discretion, require the Borrower to sign one or more
promissory notes.
11.3 TELEPHONE AND TELEFAX AUTHORIZATION.
(a) The Bank may honor telephone or telefax instructions for
advances or repayments or for the designation of optional interest rates
and telefax requests for the issuance of letters of credit given by any
one of the individuals authorized to sign loan agreements on behalf of
the Borrower, or any other individual designated by any one of such
authorized signers.
(b) Advances will be deposited in and repayments will be
withdrawn from the Borrower's account number 12331-16650, or such other
of the Borrower's accounts with the Bank as designated in writing by the
Borrower.
(c) The Borrower indemnifies and excuses the Bank (including
its officers, employees, and agents) from all liability, loss, and costs
in connection with any act resulting from telephone or telefax
instructions it reasonably believes are made by any individual authorized
by the Borrower to give such instructions. This indemnity and excuse
will survive this Agreement's termination.
11.4 DIRECT DEBIT (PRE-BILLING).
(a) The Borrower agrees that the Bank will debit the Borrower's
deposit account number 12331-16650, or such other of the Borrower's
accounts with the Bank as designated in writing by the Borrower (the
"Designated Account") on the date each payment of principal and interest
and any fees from the Borrower becomes due (the "Due Date"). If the Due
Date is not a banking day, the Designated Account will be debited on the
next banking day.
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(b) Approximately 10 days prior to each Due Date, the Bank will
mail to the Borrower a statement of the amounts that will be due on that
Due Date (the "Billed Amount"). The calculation will be made on the
assumption that no new extensions of credit or payments will be made
between the date of the billing statement and the Due Date, and that
there will be no changes in the applicable interest rate.
(c) The Bank will debit the Designated Account for the Billed
Amount, regardless of the actual amount due on that date (the "Accrued
Amount"). If the Billed Amount debited to the Designated Account differs
from the Accrued Amount, the discrepancy will be treated as follows:
(i) If the Billed Amount is less than the Accrued
Amount, the Billed Amount for the following Due Date will be
increased by the amount of the discrepancy. The Borrower will not
be in default by reason of any such discrepancy.
(ii) If the Billed Amount is more than the Accrued
Amount, the Billed Amount for the following Due Date will be
decreased by the amount of the discrepancy.
Regardless of any such discrepancy, interest will continue to accrue
based on the actual amount of principal outstanding without compounding.
The Bank will not pay the Borrower interest on any overpayment.
(d) The Borrower will maintain sufficient funds in the
Designated Account to cover each debit. If there are insufficient funds
in the Designated Account on the date the Bank enters any debit
authorized by this Agreement, the debit will be reversed.
11.5 BANKING DAYS. Unless otherwise provided in this Agreement, a
banking day is a day other than a Saturday or a Sunday on which the Bank is open
for business in California. For amounts bearing interest at an offshore rate
(if any), a banking day is a day other than a Saturday or a Sunday on which the
Bank is open for business in California and dealing in offshore dollars. All
payments and disbursements which would be due on a day which is not a banking
day will be due on the next banking day. All payments received on a day which
is not a banking day will be applied to the credit on the next banking day. For
amounts bearing interest at a LIBOR Rate, a banking day is a day other than a
Saturday or a Sunday on which the Bank is open for business in California, New
York and London and dealing in offshore dollars.
11.6 TAXES. If any payments to the Bank under this Agreement are made
from outside the United States, the Borrower will not deduct any foreign taxes
from any payments it makes to the Bank. If any such taxes are imposed on any
payments made by the Borrower (including payments under this paragraph), the
Borrower will pay the taxes and will also pay to the Bank, at the time interest
is paid, any additional amount which the Bank specifies as necessary to preserve
the after-tax yield the Bank would have received if such taxes had not been
imposed. The Borrower will confirm that it has paid the taxes by giving the
Bank official tax receipts (or notarized copies) within 30 days after the due
date.
