<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-19540
CUSTOM CHROME, INC.
(Exact name of Registrant as specified in its charter)
Delaware 94-1716138
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
16100 Jacqueline Court
Morgan Hill, California 95037
(Address of Principal Executive Offices, including Zip Code)
Registrant's telephone number, including area code: (408) 778-0500
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title and Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [x]
The aggregate market value of voting stock held by non-affiliates of the
Registrant, as of April 15, 1996, was approximately $83,600,000 (based upon the
closing price for shares of the Registrant's Common Stock as reported by the
NASDAQ National Market for the last trading date prior to that date). Shares of
Common Stock held by each officer, director and holder of 5% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
On April 15, 1996, approximately 5,114,000 shares of the Registrant's Common
Stock, $.001 par value, were outstanding.
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The undersigned Registrant hereby amends its Annual Report on Form 10-K for the
fiscal year ended January 31, 1996 (the "10-K"), as set forth below:
The Registrant had originally intended to incorporate certain items from
Part III of the 10-K from designated portions of the Registrant's definitive
proxy statement. Since such definitive proxy statement will not be filed with
the Commission within 120 days after the end of fiscal year covered by the 10-K,
the Registrant is hereby filing the required information for Part III in this
Report on Form 10-K/A.
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PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information regarding the directors of the Company, and their
respective ages and positions as of April 30, 1996:
NAME POSITION(S) WITH THE COMPANY AGE
- - ---- ---------------------------- ---
Ignatius J. Panzica. . Chairman of the Board of Directors; 52
Chief Executive Officer and President
James J. Kelly, Jr.. . Director; Executive Vice President, Finance; 45
Chief Financial Officer; Secretary
Lionel M. Allan. . . . Director 52
Joseph F. Keenan . . . Director 55
Joseph Piazza. . . . . Director 61
BUSINESS EXPERIENCE OF DIRECTORS
IGNATIUS ("NACE") J. PANZICA is a co-founder of the Company and has been
President of the Company since February 1991, Chief Executive Officer since
September 1991 and Chairman of the Board since January 1994. Mr. Panzica served
as Vice President, Operations of the Company from 1975 to 1991 and has been a
member of the Board of Directors of the Company since 1975.
JAMES J. KELLY, JR. has served as Executive Vice President, Finance of the
Company since November 1995, Vice President, Finance and Chief Financial Officer
of the Company since March 1992, Secretary of the Company since June 1992 and as
a Director of the Company since July 1993. Prior to joining the Company in
March 1992, Mr. Kelly served as Vice President, Finance and Chief Financial
Officer of Canadian Marconi Company for eight years. Mr. Kelly is a member of
the American Institute of Certified Public Accountants, the California Society
of Certified Public Accountants and the Financial Executives Institute.
LIONEL M. ALLAN has served as a director of the Company since June 1994. Mr.
Allan is President of Allan Advisors, Inc., a legal consulting firm that he
founded in April 1992. Previously, and for more than 20 years, Mr. Allan was in
private law practice with Hopkins & Carley. Mr. Allan is also a director and
past Chairman of the Board of KTEH Public Television Channel 54, in San Jose,
California, a director of Accom, Inc., a digital video systems company, and a
director of Catalyst Semiconductor, Inc., a semiconductor company.
JOSEPH F. KEENAN has served as a Director of the Company since July 1993. Mr.
Keenan served as President and Chief Executive Officer of Data East U.S.A. Inc.,
a privately owned manufacturer of coin operated and home video electronics
games, from 1989 to 1992. Previously, he was principal of Wilkes Bashford Ltd.,
a specialty retailer of clothing and accessories in Northern California. Mr.
Keenan has also held the positions of President and Chief Executive Officer at
Pizza Time Theater, Inc. and Atari, Inc.
JOSEPH PIAZZA has served as a Director of the Company since April 1996. From
1989 until October 1992, Mr. Piazza served as Executive Vice President of Lacy
Diversified Industries, a privately-owned holding company, which owns Rocky
Cycle Co., a motorcycle parts and accessory distribution company. From 1975 to
1986, Mr. Piazza served as President and Chief Executive Officer of Rocky Cycle
Co.
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BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of five (5) meetings during the year ended
January 31, 1996. The Company has an Audit Committee and a Compensation
Committee of the Board of Directors. Each incumbent director attended at least
75% of the aggregate number of meetings of the Board of Directors and of the
Committees on which such directors served and that were held during the period
that such individual was a member of the Board of Directors. There are no family
relationships among executive officers or directors of the Company.
The Audit Committee is primarily responsible for approving the services
performed by the Company's independent auditors and reviewing reports of the
Company's external auditors regarding the Company's accounting practices and
systems of internal accounting controls. This Committee currently consists of
Messrs. Allan and Keenan. The Audit Committee held two (2) meetings during the
year ended January 31, 1996.
The Compensation Committee reviews and approves the Company's general
compensation policies, establishes the compensation levels for the Company's
executive officers and is responsible for administration of the Company's Stock
Option Plans. This Committee currently consists of Messrs. Keenan and Piazza.
The Compensation Committee held four (4) meetings during the year ended January
31, 1996.
REMUNERATION
The Company currently pays all non-employee Board members a fee of $5,000 for
each full fiscal quarter that they serve as a Board member and also reimburses
such individuals for the expenses incurred in connection with their attendance
at Board and Committee meetings. In addition, the Company's 1995 Stock Option
Plan includes an automatic option grant program under which each individual who
first becomes a non-employee Board member after September 30, 1994 will receive,
at the time of his or her initial election or appointment to the Board, an
automatic option grant to purchase 2,500 shares of Common Stock at an exercise
price per share equal to 100% of the fair market value per share on the grant
date. In addition, at each Annual Stockholders Meeting, each individual who is
to continue to serve as a non-employee Board member after the Meeting will
receive an additional option grant to purchase 2,500 shares of Common Stock.
The initial 2,500 share grant will become exercisable for 25% of the option
shares upon the optionee's completion of one year of Board service measured from
the grant date and will become exercisable for the balance of the option shares
in 36 equal and successive monthly installments upon the optionee's completion
of each additional month of Board service thereafter. Each additional 2,500
share grant will vest upon the optionee's completion of one year of Board
service measured from the grant date. However, each option will become
immediately exercisable for all the option shares in the event the Company is
acquired by merger or asset sale or there should occur a change in control of
the Company, whether through a successful tender offer for more than 50% of the
outstanding Common Stock or a change in the majority of the Board by one or more
proxy contests. Each option will have a maximum term of 10 years, subject to
earlier termination upon the optionee's cessation of Board service.
Information as to the Company's executive officers appears at the end of Part I
of the originally-filed Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the Company's only other executive officer whose
compensation for the year ended January 31, 1996 was at least $100,000 for
services rendered in all capacities to the Company for each of the last three
fiscal years.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Number of
Year Securities
Name and Ended Underlying All Other
Principal Position January 31, Salary($)(1) Bonus($) Options(#) Compensation
- - ------------------ ----------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Ignatius J. Panzica 1996 337,550 614,805 100,000 500(2)
Chairman of the Board, 1995 325,964 467,126 241,088 500(2)
President and 1994 269,231 619,277 100,000 500(2)
Chief Executive Officer
James J. Kelly, Jr. 1996 131,005 4,551(3) 32,250 500(2)
Director, Executive 1995 135,511 12,676(4) 30,000 500(2)
Vice President, Finance 1994 121,608 20,000 27,500 500(2)
Chief Financial Officer,
Secretary
</TABLE>
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(1) Includes (i) salary deferral contributions made by the executive officer
to the Company's 401(k) Plan and (ii) compensation for accrued vacation
time not taken.
(2) Represents matching contributions made by the Company on behalf of such
executive officers to the Company's 401(k) Plan.
(3) Represents forgiveness of interest accrued during calendar year 1995 on
a loan made to Mr. Kelly to the Company in June 1994. See "Certain
Relationships and Related Transactions."
(4) Includes forgiveness of interest accrued of $2,676 during calendar year
1994 on a loan made to Mr. Kelly by the Company in June 1994 and a cash
bonus of $10,000, which was applied as payment toward the outstanding
principal balance on the loan. See "Certain Relationships and Related
Transactions."
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OPTION GRANTS
The following table provides information with respect to the stock
option grants made during the year ended January 31, 1996 to the Company's
executive officers named in the Summary Compensation Table above. No stock
appreciation rights were granted to these individuals during such fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual
Rate of Stock
Price Appreciation
Individual Grants for Option Term
------------------------------------------------- ------------------------
% of Total
Options Exercise
Granted to or Base
Options Employees in Price(1) Expiration
Name Granted(#) Fiscal Year ($/sh) Date 5 % ($)(2) 10 % ($)(2)
- - ---- ---------- ----------- ------ ---- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ignatius J. Panzica 100,000(3) 32.2% $18.63 02/08/05 1,173,690 2,962,170
James J. Kelly, Jr. 32,250(4) 10.4% $18.63 02/08/05 378,515 955,300
</TABLE>
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(1) The exercise price may be paid in cash, in shares of Common Stock valued
at fair market value on the exercise date or through a cashless exercise
procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares and
the federal and state income tax liability incurred by the optionee in
connection with such exercise.
(2) The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by the Securities and Exchange Commission.
There is no assurance provided to any executive officer or any other
holder of the Company's securities that the actual stock price
appreciation over the 10-year option term will be at the assumed 5% and
10% levels or at any other defined level. Unless the market price of
the Common Stock appreciates over the option term, no value will be
realized from the option grants made to the executive officers.
(3) Such option will become exercisable for 100% of the option shares upon
the optionee's completion of one year of service with the Company,
measured from the February 8, 1995 grant date. However, the option will
become immediately exercisable for all the option shares in the event
the Company is acquired by a merger or asset sale, unless the option is
assumed or replaced by the acquiring entity. The Compensation Committee
also has the authority to provide for the automatic acceleration of such
option in the event there is a hostile take-over of the Company, whether
by successful tender offer for more than 50% of the Company's
outstanding voting securities or contested election of Board membership.
The option has a maximum term of 10 years, subject to earlier
termination in the event of the optionee's cessation of employment with
the Company.
(4) Such option will become exercisable for 25% of the option shares upon
the optionee's completion of one year of service with the Company,
measured from the February 8, 1995 grant date, and will become
exercisable
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for the balance of the shares in 36 equal and successive monthly
installments upon the optionee's completion of each additional month of
service thereafter. However, the option will become immediately
exercisable for all the option shares in the event the Company is
acquired by a merger or asset sale, unless the option is assumed or
replaced by the acquiring entity. The Compensation Committee also has
the authority to provide for the automatic acceleration of such option
in the event there is a hostile take-over of the Company, whether by
successful tender offer for more than 50% of the Company's outstanding
voting securities or contested election of Board membership. The option
has a maximum term of 10 years, subject to earlier termination in the
event of the optionee's cessation of employment with the Company.
OPTION EXERCISES AND HOLDINGS
The table below sets forth information concerning the exercise of
options during the fiscal year ended January 31, 1996 and unexercised options
held as of the end of such year by the Company's executive officers named in the
Summary Compensation Table. No stock appreciation rights were exercised during
such fiscal year or outstanding as of the end of that fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number Value of
of Unexercised
Unexercised In-the-Money
Shares Aggregate Options at Options at
Acquired On Value Realized FY-End (#) FY-End(2)
Name Exercise(#) ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
- - ---- ----------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Ignatius J. Panzica 29,167 $298,556 206,713/205,208 $1,197,224/$1,442,165
James J. Kelly, Jr. 27,082 $302,088 12,397/62,771 $70,310/$497,151
</TABLE>
(1) Value Realized is equal to the market price of the purchased shares at
the time the option is exercised, less the aggregate exercise price paid
for such shares. Value Realized does not take into account the federal
and state income taxes payable by the individual in connection with the
option exercise or the subsequent sale of the shares.
(2) Market price at fiscal year end ($25.06) less exercise price. For
purposes of this calculation, the fiscal year end market price of the
shares is deemed to be the closing sale price of the Company's Common
Stock as reported on the National Association of Securities Dealers
Automated Quotations System on Wednesday, January 31, 1996.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENT
Ignatius J. Panzica entered into an employment agreement with the Company in
August 1989 in connection with the acquisition of the Company by Custom Chrome
Holdings, Inc. This agreement was subsequently amended in September 1991 in
connection with the initial public offering of the Common Stock and provides for
an employment relationship terminable at will by either party at any time for
any reason. Pursuant to this agreement, Mr. Panzica is entitled to a minimum
level of annual base salary, which as a result of periodic increases authorized
by the Compensation Committee is at $300,000, effective February 1, 1994. In
addition, Mr. Panzica is to be paid an annual bonus based upon the Company's
operating income for each fiscal year. Under the bonus formula, Mr. Panzica
will earn an aggregate bonus each year equal to 3% of operating income up to
$5,400,000, 4% of
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<PAGE>
operating income between $5,400,000 and $8,000,000 and 5% of operating income in
excess of $8,000,000. Operating income is defined as the consolidated net
income of the Company and its subsidiaries, as reflected in the Company's
audited financial statements, but adjusted to exclude extraordinary gains or
losses and to add back nonrecurring charges, interest on long-term debt, income
taxes and amortization and depreciation associated with the 1989 acquisition.
The bonus will be payable in a lump sum following the close of the fiscal year
for which earned. When the cumulative gross amounts paid to Mr. Panzica after
February 1, 1991 on account of salary in excess of $125,000 per year for fiscal
years through January 31, 1994 and $300,000 per year for fiscal years beginning
January 31, 1994 and bonus exceed $6,093,000, no further bonuses under this
agreement will be payable.
James J. Kelly, Jr. entered into an employment agreement with the Company in
March 1992, when he first joined the Company as Chief Financial Officer.
Pursuant to that agreement, Mr. Kelly is entitled to a minimum level of annual
base salary, which as a result of periodic increases authorized by the
Compensation Committee is at $125,000 effective March 1, 1994, plus a bonus of
up to 20% of his base salary awarded in the sole discretion of the Compensation
Committee.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The members of the Board of Directors, the executive officers of the Company and
persons who hold more than ten percent (10%) of the Company's outstanding Common
Stock are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, which requires such individuals to file reports
with respect to their ownership of and transactions in the Company's securities.
Officers, directors and greater than ten percent (10%) stockholders are required
to furnish the Company with copies of all such reports they file.
Based upon the copies of those reports furnished to the Company and written
representations that no other reports were required to be filed, the Company
believes that all reporting requirements under Section 16(a) for the year ended
January 31, 1996 were met in a timely manner by executive officers, Board
members and greater than ten percent (10%) stockholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Mr. Keenan and (since
April 1996) Joseph Piazza. Neither Mr. Keenan nor Mr. Piazza was at any time
during the year ended January 31, 1996 or at any other time an officer or
employee of the Company. Tyrone Cruze, Sr. also served on the Compensation
Committee during the year ended January 31, 1996 and also served as the Vice-
Chairman of the Board during such fiscal year and served as President and Chief
Executive Officer from 1975 to January 1991. Mr. Cruze resigned from the Board
of Directors and from the Compensation Committee in March 1996.
No executive officer of the Company serves as a member of the board of directors
or compensation committee of any entity which has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
April 15, 1996 by (i) all persons who are beneficial owners of five percent or
more of the Company's Common Stock, (ii) each director, (iii) each executive
officer of the Company named in the Summary Compensation Table above, and (iv)
all current directors and executive officers as a group. Except as otherwise
indicated, the Company believes that the beneficial owners of the Common Stock
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community
property laws where applicable.
-8-
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<TABLE>
<CAPTION>
NAME AND ADDRESS,
IF REQUIRED, OF SHARES PERCENT OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
---------------- ------------------ ------------------
<S> <C> <C>
Ignatius J. Panzica (1) 469,808 8.6%
Custom Chrome, Inc.
16100 Jacqueline Court
Morgan Hill, CA 95037
Northwestern Mutual Life Insurance Co. (2) 457,100 8.9%
720 East Wisconsin Avenue
Milwaukee, WI 53202
State of Wisconsin Investment Board (3) 437,700 8.6%
121 E. Wilson Street
Madison, WI 53702
Putnam Investment Management, Inc. (4) 376,625 7.4%
One Post Office Square
Boston, MA 02109
Gardner Lewis Asset Management, Inc. (5) 370,400 7.2%
285 Wilmington Pike
Chadford, PA 19317
James J. Kelly, Jr. (6) 24,862 *
Lionel M. Allan (7) 5,291 *
Joseph F. Keenan (8) 3,208 *
Joseph Piazza -- *
All current directors and executive officers as
a group (8 persons) (1)(6)(7)(8) 615,850 11.1%
</TABLE>
- - ------------------
* Less than one percent (1%).