11.7 ADDITIONAL COSTS. The Borrower will pay the Bank, on demand, for
the Bank's costs or losses arising from any statute or regulation, or any
request or requirement of a regulatory agency which is applicable to all
national banks or a class of all national banks. The
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costs and losses will be allocated to the loan in a manner determined by the
Bank, using any reasonable method. The costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and
commitments for credit.
11.8 INTEREST CALCULATION. Except as otherwise stated in this
Agreement, all interest and fees, if any, will be computed on the basis of a
360-day year and the actual number of days elapsed. This results in more
interest or a higher fee than if a 365-day year is used.
11.9 DEFAULT RATE. Upon the occurrence and during the continuation of
any default under this Agreement, principal amounts outstanding under this
Agreement will at the option of the Bank bear interest at a rate which is two
(2.00) percentage points higher than the rate of interest otherwise provided
under this Agreement. This will not constitute a waiver of any default.
Installments of principal which are not paid when due under this Agreement shall
continue to bear interest until paid. Any interest, fees or costs which are not
paid when due shall bear interest at the Bank's Reference Rate plus two (2.00)
percentage points. This may result in compounding of interest.
12. CONDITIONS
The Bank must receive the following items, in form and content acceptable
to the Bank, before it is required to extend any credit to the Borrower under
this Agreement:
12.1 AUTHORIZATIONS. Evidence that the execution, delivery and
performance by the Borrower of this Agreement and any instrument or agreement
required under this Agreement have been duly authorized.
12.2 SECURITY AGREEMENTS. Signed original security agreements,
assignments, financing statements and fixture filings (together with collateral
in which the Bank requires a possessory security interest), which the Bank
requires.
12.3 EVIDENCE OF PRIORITY. Evidence that security interests and liens
in favor of the Bank are valid, enforceable, and prior to all others' rights and
interests, except those the Bank consents to in writing.
12.4 INSURANCE. Evidence of insurance coverage, as required in the
"Covenants" section of this Agreement.
12.5 GUARANTIES.
(a) A Continuing Guaranty (Multicurrency) executed by the
Borrower in the amount of Two Million One Hundred Thousand U.S. Dollars
(U.S. $2,100,000) guarantying the Obligations of IMPCO Technologies,
B.V.; and
(b) A Continuing Guaranty (Multicurrency) executed by the
Borrower in the amount of Three Million U.S. Dollars (U.S. $3,000,000)
guarantying the obligations of Grupo I.M.P.C.O. Mexicano, S. de R.L. de
C.V. arising in connection with the Mexico Commitment together with
Corporate Resolutions Authorizing Execution of Guaranty (Multicurrency).
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12.6 OTHER ITEMS. Any other items that the Bank reasonably requires.
13. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in
full, the Borrower makes the following representations and warranties. Each
request for an extension of credit constitutes a renewed representation:
13.1 ORGANIZATION OF BORROWER. The Borrower is a corporation duly
formed and existing under the laws of the state where organized.
13.2 AUTHORIZATION. This Agreement, and any instrument or agreement
required hereunder, are within the Borrower's powers, have been duly authorized,
and do not conflict with any of its organizational papers.
13.3 ENFORCEABLE AGREEMENT. This Agreement is a legal, valid and
binding agreement of the Borrower, enforceable against the Borrower in
accordance with its terms, and any instrument or agreement required hereunder,
when executed and delivered, will be similarly legal, valid, binding and
enforceable.
13.4 GOOD STANDING. In each state in which the Borrower does business,
it is properly licensed, in good standing, and, where required, in compliance
with fictitious name statutes.
13.5 NO CONFLICTS. This Agreement does not conflict with any law,
agreement, or obligation by which the Borrower is bound.
13.6 FINANCIAL INFORMATION. All financial and other information that
has been or will be supplied to the Bank is:
(a) sufficiently complete to give the Bank accurate knowledge
of the Borrower's financial condition.