(1) Includes 319,423 shares issuable upon the exercise of options which are
currently exercisable or which will become exercisable within 60 days of
April 15, 1996.
(2) Such information is based upon information received from Northwestern
Mutual Life Insurance Company and reflects shares held in several
accounts.
(3) Represents shares beneficially owned by Wisconsin Investment Board as a
result of its serving as investment advisor to various investment
accounts. Wisconsin Investment Board has sole voting power and sole
dispositive power with respect to all such shares. Such information is
based on communications from Wisconsin Investment Board and the
Company's knowledge after investigation.
(4) Represents shares beneficially owned by Putnam Investment Management,
Inc. ("Putnam Investment") as a result of its serving as investment
advisor to various investment accounts. Putnam Investment has sole
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voting power and sole dispositive power with respect to all such shares.
Such information is based on the Company's knowledge after investigation
and previous communications from Putnam Investment.
(5) Represents shares beneficially owned by Gardner Lewis Asset Management,
Inc. ("Gardner Lewis") as a result of its serving as investment advisor
to various investment accounts. Gardner Lewis has sole voting power
with respect to 332,200 of such shares. Such information is based on
communications from Gardner Lewis.
(6) Includes 23,412 shares issuable upon the exercise of options which are
currently exercisable or which will become exercisable within 60 days
after April 15, 1996.
(7) Includes 3,291 shares issuable upon the exercise of options which are
currently exercisable or which will become exercisable within 60 days
after April 15, 1996. Mr. Allan's shares are held by the Allan
Advisors, Inc. Profit Sharing Plan.
(8) Includes 708 shares issuable upon the exercise of options which are
currently exercisable or which will become exercisable within 60 days
after April 15, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 11, 1994, the Company loaned James J. Kelly, Jr., the Executive
Vice President, Finance, Chief Financial Officer, Secretary, and a Director of
the Company, $100,000, at an annual interest rate of 5.63%, compounded annually.
The loan was made for the sole purpose of assisting Mr. Kelly with the purchase
of Mr. Kelly's principal residence in Morgan Hill, California, and the loan is
secured by a Second Deed of Trust on such residence. The entire principal
balance of the loan, together with all accrued and unpaid interest, was due and
payable on July 11, 2001. The Company agreed to forgive the interest accrued on
the unpaid total balance on the loan as a yearly bonus at the end of each
calendar year while the loan remained outstanding; in turn, 75% of the cash
portion of any annual bonus received by Mr. Kelly was to be applied as payment
toward the outstanding principal balance on the loan. During the year ended
January 31, 1996, the largest amount outstanding under Mr. Kelly's loan was
$100,000, and on April 15, 1996, Mr. Kelly repaid the entire remaining amount
outstanding under the loan.
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<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page
----
The following Consolidated Financial Statements of Custom
Chrome, Inc. and its subsidiaries are filed as part of this
report on Form 10-K:
Independent Auditors' Report F-1
Consolidated Balance Sheets - January 31, 1996 and
1995 F-2
Consolidated Statements of Operations - Years ended
January 31, 1996, 1995 and 1994 F-3
Consolidated Statements of Shareholders' Equity -
Years ended January 31,1996, 1995 and 1994 F-4
Consolidated Statements of Cash Flows - Years ended
January 31, 1996, 1995 and 1994 F-5 & F-6
Notes to Consolidated Financial Statements F-7 - F-12
2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts II-1
All other schedules have been omitted because the matter or
conditions are not present or the information required to be
set forth therein is included in the Consolidated Financial
Statements hereto.
(b) REPORTS ON FORM 8-K
A report on Form 8-K was filed with the Securities and
Exchange Commission on March 20, 1996 disclosing important
factors that could cause the Company's actual results to
differ materially from those described in forward-looking
statements made by or on behalf of the Company.
(c) EXHIBITS
Exhibit
Number Exhibit
- - ------ -------
3.1(1) Certificate of Incorporation of Custom Chrome, Inc.
3.2(3) Restated Certificate of Incorporation of Custom Chrome, Inc.
3.3(1) Bylaws, as amended.
3.4(1) Form of Amendment to Bylaws.
4.1 Reference is made to Exhibit 3.1.
4.2 Reference is made to Exhibit 3.2.
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4.3 Reference is made to Exhibit 3.3.
10.1(1) Custom Chrome, Inc. 1991 Stock Option Plan (the "Stock Option
Plan").
10.2(1) Form of Stock Option Agreement for granting stock options under
the Stock Option Plan.
10.3(2) Custom Chrome, Inc. 1991 Stock Option Plan, as restated on March
2, 1992 (the "Restated Stock Option Plan").
10.4(2) Form of Notice of Grant of Stock Option (the "Notice of Grant")
and Stock Option Agreement, attached as Exhibit A to the Notice
of Grant, for granting stock options under the Restated Stock
Option Plan.
10.5(2) Form of Non-Statutory Stock Option Agreement for automatic option
grants made under the Restated Stock Option Plan.
10.6(1) Form of Employment or Association Agreement for Assignment of
Inventions and Confidentiality of Company Information.
10.7(1) Form of Director's Indemnification Agreement.
10.10(1) Stock Purchase Agreement among Tyrone Cruze, Sr., Custom Chrome
Holdings, Inc. and Custom Chrome, Inc. dated May 24, 1989.
10.15(1) Long-Term Incentive Compensation Agreement between Custom Chrome
Holdings, Inc. and Ignatius J. Panzica dated August 23, 1989.
10.18(1) Management Bonus and Non-competition Agreement between Custom
Chrome, Inc. and Ignatius J. Panzica dated August 23, 1989.
10.39(1) Asset Purchase Agreement between Custom Chrome Manufacturing,
Inc. and TBW, Inc. dba Santee Industries dated January 19, 1990.
10.40(1) Assignment and Assumption Agreement among Derek and Louise
Whitehead, F.M.& L., Inc. and Custom Chrome Manufacturing, Inc.,
dated January 19, 1990, including promissory notes to F.M.& L.
10.42(1) Settlement Agreement, Release and Covenant Not-To-Sue among
Custom Chrome Manufacturing, Inc., Custom Chrome, Inc., Robert
Lautz and TBW, Inc. (d/b/a Santee Industries) dated November 4,
1990.
10.45(1) Exclusive Manufacturing and Royalty Agreement between Custom
Chrome, Inc. and Zodiac Enterprises, Ltd. dated March 7, 1987.
10.46(1) Amendment Agreement to Exclusive Manufacturing and Royalty
Agreement between Custom Chrome, Inc. and Zodiac Enterprises,
Ltd. dated August 1991.
10.55(1) Option Agreement between Custom Chrome Holdings, Inc. and
Ignatius J. Panzica dated July 31, 1991.
10.56(1) Employment Agreement between Custom Chrome, Inc. and Ignatius J.
Panzica dated September 19, 1991.
10.57(1) Amendment between Ignatius J. Panzica and Custom Chrome, Inc.
dated September 19, 1991, to Subscription and Stockholders
Agreement between Custom Chrome, Inc. and the Investors therein
August 23, 1989.
10.62(3) Form of Master Lease Agreement between Custom Chrome, Inc. and
BancBoston Leasing Inc.
10.63(3) Installment Sale Agreement between Custom Chrome, Inc. and
Hewlett-Packard Company dated February 1992 and related
documents.
10.64(5) Lease agreement between Custom Chrome, Inc. and Central Storage &
Transfer Co. dated December 17, 1991.
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10.65(4) Line of Credit Agreement between the Company and Bank of America
N. T. & S. A.
10.66(6) Lease between the Company and Allen Chrome Partners, dated April
14, 1994.
10.67(6) Lease between the Company and H.L.M Properties dated February 18,
1994.
10.68(7) Note Agreement between the Company and Connecticut Mutual Life
Insurance Company, dated as of December 1, 1994.
10.69(8) Note Secured by Second Deed of Trust executed by James J. Kelly,
Jr., dated July 11, 1994 and related letter agreement of the same
date.
10.70(8) 1995 Stock Option Plan and form of stock option agreement.
10.71 Business Loan Agreement between the Company and Bank of America
National Trust and Savings Association, dated May 23, 1996.
11.1(9) Statement re Computation of Net Income per Common Share and Share
Equivalent.
22.1(1) Subsidiaries of the Company.
23.1(9) Consent of Independent Auditors
24.1 Power of Attorney. Reference is made to page 22 of the
originally filed Report on Form 10-K.
- - --------------------------------
(1) Incorporated by reference from an exhibit filed with the Company's
Registration Statement on Form S-1 (File No. 33-42875) declared
effective by the Securities and Exchange Commission on November 5, 1991.
(2) Incorporated by reference from an exhibit filed with the Company's
Registration Statement on Form S-8 (File No. 33-47223) filed with the
Securities and Exchange Commission on April 15, 1992.
(3) Incorporated by reference from an exhibit filed with the Company's
Annual Report on Form 10-K (File No. 00019540) filed with the Securities
and Exchange Commission on April 30, 1992.
(4) Incorporated by reference from an exhibit filed with the Company's
Registration Statement on Form S-3 (File No. 33-65112) declared
effective by the Securities and Exchange Commission on July 22, 1993.
(5) Incorporated by reference from an exhibit filed with the Company's
Annual Report on Form 10-K (File No. 00019540) filed with the Securities
and Exchange Commission on April 30, 1993.
(6) Incorporated by reference from an exhibit filed with the Company's
Annual Report on Form 10-K (File No. 00019540) filed with the Securities
and Exchange Commission on April 28, 1994.
(7) Incorporated by reference from an exhibit filed with the Company's
Annual Report on Form 10-K (File No. 00019540) filed with the Securities
and Exchange Commission on April 28, 1995.
(8) Incorporated by reference from an exhibit filed with the Company's
Registration Statement of Form S-8 (File No. 33-80095) filed with the
Securities and Exchange Commission on December 6, 1995.
(9) Incorporated by reference from an exhibit filed with the Company's
Annual Report on Form 10-K (File No. 00019540) filed with the Securities
and Exchange Commission on April 30, 1996.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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, IN MORGAN HILL, CALIFORNIA
ON THIS 28TH DAY OF MAY, 1996.
CUSTOM CHROME, INC.
By: /s/ Ignatius J. Panzica
--------------------------
Ignatius J. Panzica
Chairman, President and
Chief Executive Officer
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- - --------------------------------------------------------------------------------
[LOGO]
BANK OF AMERICA BUSINESS LOAN AGREEMENT
NATIONAL TRUST AND SAVINGS ASSOCIATION
- - --------------------------------------------------------------------------------
THIS AGREEMENT DATED AS OF MAY 23, 1996, IS BETWEEN BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION (THE "BANK") AND CUSTOM CHROME, INC. (THE
"BORROWER").
1. FACILITY NO. 1: 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 to the Borrower. The amount of the line of credit (the
"Facility 1 Commitment") is equal to the amount indicated for each period
set forth below:
Period Amount
-------- --------
From the date of this Agreement
through July 31, 1996 $20,000,000
On August 1, 1996
and thereafter $15,000,000
Notwithstanding the foregoing, if at any time during the period from the
date of this Agreement through July 31, 1996, the Borrower receives
proceeds of any new private placement of debt or any new private placement
or public offering of equity, then the Facility 1 Commitment for such
period shall be immediately decreased to Fifteen Million Dollars
($15,000,000), and any payments that may be required in accordance with
subparagraph (c) of this paragraph as a result of such decrease shall be
immediately made.
(b) This is a revolving line of credit with within line facilities for letters
of credit and Local Currency (as defined below) advances. During the
availability period, the Borrower may repay principal amounts and reborrow
them.
(c) The Borrower agrees not to permit the outstanding principal balance of the
line of credit plus the outstanding amounts of any letters of credit,
including amounts drawn on letters of credit and not yet reimbursed, plus
the Equivalent Amount (as defined below) of Local Currency advances
outstanding to exceed the Facility 1 Commitment.
1.2 AVAILABILITY PERIOD. The line of credit is available between the date of
this Agreement and June 30, 1997 (the "Facility 1 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.
(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.
1.4 REPAYMENT TERMS.
(a) The Borrower will pay interest on June 1, 1996, and then monthly thereafter
until payment in full of any principal outstanding under this line of
credit.
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(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
Facility 1 Expiration Date.
1.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Bank's
Reference Rate, the Borrower may elect to have all or portions of the line of
credit (during the availability period) bear interest at the rate(s) described
below during an interest period agreed to by the Bank and the Borrower. Each
interest rate is a rate per year. Interest will be paid on the last day of each
interest period, and on the first day 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.
1.6 SHORT TERM FIXED RATE. The Borrower may elect to have all or portions of
the principal balance of the line of credit bear interest at the Short Term
Fixed Rate, subject to the following requirements:
(a) The "Short Term Fixed Rate" means the Short Term Base Rate plus 1.0
percentage point.
(b) The "Short Term Base Rate" means the fixed interest rate per annum,
determined solely by the Bank on the first day of the applicable interest
period for the Short Term Fixed Rate portion, as the rate at which the Bank
would be able to borrow funds in the Money Market in the amount of the
Short Term Fixed Rate portion and with an interest and principal payment
schedule equal to the Short Term Fixed Rate portion and for a term equal to
the applicable interest period. The Short Term Base Rate shall include
adjustments for reserve requirements, federal deposit insurance, and other
similar adjustment which the Bank deems appropriate. The Short Term Base
Rate is the Bank's estimate only and the Bank is under no obligation to
actually purchase or match funds for any transaction.
(c) "Money Market" means one or more wholesale funding markets available to the
Bank, including domestic negotiable certificates of deposit, eurodollar
deposits, bank deposit notes or other appropriate money market instruments
selected by the Bank.
(d) The interest period during which the Short Term Fixed Rate will be in
effect will be one year or less.
(e) Each Short Term Fixed Rate portion will be for an amount not less than the
following:
(i) for interest periods of 14 days or longer, Five Hundred Thousand
Dollars ($500,000).
(ii) for interest periods of 1 to 3 days, Five Million Dollars
($5,000,000).
(iii) for interest periods of between 4 days and 13 days, an amount
which, when multiplied by the number of days in the applicable
interest period, is not less than fifteen million (15,000,000)
dollar-days.
(f) Any portion of the principal balance of the line of credit already bearing
interest at the Short Term Fixed Rate will not be converted to a different
rate during its interest period.
(g) Each prepayment of a Short Term Fixed 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 equal to the
amount (if any) by which
(i) the additional interest which would have been payable 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 Money Market 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).
1.7 OFFSHORE RATE. The Borrower may elect to have all or portions of the
principal balance of the line of credit bear interest at the Offshore Rate plus
1.0 percentage point.
Designation of an Offshore Rate portion is subject to the following
requirements:
(a) The interest period during which the Offshore Rate will be in effect
will be one year or less. The last day of the interest period will be
determined by the Bank using the practices of the offshore dollar inter-
bank market.
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(b) Each Offshore Rate portion will be for an amount not less than Five Hundred
Thousand Dollars ($500,000) for interest periods of 30 days or longer. For
shorter maturities, each Offshore Rate portion will be for an amount which,
when multiplied by the number of days in the applicable interest period, is
not less than fifteen million (15,000,000) dollar-days.
(c) The "Offshore 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.)
Offshore Rate = Grand Cayman Rate
-----------------------------
(1.00 - Reserve Percentage)
Where,
(i) "Grand Cayman Rate" means the interest rate (rounded upward to the
nearest 1/16th of one percent) 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 markets.
(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 the 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 may not elect an Offshore Rate with respect to any portion of
the principal balance of the line of credit which is scheduled to be repaid
before the last day of the applicable interest period.
(e) Any portion of the principal balance of the line of credit already bearing
interest at the Offshore Rate will not be converted to a different rate
during its interest period.
(f) Each prepayment of an Offshore 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 equal to the amount
(if any) by which
(i) the additional interest which would have been payable 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 offshore dollar market
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).
(g) The Bank will have no obligation to accept an election for an Offshore 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 an Offshore Rate portion are not available in the
offshore dollar inter-bank markets; or
(ii) the Offshore Rate does not accurately reflect the cost of an
Offshore Rate portion.
1.8 LETTERS OF CREDIT. This line of credit may be used for financing:
(i) commercial letters of credit with a maximum maturity of 365 days but
not to extend more than 90 days beyond the Facility 1 Expiration Date.
Each commercial letter of credit will require drafts payable at sight.
(ii) standby letters of credit with a maximum maturity of 365 days but
not to extend more than 90 days beyond the Facility 1 Expiration Date.
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<PAGE>
(iii) The amount of letters of credit outstanding at any one time
(including amounts drawn on letters of credit and not yet reimbursed)
may not exceed Two Million Five Hundred Thousand Dollars ($2,500,000)
for commercial letters of credit and One Million Dollars ($1,000,000)
for standby letters of credit.
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.