(b) in compliance with all government regulations that apply.
13.7 LAWSUITS. There is no lawsuit, tax claim or other dispute pending
or threatened against the Borrower which, if lost, would impair the Borrower's
financial condition or ability to repay the loan, except as have been disclosed
in writing to the Bank.
13.8 COLLATERAL. All collateral required in this Agreement is owned by
the grantor of the security interest free of any title defects or any liens or
interests of others.
13.9 PERMITS, FRANCHISES. The Borrower possesses all permits,
memberships, franchises, contracts and licenses required and all trademark
rights, trade name rights, patent rights and fictitious name rights necessary to
enable it to conduct the business in which it is now engaged.
13.10 OTHER OBLIGATIONS. The Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
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13.11 INCOME TAX RETURNS. The Borrower has no knowledge of any pending
assessments or adjustments of its income tax for any year.
13.12 NO EVENT OF DEFAULT. There is no event which is, or with notice
or lapse of time or both would be, a default under this Agreement.
13.13 LOCATION OF BORROWER. The Borrower's place of business (or, if
the Borrower has more than one place of business, its chief executive office) is
located at the address listed under the Borrower's signature on this Agreement.
13.14 YEAR 2000 PROBLEM. On the basis of a comprehensive review and
assessment of the Borrower's systems and equipment and inquiry made of the
Borrower's material suppliers, vendors and customers, the Borrower reasonably
believes that the "Year 2000 problem" (that is, the inability of computers,
as well as embedded microchips in non-computing devices, to perform properly
date-sensitive functions with respect to certain dates prior to and after
December 31, 1999), including costs of remediation, will not result in a
material adverse change in the operations, business, properties, condition
(financial or otherwise) or prospects of the Borrower. The Borrower has
developed feasible contingency plans adequately to ensure uninterrupted and
unimpaired business operation in the event of failure its own or a third
party's systems or equipment due to the Year 2000 problem, including those of
vendors, customers, and suppliers, as well as a general failure of or
interruption in its communications and delivery infrastructure.
14. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement
and until the Bank is repaid in full:
14.1 USE OF PROCEEDS. To use the proceeds of (i) Facility No. 1 only
for the Borrower's working capital and other general corporate purposes; (ii)
Facility No. 2 only for the Borrower's acquisition of a 51% ownership in
Technisch Bureau Media BV and related acquisition costs; (iii) Facility No. 3
only for the acquisition of Grupo I.M.P.C.O. Mexicano and an interest in IMPCO,
B.V.; (iv) Facility No. 4 only for the acquisitions made between September 11,
1998, and the date of this Agreement; Facility No. 5 only for the financing of
Acceptable Acquisitions; Facility No. 6 only for the financing of capital
expenditures; and Facility No. 7 only for the issuance of credit described in
such facility. For purposes of this Agreement, "Acquisition" (collectively,
"Acquisitions") means any transaction or series of related transactions for the
purpose of or resulting, directly or indirectly, in (a) the acquisition of all
or substantially all of the assets of a person or entity or any business or
division of a person or entity, (b) the acquisition of in excess of 50% of the
capital stock, partnership interests, membership interests or equity of any
entity, or otherwise causing any entity to become a subsidiary, or (c) a merger
or consolidation or any other combination with another entity (other than an
entity that is a subsidiary) provided that the Borrower is the surviving entity;
"Acceptable Acquisition" (collectively, "Acceptable Acquisitions") means an
Acquisition where (i) the Acquisition has been approved by the board of
directors or similar governing body of the entity, whose assets, business, or
securities are to be acquired or purchased, (ii) immediately after such
Acquisition, the Borrower would be in compliance with the terms and conditions
of this Agreement on a pro forma basis, and (iii) the business of the person or
entity to be acquired is substantially similar to the existing business of the
Borrower.
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14.2 FINANCIAL INFORMATION. To provide the following financial
information and statements in form and content acceptable to the Bank, and such
additional information as requested by the Bank from time to time:
(a) Within 90 days of each fiscal year end, the Borrower's
annual financial statements. These financial statements must be audited
by a certified public accountant acceptable to the Bank. The statements
shall be prepared on a consolidated and consolidating basis.
(b) Within 30 days of each fiscal quarter's end, the Borrower's
quarterly financial statements. These financial statements may be
Borrower prepared. The statements shall be prepared on a consolidated
and consolidating basis.
(c) Within 90 days of each fiscal year end, copies of the
Borrower's Form 10-K Annual Report.
(d) Within 45 days of each fiscal quarter, copies of the
Borrower's Form 10-Q Quarterly Report.
(e) Within 90 days of each fiscal year end, consolidated and
consolidating projections for the then current fiscal year of the
Borrower.
(f) Within the period(s) provided in subparagraphs (a) and (b)
above, a compliance certificate signed by an authorized financial officer
of the Borrower setting forth (i) the information and computations (in
sufficient detail) to establish that the Borrower is in compliance with
all financial covenants at the end of the period covered by the financial
statements then being furnished and (ii) whether there existed as of the
date of such financial statements and whether there exists as of the date
of the certificate, any default under this Agreement and, if any such
default exists, specifying the nature thereof and the action the Borrower
is taking and proposes to take with respect thereto.
14.3 QUICK RATIO. To maintain on a consolidated basis a ratio of quick
assets to current liabilities of at least 0.70:1.0.
"Quick assets" means cash, short-term cash investments, net trade
receivables and marketable securities not classified as long-term
investments. This covenant will be calculated on a quarterly basis.
14.4 TANGIBLE NET WORTH. To maintain on a consolidated basis tangible
net worth equal to Twenty Seven Million Five Hundred Thousand Dollars
($27,500,000), PLUS, as of each April 30, commencing April 30, 2000, an amount
equal to 75% of the Borrower's net income after income taxes (without
subtracting losses) earned in the preceding 12-month period.
"Tangible net worth" means the gross book value of assets (excluding
goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred research
and development costs, deferred marketing expenses, and other like
intangibles but including 100% of any additional paid in capital from
additional equity issuances or otherwise), LESS total liabilities,
including but not limited to accrued and deferred income taxes, and any
reserves against assets. This covenant will be calculated on a quarterly
basis.
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14.5 FUNDED DEBT TO EBITDA. To maintain on a consolidated basis a
ratio of total interest bearing debt to EBITDA not exceeding 2.75:1.00. This
ratio will be calculated at the end of each fiscal quarter, using the result of
that quarter and each of the 3 immediately preceding quarters.
"EBITDA" means the sum of income from operations and investments before
taxes, plus interest expense, plus depreciation and amortization.
14.6 CASH FLOW RATIO. To maintain on a consolidated basis a cash flow
ratio of at least 1.35:1.00.
"Cash flow ratio" means the ratio of cash flow to the current portion of
long term liabilities. "Cash flow" is defined as net income from
operations and investments, PLUS interest expense, depreciation,
amortization and other non-cash charges, LESS dividends and maintenance
capital expenditures not exceeding One Million Five Hundred Thousand
Dollars ($1,500,000), DIVIDED BY the sum of interest expense PLUS current
portion of long term debt. This ratio will be calculated at the end of
each fiscal quarter, using the results of that quarter and each of the 3
immediately preceding quarters. The current portion of long term
liabilities will be measured as of the last day of the preceding fiscal
year.
14.7 OTHER DEBTS. Not to have outstanding or incur any direct or
contingent liabilities (other than those to the Bank and/or any other subsidiary
or affiliate of Bank of America Corporation), or become liable for the
liabilities of others without the Bank's written consent. This does not
prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade
credit, and incurring indebtedness for services rendered, similar in
nature and amount to such indebtedness incurred by the Borrower in the
past.
(b) Endorsing negotiable instruments received in the usual
course of business.