(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
quarterly in advance, calculated on the basis of the face amount
outstanding on the day the fee is calculated.
1.9 THE LOCAL CURRENCY FACILITY.
(a) From time to time during the availability period, the Bank or a Local
Currency Affiliate will make Local Currency advances to the Borrower and to
direct and indirect subsidiaries of the Borrower acceptable to the Bank and
located outside of the United States ("Subsidiaries"). The Equivalent
Amount of all Local Currency advances outstanding at any one time under
this Agreement may not exceed Two Million Five Hundred Thousand Dollars
($2,500,000).
(b) Neither the Bank nor the Local Currency Affiliate shall have any obligation
to make any Local Currency advance unless the Bank or the Local Currency
Affiliate and the Borrower or the Subsidiary agree, at the time of the
Borrower's or the Subsidiary's request for a Local Currency advance, on the
currency, the amount, the principal payment date, the interest rate and
payment dates, the prepayment and overdue payment terms, and the reserve
and tax provisions for such advance.
(c) The Borrower or the Subsidiary shall execute such additional documentation
as the Bank or the Local Currency Affiliate may require relating to each
Local Currency advance.
(d) Each Local Currency advance to a Subsidiary shall be guaranteed by the
Borrower pursuant to a guaranty in form and substance satisfactory to the
Bank or the Local Currency Affiliate.
(e) For purposes of this Agreement:
(i) "Equivalent Amount" means the equivalent in U.S. Dollars of another
currency calculated at the spot rate for the purchase of such other
currency with U.S. Dollars quoted by the Bank's Foreign Exchange
Trading Center in San Francisco, California, at approximately 8:00
a.m. San Francisco time two (2) banking days (as determined by the
Bank with respect to such currency) prior to the relevant date.
(ii) "Local Currency" means a lawful currency other than U.S. Dollars
which is available at a Local Currency Affiliate and is the legal
tender of the country where the Local Currency Affiliate is located.
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(iii) "Local Currency Affiliate" means an affiliate or branch of the
Bank located in the country where a Local Currency advance is to be
made or, with respect to Article 2 below, where a foreign exchange
contract is to be entered into.
2. FACILITY NO. 2: FOREIGN EXCHANGE FACILITY AMOUNT AND TERMS
2.1 FOREIGN EXCHANGE FACILITY.
(a) Between the date of this Agreement and June 30, 1997 (the "Facility 2
Expiration Date"), the Bank or a Local Currency Affiliate in its discretion
may enter into spot and future foreign exchange contracts with the Borrower
or a Subsidiary. The foreign exchange contract limit will be Thirteen
Million U.S. Dollars (U.S. $13,000,000), and the settlement limit will be
Four Million Five Hundred Thousand U.S. Dollars (U.S. $4,500,000). The
"foreign exchange contract limit" is the maximum limit on the net
difference between the total foreign exchange contracts outstanding less
the total foreign exchange contracts for which the Borrower or a Subsidiary
has already compensated the Bank or a Local Currency Affiliate, as
applicable. The "settlement limit" is the maximum limit on the gross total
amount of all sale and purchase contracts on which delivery is to be
effected and settlement allowed on any one banking day.
(b) Neither the Bank nor the Local Currency Affiliate shall be required to pay
the Borrower or the Subsidiary or deliver any foreign currency to the
Borrower or the Subsidiary under any foreign exchange contract until the
Bank or the Local Currency Affiliate receives evidence satisfactory to it
that the Borrower or the Subsidiary has paid the Bank or the Local Currency
Affiliate the required U. S. Dollars in immediately available funds or
delivered the required foreign currency to the Bank or the Local Currency
Affiliate under such foreign exchange contract. Neither the Bank nor the
Local Currency Affiliate shall be liable for interest or other damages
caused by any such failure to pay or deliver or any such delay in payment
or delivery.
(c) The Borrower or the Subsidiary will pay the Bank or the Local Currency
Affiliate on demand the Bank's or the Local Currency Affiliate's then
standard foreign exchange contract fees for each contract.
(d) Foreign exchange contracts will be in form and substance satisfactory to
the Bank or the Local Currency Affiliate. The Borrower or the Subsidiary
shall execute such additional documentation as the Bank or the Local
Currency Affiliate may require relating to each foreign exchange contract
including, with respect to any foreign exchange contract between the Bank
or a Local Currency Affiliate and a Subsidiary, a guaranty signed by the
Borrower in form, amount, and substance satisfactory to the Bank or the
Local Currency Affiliate.
(e) No foreign exchange contract will mature later than fifteen (15) months
from the date it is entered into and in no event more than ninety (90) days
after the Facility 2 Expiration Date; provided, however, that for a
Subsidiary, no foreign exchange contract will mature later than twelve (12)
months from the date it is entered into.
(f) Neither the Bank nor the Local Currency Affiliate shall be liable for any
loss suffered by the Borrower or the Subsidiary as a result of the
Borrower's or the Subsidiary's foreign exchange transactions.
(g) Any sum owed to the Bank or a Local Currency Affiliate under a foreign
exchange contract may, at the option of the Bank or the Local Currency
Affiliate, be added to the principal amount outstanding under this
Agreement. The amount will bear interest and be due as described elsewhere
in this Agreement.
(h) In addition to any other rights or remedies which the Bank or the Local
Currency Affiliate may have under this Agreement or otherwise, upon the
occurrence of an event of default the Bank or the Local Currency Affiliate
may:
(i) Suspend performance of its obligations to the Borrower or the
Subsidiary under any foreign exchange contract;
(ii) Declare all foreign exchange contracts, interest and any other
amounts which are payable by the Borrower or the Subsidiary to the
Bank or the Local Currency Affiliate immediately due and payable;
and
(iii) Without notice to the Borrower or the Subsidiary, close out any or
all foreign exchange contracts or positions of the Borrower or the
Subsidiary with the Bank or the Local Currency Affiliate.
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Neither the Bank nor the Local Currency Affiliate shall be under any
obligation to exercise any such rights or remedies or to exercise them at a
time or in a manner beneficial to the Borrower or the Subsidiary. The
Borrower or the Subsidiary shall be liable for any amounts owing to the
Bank or the Local Currency Affiliate after exercise of any such rights and
remedies.
3. FACILITY NO. 3: TERM LOAN AMOUNT AND TERMS
3.1 LOAN AMOUNT. The Bank agrees to provide a term loan to the Borrower in the
amount of One Million Five Hundred Thousand Dollars ($1,500,000) (the "Facility
3 Commitment").
3.2 AVAILABILITY PERIOD. The loan is available in one or more disbursements
from the Bank between the date of this Agreement and September 30, 1996, unless
the Borrower is in default.
3.3 INTEREST RATE. Unless the Borrower elects an optional interest rate as
described below, the interest rate is the Bank's Reference Rate.
3.4 REPAYMENT TERMS.
(a) The Borrower will pay all accrued but unpaid interest on June 1, 1996, and
then monthly thereafter and upon payment in full of the principal of the
loan.
(b) The Borrower will repay principal in 28 successive monthly installments
starting November 1, 1996. Each installment will be in an amount that
would fully amortize the outstanding principal amount over 180 monthly
installments. On February 21, 1999, 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.
3.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Bank's
Reference Rate, the Borrower may elect to have all or portions of the loan bear
interest at the rate(s) described below during an interest period agreed to by
the Bank and the Borrower. Each interest rate is a rate per year. Interest
will be paid on the last day of each interest period, and on the first day 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.
3.6 SHORT TERM FIXED RATE. The Borrower may elect to have all or portions of
the principal balance of the loan bear interest at the Short Term Fixed Rate,
subject to the same requirements set forth in subparagraphs (b) through (g) of
Paragraph 1.6 (except for purposes of this Facility No. 3, the "Short Term Fixed
Rate" means the Short Term Base Rate plus 2.25 percentage points, and the term
"loan" is substituted for the term "line of credit" in subparagraph (f) of
Paragraph 1.6).
3.7 LONG TERM RATE. The Borrower may elect to have all or portions of the
principal balance of the loan bear interest at the Long Term Rate, subject to
the following requirements:
(a) The interest period during which the Long Term Rate will be in effect will
be one year or more.
(b) The "Long Term Rate" means the Long Term Base Rate plus 2.25 percentage
points.