(c) Obtaining surety bonds in the usual course of business.
(d) Liabilities in existence on the date of this Agreement
disclosed in writing to the Bank.
(e) Additional debts for purchase money transactions including
capital leases, conditional sales or other title retention contracts with
respect to property used or acquired, which do not exceed a total
principal amount of Three Hundred Thousand Dollars ($300,000) for each
annual accounting period.
14.8 OTHER LIENS. Not to create, assume, or allow any security
interest or lien (including judicial liens) on property the Borrower now or
later owns, except:
(a) Deeds of trust and security agreements in favor of the
Bank.
(b) Liens for taxes not yet due.
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<PAGE>
(c) Additional purchase money security interests and similar
liens in property acquired after the date of this Agreement, to secure
transactions permitted under Paragraph 11.7(e).
14.9 NOTICES TO BANK. To promptly notify the Bank in writing of:
(a) any lawsuit over One Hundred Thousand Dollars ($100,000)
against the Borrower.
(b) any substantial dispute between the Borrower and any
government authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in the Borrower's business
condition (financial or otherwise), operations, properties or prospects,
or ability to repay the credit.
(e) any change in the Borrower's name, legal structure, place
of business, or chief executive office if the Borrower has more than one
place of business.
14.10 BOOKS AND RECORDS. To maintain adequate books and records.
14.11 AUDITS. To allow the Bank and its agents to inspect the
Borrower's properties and examine, audit and make copies of books and records at
any reasonable time. If any of the Borrower's properties, books or records are
in the possession of a third party, the Borrower each authorizes that third
party to permit the Bank or its agents to have access to perform inspections or
audits and to respond to the Bank's requests for information concerning such
properties, books and records.
14.12 COMPLIANCE WITH LAWS. To comply with the laws (including any
fictitious name statute), regulations, and orders of any government body with
authority over the Borrower's business.
14.13 PRESERVATION OF RIGHTS. To maintain and preserve all rights,
privileges, and franchises the Borrower now has.
14.14 MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or
replacements to keep the Borrower's properties in good working condition.
14.15 PERFECTION OF LIENS. To help the Bank perfect and protect its
security interests and liens, and reimburse it for related costs it incurs to
protect its security interests and liens.
14.16 COOPERATION. To take any action reasonably requested by the Bank
to carry out the intent of this Agreement.
14.17 INSURANCE.
(a) INSURANCE COVERING COLLATERAL. To maintain all risk
property damage insurance policies covering the tangible property
comprising the collateral. Each insurance policy must be in an amount
acceptable to the Bank. The insurance must be issued by an insurance
company acceptable to the Bank and must include a lender's loss payable
endorsement in favor of the Bank in a form acceptable to the Bank.
-20-
<PAGE>
(b) GENERAL BUSINESS INSURANCE. To maintain insurance
satisfactory to the Bank as to amount, nature and carrier covering
property damage (including loss of use and occupancy) to any of the
Borrower's properties, public liability insurance including coverage for
contractual liability, product liability and workers' compensation, and
any other insurance which is usual for the Borrower's business.
(c) EVIDENCE OF INSURANCE. Upon the request of the Bank, to
deliver to the Bank a copy of each insurance policy, or, if permitted by
the Bank, a certificate of insurance listing all insurance in force.
14.18 ADDITIONAL NEGATIVE COVENANTS. Except with respect to an
Acceptable Acquisition financed under Facility No. 5, not to, without the Bank's
written consent:
(a) engage in any business activities substantially different
from the Borrower's present business.
(b) liquidate or dissolve the Borrower's business.
(c) enter into any consolidation, merger, or other combination,
or become a partner in a partnership, a member of a joint venture, or a
member of a limited liability company, for a total consideration
(including assumption of debt) which, when added to any consideration
(including assumption of debt) for transactions described in subparagraph
(c) below, would exceed One Million Dollars ($1,000,000).
(d) sell, lease, transfer or dispose of all or a substantial
part of the Borrower's business or the Borrower's assets except in an
aggregate amount not exceeding Two Hundred Thousand Dollars ($200,000) in
any fiscal year.
(e) acquire or purchase a business or its assets for a
consideration (including assumption of debt) which, when added to any
consideration (including assumption of debt) for transactions described
in subparagraph (c) above, would exceed One Million Dollars ($1,000,000).
(f) sell, assign, lease, transfer or otherwise dispose of any
assets for less than fair market value, or enter into any agreement to do
so.
(g) enter into any sale and leaseback agreement covering any of
its fixed or capital assets.
(h) voluntarily suspend its business for more than 7 days in
any 30 day period.
-21-
<PAGE>
15. HAZARDOUS WASTE INDEMNIFICATION
The Borrower will indemnify and hold harmless the Bank from any loss or
liability directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply
whether the hazardous substance is on, under or about the Borrower's property or
operations or property leased to the Borrower. The indemnity includes but is
not limited to attorneys' fees (including the reasonable estimate of the
allocated cost of in-house counsel and staff). The indemnity extends to the
Bank, its parent, subsidiaries and all of their directors, officers, employees,
agents, successors, attorneys and assigns. For these purposes, the term
"hazardous substances" means any substance, material, or waste which is or
becomes designated as "hazardous," "toxic," "pollutant,", or "contaminant" or a
similar designation or regulation under any federal, state or local law (whether
under common law, statute, regulation, or otherwise) or judicial interpretation
of such, including without limitation petroleum or natural gas. This indemnity
will survive repayment of the Borrower's obligations to the Bank.
16. DEFAULT
If any of the following events occurs, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice. If an event of default occurs under the
paragraph entitled "Bankruptcy," below, with respect to the Borrower, then the
entire debt outstanding under this Agreement will automatically be due
immediately.
16.1 FAILURE TO PAY. The Borrower fails to make a payment under this
Agreement within 10 days after the date when due.
16.2 LIEN PRIORITY. The Bank fails to have an enforceable first lien
(except for any prior liens to which the Bank has consented in writing) on or
security interest in any property given as security for this loan.
16.3 FALSE INFORMATION. The Borrower has given the Bank false or
misleading information or representations.
16.4 BANKRUPTCY. The Borrower files a bankruptcy petition, a
bankruptcy petition is filed against the Borrower or the Borrower makes a
general assignment for the benefit of creditors. The default will be deemed
cured if any bankruptcy petition filed against the Borrower is dismissed within
a period of 60 days after the filing; provided, however, that the Bank will not
be obligated to extend any additional credit to the Borrower during that period.
16.5 RECEIVERS. A receiver or similar official is appointed for the
Borrower's business, or the business is terminated.
16.6 LAWSUITS. Any lawsuit or lawsuits are filed on behalf of one or
more trade creditors against the Borrower in an aggregate amount of Two Hundred
Fifty Thousand Dollars ($250,000) or more in excess of any insurance coverage.
16.7 JUDGMENTS. Any judgments or arbitration awards are entered
against the Borrower, or the Borrower enters into any settlement agreements with
respect to any litigation or arbitration, in an aggregate amount of Two Hundred
Fifty Thousand Dollars ($250,000) or more in excess of any insurance coverage.
-22-
<PAGE>
16.8 GOVERNMENT ACTION. Any government authority takes action that the
Bank believes materially adversely affects the Borrower's financial condition or
ability to repay.
16.9 MATERIAL ADVERSE CHANGE. A material adverse change occurs in the
Borrower's business condition (financial or otherwise), operations, properties
or prospects, or ability to repay the credit.
16.10 CROSS-DEFAULT. Any default occurs under any agreement in
connection with any credit the Borrower has obtained from anyone else or which
the Borrower has guaranteed and such default is not cured or waived within any
cure period applicable thereto.