(c) The "Long Term Base Rate" means the fixed interest rate per annum,
determined solely by the Bank on the first day of the applicable interest
period for the Long Term Rate portion, as the rate at which the Bank would
be able to borrow funds in the Money Market in the amount of the Long Term
Rate portion and with an interest payment frequency and principal repayment
schedule equal to the Long Term Rate portion and for a term equal to the
applicable interest period. The Long Term Base Rate shall include
adjustments for reserve requirements, federal deposit insurance, and any
other similar adjustment which the Bank deems appropriate. The Long Term
Base Rate is the Bank's estimate only and the Bank is under no obligation
to actually purchase or match funds for any transaction.
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(d) "Money Market" means one or more wholesale funding markets available to the
Bank, including domestic negotiable certificates of deposit, eurodollar
deposits, bank deposit notes or other appropriate money market instruments
selected by the Bank.
(e) Each Long Term Rate portion will be for an amount not less than One Hundred
Thousand Dollars ($100,000).
(f) Any portion of the principal balance of the loan already bearing interest
at the Long Term Rate will not be converted to a different rate during its
interest period.
(g) The Borrower may prepay the Long Term Rate portion in whole or in part in
the minimum amount of One Hundred Thousand Dollars ($100,000). The
Borrower will give the Bank irrevocable written notice of the Borrower's
intention to make the prepayment, specifying the date and amount of the
prepayment. The notice must be received by the Bank at least 5 banking
days in advance of the prepayment. All prepayments of principal on the
Long Term Rate portion will be applied on the most remote principal
installment or installments then unpaid.
(h) Each prepayment of a Long Term Rate portion, whether voluntary, by reason
of acceleration or otherwise, will be accompanied by payment of all accrued
interest on the amount of the prepayment and the prepayment fee described
below.
(i) The prepayment fee will be the sum of fees calculated separately for each
Prepaid Installment, as follows:
(i) The Bank will first determine the amount of interest which would have
accrued each month for the Prepaid Installment had it remained
outstanding until the applicable Original Payment Date, using the Long
Term Rate;
(ii) The Bank will then subtract from each monthly interest amount
determined in (i), above, the amount of interest which would accrue
for that Prepaid Installment if it were reinvested from the date of
prepayment through the Original Payment Date, using the following
rate:
(A) If the Original Payment Date is more than 5 years after the date
of prepayment: the Treasury Rate plus one-quarter of one
percentage point;
(B) If the Original Payment Date is 5 years or less after the date of
prepayment: the Money Market Rate.
(iii) If (i) minus (ii) for the Prepaid Installment is greater than
zero, the Bank will discount the monthly differences to the date of
prepayment by the rate used in (ii) above. The sum of the
discounted monthly differences is the prepayment fee for that
Prepaid Installment.
(j) The following definitions will apply to the calculation of the prepayment
fee:
"Money Market Rate" means the fixed interest rate per annum which the Bank
determines could be obtained by reinvesting a specified Prepaid Installment
in the Money Market from the date of prepayment through the Original
Payment Date.
"Original Payment Dates" means the dates on which principal of the Long
Term Rate portion would have been paid if there had been no prepayment. If
a portion of the principal would have been paid later than the end of the
interest period in effect at the time of prepayment, then the Original
Payment Date for that portion will be the last day of the interest period.
"Prepaid Installment" means the amount of the prepaid principal of the Long
Term Rate portion which would have been paid on a single Original Payment
Date.
"Treasury Rate" means the interest rate yield for U.S. Government Treasury
Securities which the Bank determines could be obtained by reinvesting a
specified Prepaid Installment in such securities from the date of
prepayment through the Original Payment Date.
The Bank may adjust the Treasury Rate and Money Market Rate to reflect the
compounding, accrual basis, or other costs of the Long Term Rate portion.
Each of the rates is the Bank's estimate only and the Bank is under no
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obligation to actually reinvest any prepayment. The rates will be based on
information from either the Telerate or Reuters information services, THE
WALL STREET JOURNAL, or other information sources the Bank deems
appropriate.
3.8 LIBOR RATE. The Borrower may elect to have all or portions of the
principal balance bear interest at the LIBOR Rate plus 2.25 percentage points.
Designation of a LIBOR Rate portion is subject to the following requirements:
(a) The interest period during which the LIBOR Rate will be in effect will be
one, three, or six 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.
(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. (All amounts in the calculation will be determined by the Bank as
of the first day of the interest period.)
LIBOR Rate = LIBOR
---------------------------
(1.00 - Reserve Percentage)
Where,
(i) "LIBOR" means the average per annum rate of interest at which U.S.
dollar deposits in the amount of the LIBOR Rate portion would be
offered for the applicable interest period by major banks in the
London U.S. dollar inter-bank market as shown on the Telerate Page
3750 (or such other page as may replace it) at approximately 11:00
a.m. London time two (2) London Banking Days before the commencement
of the interest period. If such rate does not appear on the
Telerate Page 3750 (or such other page as may replace it), the rate
for that interest period will be determined by such alternative
method as reasonably selected by the Bank. 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 LIBOR 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
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(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).
(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.
4. FEES AND EXPENSES
4.1 LOAN FEES. The Borrower agrees to pay a Twenty-Two Thousand Five Hundred
Dollar ($22,500) fee due on June 30, 1996.
4.2 EXPENSES.
(a) The Borrower agrees to immediately repay the Bank for expenses that
include, but are not limited to, filing, recording and search fees and
documentation fees.
(b) 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.
(c) 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.
5. COLLATERAL
5.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank under this
Agreement will be secured pursuant to the Security Agreement and Intercreditor
Agreement Re: Receivables, Equipment, Inventory and General Intangibles dated as
of December 1, 1994, among the Borrower, Wilmington Trust Company, individually
only as expressly provided therein and otherwise solely as Collateral Agent (the
"Collateral Agent"), the Bank and Connecticut Mutual Life Insurance Company (as
now in effect and as amended from time to time, the "Security and Intercreditor
Agreement") and will constitute Senior Secured Obligations as defined in the
Security and Intercreditor Agreement.
6. DISBURSEMENTS, PAYMENTS AND COSTS
6.1 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.
6.2 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.
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6.3 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 14870 -50076, 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.
6.4 DIRECT DEBIT.
(a) The Borrower agrees that interest and principal payments and any fees will
be deducted automatically on the due date from checking account number
14870-50076.
(b) The Bank will debit the account on the dates the payments become due. If a
due date does not fall on a banking day, the Bank will debit the account on
the first banking day following the due date.
(c) The Borrower will maintain sufficient funds in the account on the dates the
Bank enters debits authorized by this Agreement. If there are insufficient
funds in the account on the date the Bank enters any debit authorized by
this Agreement, the debit will be reversed.
6.5 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.
6.6 TAXES. The Borrower will not deduct any taxes from any payments it makes
to the Bank. If any government authority imposes any taxes on any payments made
by the Borrower, 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. Upon request by the Bank, 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. However, the Borrower will
not pay the Bank's net income taxes.
6.7 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 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.
6.8 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.
6.9 INTEREST ON LATE PAYMENTS. At the Bank's sole option in each instance, any
amount not paid when due under this Agreement (including interest) shall bear
interest from the due date at the Bank's Reference Rate. This may result in
compounding of interest.
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7. 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:
7.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance by
the Borrower (and any Subsidiary) of this Agreement and any instrument or
agreement required under this Agreement have been duly authorized.
7.2 SECURITY AGREEMENTS. Signed original security agreements, assignments,
acknowlegments, financing statements and fixture filings (together with
collateral in which the Bank requires a possessory security interest), which the
Bank requires, subject in all cases to the Security and Intercreditor Agreement.
7.3 EVIDENCE OF PRIORITY. Evidence that security interests and liens in favor
of the Bank and the Collateral Agent under the Security and Intercreditor
Agreement are valid, enforceable, and prior to all others' rights and interests,
except those the Bank consents to in writing and except as provided in the
Security and Intercreditor Agreement.
7.4 INSURANCE. Evidence of insurance coverage, as required in the "Covenants"
section of this Agreement.
7.5 GUARANTIES. Continuing Guaranties (Multicurrency) in favor of the Bank,
its subsidiaries or any of its affiliates, each signed by the Borrower, in the
amount of Two Million Seven Hundred Fifty Thousand U.S. Dollars (U.S.
$2,750,000) and One Million Five Hundred Thousand U.S. Dollars (U.S.
$1,500,0000), respectively, as required under Paragraph(s) 1.9 and/or 2.1 above.
7.6 ENVIRONMENTAL PHASE 2 REPORT. A completed environmental Phase 2 report on
the existing warehouse located in Louisville, KY ("Warehouse Property"). The
results of such report must be acceptable to the Bank.