16.11 DEFAULT UNDER RELATED DOCUMENTS. Any guaranty, subordination
agreement, security agreement, or other document required by this Agreement is
violated or no longer in effect.
16.12 OTHER BANK AGREEMENTS. The Borrower fails to meet the conditions
of, or fails to perform any obligation under any other agreement the Borrower
has with the Bank or any affiliate of the Bank.
16.13 OTHER BREACH UNDER AGREEMENT. The Borrower fails to meet the
conditions of, or fails to perform any obligation under, any term of this
Agreement not specifically referred to in this Article. This includes any
failure or anticipated failure by the Borrower to comply with any financial
covenants set forth in this Agreement, whether such failure is evidenced by
financial statements delivered to the Bank or is otherwise known to the
Borrower or the Bank. If, in the Bank's opinion, the breach is capable of
being remedied, the breach will not be considered an event of default under
this Agreement for a period of thirty (30) days after the date on which the
Bank gives written notice of the breach to the Borrower; provided, however,
that the Bank will not be obligated to extend any additional credit to the
Borrower during that period.
17. ENFORCING THIS AGREEMENT; MISCELLANEOUS
17.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
17.2 CALIFORNIA LAW. This Agreement is governed by California law.
17.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the
Borrower's and the Bank's successors and assignees. The Borrower each agrees
that it may not assign this Agreement without the Bank's prior consent. The
Bank may sell participations in or assign this loan, and may exchange financial
information about the Borrower with actual or potential participants or
assignees. If a participation is sold or the loan is assigned, the purchaser
will have the right of set-off against the Borrower.
17.4 ARBITRATION.
(a) This paragraph concerns the resolution of any controversies
or claims between the Borrower and the Bank, including but not limited to
those that arise from:
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<PAGE>
(i) This Agreement (including any renewals, extensions
or modifications of this Agreement);
(ii) Any document, agreement or procedure related to or
delivered in connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business
conducted between the Borrower and the Bank, including claims for
injury to persons, property or business interests (torts).
(b) At the request of the Borrower or the Bank, any such
controversies or claims will be settled by arbitration in accordance with
the United States Arbitration Act. The United States Arbitration Act
will apply even though this Agreement provides that it is governed by
California law.
(c) Arbitration proceedings will be administered by the
American Arbitration Association and will be subject to its commercial
rules of arbitration.
(d) For purposes of the application of the statute of
limitations, the filing of an arbitration pursuant to this paragraph is
the equivalent of the filing of a lawsuit, and any claim or controversy
which may be arbitrated under this paragraph is subject to any applicable
statute of limitations. The arbitrators will have the authority to
decide whether any such claim or controversy is barred by the statute of
limitations and, if so, to dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable,
the arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding
may be submitted to any authorized court of law to be confirmed and
enforced.
(g) The procedure described above will not apply if the
controversy or claim, at the time of the proposed submission to
arbitration, arises from or relates to an obligation to the Bank secured
by real property located in California. In this case, both the Borrower
and the Bank must consent to submission of the claim or controversy to
arbitration. If both parties do not consent to arbitration, the
controversy or claim will be settled as follows:
(i) The Borrower and the Bank will designate a referee
(or a panel of referees) selected under the auspices of the
American Arbitration Association in the same manner as arbitrators
are selected in Association-sponsored proceedings;
(ii) The designated referee (or the panel of referees)
will be appointed by a court as provided in California Code of
Civil Procedure Section 638 and the following related sections;
(iii) The referee (or the presiding referee of the panel)
will be an active attorney or a retired judge; and
-24-
<PAGE>
(iv) The award that results from the decision of the
referee (or the panel) will be entered as a judgment in the court
that appointed the referee, in accordance with the provisions of
California Code of Civil Procedure Sections 644 and 645.
(h) This provision does not limit the right of the Borrower or
the Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal
property collateral; or
(iii) act in a court of law, before, during or after the
arbitration proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
(i) The pursuit of or a successful action for interim,
additional or supplementary remedies, or the filing of a court action,
does not constitute a waiver of the right of the Borrower or the Bank,
including the suing party, to submit the controversy or claim to
arbitration if the other party contests the lawsuit. However, if the
controversy or claim arises from or relates to an obligation to the Bank
which is secured by real property located in California at the time of
the proposed submission to arbitration, this right is limited according
to the provision above requiring the consent of both the Borrower and the
Bank to seek resolution through arbitration.
(j) If the Bank forecloses against any real property securing
this Agreement, the Bank has the option to exercise the power of sale
under the deed of trust or mortgage, or to proceed by judicial
foreclosure.
17.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank retains all
rights, even if it makes a loan after default. If the Bank waives a default, it
may enforce a later default. Any consent or waiver under this Agreement must be
in writing.
17.6 ADMINISTRATION COSTS. The Borrower shall pay the Bank for all
reasonable costs incurred by the Bank in connection with administering this
Agreement.
17.7 ATTORNEYS' FEES. The Borrower shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and including
any amendment, waiver, "workout" or restructuring under this Agreement. In the
event of a lawsuit or arbitration proceeding, the prevailing party is entitled
to recover costs and reasonable attorneys' fees incurred in connection with the
lawsuit or arbitration proceeding, as determined by the court or arbitrator. In
the event that any case is commenced by or against the Borrower under the
Bankruptcy Code (Title 11, United States Code) or any similar or successor
statute, the Bank is entitled to recover costs and reasonable attorneys' fees
incurred by the Bank related to the preservation, protection, or enforcement of
any rights of the Bank in such a case. As used in this paragraph, "attorneys'
fees" includes the allocated costs of the Bank's in-house counsel.
-25-
<PAGE>
17.8 ONE AGREEMENT. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements
between the Bank and the Borrower concerning this credit;
(b) replace any prior oral or written agreements between the
Bank and the Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final,
complete and exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
17.9 INDEMNIFICATION. The Borrower will indemnify and hold the Bank
harmless from any loss, liability, damages, judgments, and costs of any kind
relating to or arising directly or indirectly out of (a) this Agreement or any
document required hereunder, (b) any credit extended or committed by the Bank to
the Borrower hereunder, and (c) any litigation or proceeding related to or
arising out of this Agreement, any such document, or any such credit. This
indemnity includes but is not limited to attorneys' fees (including the
allocated cost of in-house counsel). This indemnity extends to the Bank, its
parent, subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys, and assigns. This indemnity will survive repayment of
the Borrower's obligations to the Bank. All sums due to the Bank hereunder
shall be obligations of the Borrower, due and payable immediately without
demand.
17.10 NOTICES. All notices required under this Agreement shall be
personally delivered or sent by first class mail, postage prepaid, to the
addresses on the signature page of this Agreement, or to such other addresses as
the Bank, the Borrower may specify from time to time in writing.
17.11 HEADINGS. Article and paragraph headings are for reference only
and shall not affect the interpretation or meaning of any provisions of this
Agreement.
17.12 COUNTERPARTS. This Agreement may be executed in as many
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
17.13 PRIOR AGREEMENT SUPERSEDED. This Agreement supersedes the
Business Loan Agreement entered into as of September 11, 1998 between the Bank,
the Borrower, and any credit outstanding thereunder shall be deemed to be
outstanding under this Agreement.
-26-
<PAGE>
This Agreement is executed as of the date stated at the top of the first
page.
BANK OF AMERICA, N.A.
IMPCO TECHNOLOGIES, INC.
By: By:
------------------------------ -------------------------
Jeff Thom
Title: Vice President Title:
-------------------------- ----------------------
Address where notices to the Bank are Address where notices to the
to be sent: Borrower are to be sent:
525 S. Flower Street, Mezzanine Level 16804 Gridley Place
Los Angeles, CA 90071 Cerritos, CA 90701-1792
-27-
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0
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