7.7 OTHER ITEMS. Any other items that the Bank reasonably requires.
8. 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.
8.1 ORGANIZATION OF BORROWER. The Borrower is a corporation duly formed and
existing under the laws of the state where organized.
8.2 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.
8.3 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.
8.4 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.
8.5 NO CONFLICTS. This Agreement does not conflict with any law, agreement, or
obligation by which the Borrower is bound.
8.6 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 form and content required by the Bank.
(c) in compliance with all government regulations that apply.
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8.7 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.
8.8 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, except those which have been approved by the Bank in
writing and except as provided in the Security and Intercreditor Agreement.
8.9 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.
8.10 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.
8.11 INCOME TAX RETURNS. The Borrower has no knowledge of any pending
assessments or adjustments of its income tax for any year.
8.12 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.
8.13 ERISA PLANS.
(a) The Borrower has fulfilled its obligations, if any, under the minimum
funding standards of ERISA and the Code with respect to each Plan and is in
compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and has not incurred any liability with
respect to any Plan under Title IV of ERISA.
(b) No reportable event has occurred under Section 4043(b) of ERISA for which
the PBGC requires 30 day notice.
(c) No action by the Borrower to terminate or withdraw from any Plan has been
taken and no notice of intent to terminate a Plan has been filed under
Section 4041 of ERISA.
(d) No proceeding has been commenced with respect to a Plan under Section 4042
of ERISA, and no event has occurred or condition exists which might
constitute grounds for the commencement of such a proceeding.
(e) The following terms have the meanings indicated for purposes of this
Agreement:
(i) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(ii) "ERISA" means the Employee Retirement Income Act of 1974, as
amended from time to time.
(iii) "PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
(iv) "Plan" means any employee pension benefit plan maintained or
contributed to by the Borrower and insured by the Pension Benefit
Guaranty Corporation under Title IV of ERISA.
8.14 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.
9. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:
9.1 USE OF PROCEEDS. To use the proceeds of (a) Facility No. 1 only for
financing working capital requirements and for the issuance of commercial and
standby letters of credit, and (b) Facility No. 3 only for financing the
expansion of the Warehouse Property.
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9.2 USE OF PROCEEDS - INELIGIBLE SECURITIES. Not to use, directly or
indirectly, any portion of the proceeds of the credit (including any letters of
credit) for any of the following purposes:
(a) knowingly to purchase Ineligible Securities from BA Securities, Inc.
(the "Arranger") during any period in which the Arranger makes a
market in such Ineligible Securities, or
(b) knowingly to purchase during the underwriting or placement period
Ineligible Securities being underwritten or privately placed by the
Arranger.
(c) to make payments of principal or interest on Ineligible Securities
underwritten or privately placed by the Arranger and issued by or for
the benefit of the Borrower or any affiliate of the Borrower.
"Ineligible Securities" means securities which may not be underwritten or dealt
in by member banks of the Federal Reserve System under Section 16 of the Banking
Act of 1933 (12 U.S.C. Section 24, Seventh), as amended. The Arranger is a
wholly-owned subsidiary of BankAmerica Corporation, and is a registered broker-
dealer which is permitted to underwrite and deal in certain Ineligible
Securities.
9.3 FINANCIAL INFORMATION. To provide the following financial information and
statements and such additional information as requested by the Bank from time to
time:
(a) Within 120 days of the Borrower's fiscal year end, the Borrower's annual
financial statements. These financial statements must be audited (with an
unqualified opinion) by a Certified Public Accountant ("CPA") acceptable to
the Bank. The statements shall be prepared on a consolidated basis.
(b) Within 120 days of the Borrower's fiscal year end, copies of CPA audited
annual financial statements for each Subsidiary for which the Bank requests
such statements.
(c) Within 120 days of the Borrower's fiscal year end, copies of the Borrower's
Form 10-K Annual Report filed with the Securities and Exchange Commission
("SEC").
(d) Within 60 days of each quarter's end, copies of the Borrower's Form 10-Q
Quarterly Report filed with the SEC and, within 30 days after the date of
filing with the SEC, copies of any Form 8-K Current Report filed by the
Borrower.
(e) Within 60 days of the Borrower's fiscal year end, copies of the Borrower's
annual business plan and capital expenditure budget for the next fiscal
year which shall include a balance sheet and income statement forecast on a
monthly basis.
9.4 CURRENT RATIO. To maintain on a consolidated basis a ratio of current
assets to current liabilities of at least 2.0:1.0. For the purposes of this
calculation, the principal balance outstanding under Facility No. 1 shall be
classified as a current liability.
9.5 FIXED CHARGES COVERAGE RATIO. To maintain a Fixed Charges Coverage Ratio
of not less than 3.00 to 1.00. "Fixed Charges Coverage Ratio" shall have the
meaning set forth in that Note Agreement dated as of December 1, 1994 Re:
$15,000,000 8.01% Senior Secured Notes Due December 15, 2001 executed by the
Borrower and accepted by Connecticut Mutual Life Insurance Company ("Note
Agreement"). For purposes of this Agreement, the definition of Fixed Charges
Coverage Ratio shall remain as defined in the Note Agreement as in effect on
December 1, 1994, and shall not be modified or amended by any change, amendment,
restatement, or other modification or the termination of the Note Agreement
unless agreed to by the Bank in writing.
9.6 TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO. To maintain on a
consolidated basis a ratio of total liabilities not subordinated to tangible net
worth not exceeding the amounts indicated for each period specified below:
PERIOD RATIO
------ -----
From the date of this Agreement
through July 30, 1996 1.10:1.0
On July 31, 1996
and thereafter 1.0:1.0
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"Total liabilities not subordinated" means the sum of current liabilities plus
long term liabilities, excluding debt subordinated to the Borrower's obligations
to the Bank in a manner acceptable to the Bank, using the Bank's standard form.
"Tangible net worth" means the gross book value of the Borrower's 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, and
monies due from affiliates, officers, directors or shareholders of the Borrower)
plus liabilities subordinated to the Bank in a manner acceptable to the Bank
(using the Bank's standard form) less total liabilities, including but not
limited to accrued and deferred income taxes, and any reserves against assets.
9.7 PROFITABILITY. To maintain on a consolidated basis a positive net income
before taxes and extraordinary items and a positive net income after taxes and
extraordinary items as of the end of each quarterly accounting period on a
fiscal year-to-date basis.
9.8 OTHER DEBTS. Not to have outstanding or incur any direct or contingent
debts or lease obligations (other than those to the Bank), or become liable for
the debts of others without the Bank's written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debts and leases in existence on the date of this Agreement disclosed in
writing to the Bank.
(e) Additional debts and lease obligations for the acquisition of fixed or
capital assets, to the extent permitted by Paragraph 9.10 below.
(f) Additional indebtedness in a total principal amount not to exceed Fifteen
Million Dollars ($15,000,000), placed by the Arranger.
9.9 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.
(c) Liens outstanding on the date of this Agreement disclosed in writing to the
Bank.
(d) Additional purchase money security interests in personal or real property
acquired after the date of this Agreement which secure obligations
permitted under subparagraph 9.8(e), above.
(e) Liens pursuant to the Security and Intercreditor Agreement.
9.10 CAPITAL EXPENDITURES. Not to spend or incur obligations (including the
total amount of any capital leases) for more than Two Million Five Hundred
Thousand Dollars ($2,500,000) in any single fiscal year to acquire fixed or
capital assets. Any such acquisitions funded by cash shall be excluded from
this limitation.
9.11 MAXIMUM INDEBTEDNESS. To limit the total principal balance outstanding
under Facility No. 1 to Two Million Five Hundred Thousand Dollars ($2,500,000)
for a period of at least 30 consecutive days in each line-year. "Line-year"
means the period between the date of this Agreement and June 30, 1997, and each
subsequent one-year period (if any). For the purposes of this paragraph,
"principal balance outstanding" does not include undrawn amounts of outstanding
letters of credit or the outstanding amounts of Local Currency advances.
9.12 DIVIDENDS. Unless the Borrower is in compliance with the terms and
conditions of this Agreement as evidenced by compliance certificates required
herein, (a) not to declare or pay any dividends on any of its shares except
dividends
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payable in capital stock of the Borrower, and (b) not to purchase, redeem or
otherwise acquire for value any of its shares, or create any sinking fund in
relation thereto.
9.13 NOTICES TO BANK. To promptly notify the Bank in writing of:
(a) any lawsuit over Five Hundred Thousand Dollars ($500,000) 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 financial condition or
operations.
(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.
(f) any dividends declared or paid on any of the Borrower's shares, any
purchases, redemption or other acquisition of any of the Borrower's shares,
or the creation of any sinking fund in relation to any of the Borrower's
shares, any of which events shall be accompanied by the certificates of
compliance required under Paragraph 9.25 below.
9.14 BOOKS AND RECORDS. To maintain adequate books and records.
9.15 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 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.
9.16 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.
9.17 PRESERVATION OF RIGHTS. To maintain and preserve all rights,
privileges, and franchises the Borrower now has.
9.18 MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or
replacements to keep the Borrower's properties in good working condition.
9.19 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.
9.20 COOPERATION. To take any action requested by the Bank to carry out the
intent of this Agreement.
9.21 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.
(b) GENERAL BUSINESS INSURANCE. To maintain insurance as is usual for the
business it is in.
(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.
9.22 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written
consent:
(a) engage in any business activities other than manufacturing and/or
distribution of goods related to sports and /or recreation.
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(b) liquidate or dissolve the Borrower's business.
(c) enter into any consolidation, merger, pool, joint venture, syndicate, or
other combination, or acquire or purchase a business or its assets for a
consideration, including assumption of debt, in excess of an aggregate of
Thirteen Million Dollars ($13,000,000) in any one fiscal year.
(d) lease, or dispose of all or a substantial part of the Borrower's business
or the Borrower's assets.
(e) sell or otherwise dispose of any assets for less than fair market value.
(f) sell, otherwise dispose of, or enter into any sale and leaseback agreement
covering any of its fixed or capital assets in excess of Two Hundred Fifty
Thousand Dollars ($250,000) in the aggregate for each fiscal year.
9.23 ERISA PLANS. To give prompt written notice to the Bank of:
(a) The occurrence of any reportable event under Section 4043(b) of ERISA for
which the PBGC requires 30 day notice.
(b) Any action by the Borrower to terminate or withdraw from a Plan or the
filing of any notice of intent to terminate under Section 4041 of ERISA.
(c) Any notice of noncompliance made with respect to a Plan under
Section 4041(b) of ERISA.
(d) The commencement of any proceeding with respect to a Plan under
Section 4042 of ERISA.
9.24 ACQUISITIONS. To notify the Bank in writing of any acquisition of a
business or its assets at least 45 days prior to closing. For the acquisition
that causes the cumulative aggregate consideration (including assumption of
debt) for all such acquisitions since the date of this Agreement to exceed Five
Million Dollars ($5,000,000), and for each subsequent acquisition, the Borrower
agrees to submit a pro forma balance sheet and income statement, prepared with
monthly data for the period extending through the Facility 1 Expiration Date,
demonstrating both the financial effect of such acquisition and the fact that
the Borrower will continue to comply with all the terms and conditions of this
Agreement.
9.25 COMPLIANCE CERTIFICATES. To deliver to the Bank (a) within 60 days of
each quarter's end, a quarterly certificate showing compliance with the terms
and conditions of this Agreement and the Note Agreement, and (b) in conjunction
with any notice required under Paragraph 9.13(f) above, a certificate showing
compliance with the terms and conditions of this Agreement and the Note
Agreement for the next 3 fiscal quarters.
9.26 MAXIMUM INVENTORY. During the period beginning January 1, 1996 and ending
April 30, 1996, not to allow net inventory to exceed Fifty Four Million Dollars
($54,000,000), and during the period beginning May 1, 1996 and ending
July 31,1996, not to allow net inventory to exceed Fifty Million Dollars
($50,000,000).
For the purposes of this paragraph, "net inventory" means the value of the
Borrower's inventory as shown in that certain line item labelled "Net inventory"
on the Borrower's most recent financial statements delivered to the Bank under
Paragraph 9.3 of this Agreement.
10. DEFAULT
If any of the following events occur, 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.
10.1 FAILURE TO PAY. The Borrower or any Subsidiary fails to make a payment
when due under this Agreement, under any Local Currency advance, or under any
foreign exchange contract.
10.2 LIEN PRIORITY. The Collateral Agent on behalf of the Bank fails to
have an enforceable first lien (except for any prior liens to which the
Collateral Agent and the Bank have consented in writing) on or security interest
in any property given as security for this loan.
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10.3 FALSE INFORMATION. The Borrower has given the Bank false or misleading
information or representations.
10.4 BANKRUPTCY. The Borrower or any Subsidiary files a bankruptcy
petition, a bankruptcy petition is filed against the Borrower or any Subsidiary,
or the Borrower or any Subsidiary makes a general assignment for the benefit of
creditors.
10.5 RECEIVERS. A receiver or similar official is appointed for the
Borrower's or any Subsidiary's business, or the business is terminated.
10.6 LAWSUITS. Any lawsuit or lawsuits are filed on behalf of one or more
trade creditors against the Borrower in an aggregate amount of Five Hundred
Thousand Dollars ($500,000) or more in excess of any insurance coverage.
10.7 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 Five Hundred Thousand
Dollars ($500,000) or more in excess of any insurance coverage.
10.8 GOVERNMENT ACTION. Any government authority takes action that the Bank
believes materially adversely affects the Borrower's financial condition or
ability to repay.
10.9 MATERIAL ADVERSE CHANGE. A material adverse change occurs in the
Borrower's financial condition, properties or prospects, or ability to repay the
loan.
10.10 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.
10.11 DEFAULT UNDER RELATED DOCUMENTS. Any guaranty, subordination
agreement, security agreement, deed of trust, or other document required by or
referred to in this Agreement is violated or no longer in effect, including any
document executed at any time by any Subsidiary in connection with Facility No.
1 or Facility No. 2.
10.12 OTHER BANK AGREEMENTS. The Borrower or any Subsidiary fails to meet
the conditions of, or fails to perform any obligation under any other agreement
the Borrower or any Subsidiary has with the Bank or any affiliate of the Bank
including, without limitation, the Security and Intercreditor Agreement.
10.13 ERISA PLANS. The occurrence of any one or more of the following events
with respect to the Borrower, provided such event or events could reasonably be
expected, in the judgment of the Bank, to subject the Borrower to any tax,
penalty or liability (or any combination of the foregoing) which, in the
aggregate, could have a material adverse effect on the financial condition of
the Borrower with respect to a Plan:
(a) A reportable event shall occur with respect to a Plan which is, in the
reasonable judgment of the Bank likely to result in the termination of such
Plan for purposes of Title IV of ERISA.
(b) Any Plan termination (or commencement of proceedings to terminate a Plan)
or the Borrower's full or partial withdrawal from a Plan.
10.14 OTHER BREACH UNDER AGREEMENT. The Borrower or any Subsidiary 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.
11. ENFORCING THIS AGREEMENT; MISCELLANEOUS
11.1 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.
11.2 CALIFORNIA LAW. This Agreement is governed by California law.
11.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's
and the Bank's successors and assignees. The Borrower 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
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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.
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11.4 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:
(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
(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
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(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.
11.5 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.
11.6 ADMINISTRATION COSTS. The Borrower shall pay the Bank for all
reasonable costs incurred by the Bank in connection with administering this
Agreement.
11.7 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. As
used in this paragraph, "attorneys' fees" includes the allocated costs of in-
house counsel.
11.8 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; and
(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.
11.9 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 and the
Borrower may specify from time to time in writing.
11.10 HEADINGS. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.
11.11 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.
11.12 PRIOR AGREEMENT AMENDED, RESTATED, AND SUPERSEDED. This Agreement
amends and restates in its entirety and supersedes the Business Loan Agreement
entered into as of June 29, 1995, between the Bank and the Borrower, as amended,
and any credit outstanding thereunder shall be deemed to be outstanding under
this Agreement.
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This Agreement is executed as of the date stated at the top of the first page.
<TABLE>
<S> <C>
[LOGO]
BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION CUSTOM CHROME, INC.
X /s/ Kenneth E. Jones X /s/ James J. Kelly, Jr.
---------------------------- ----------------------------
BY: KENNETH E. JONES BY: JAMES J. KELLY, JR.
TITLE: VICE PRESIDENT TITLE: EVP-FINANCE AND CHIEF
FINANCIAL OFFICER
ADDRESS WHERE NOTICES TO THE BANK ADDRESS WHERE NOTICES TO THE BORROWER
ARE TO BE SENT: ARE TO BE SENT:
San Jose Commercial Banking Office # 1487 16100 Jacqueline Court
Post Office Box 910 Morgan Hill, CA 95037
San Jose, CA 95115
</TABLE>
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