REVOLVING CREDIT FACILITY
THIS AGREEMENT, dated as of March 31, 1998 by and between U.S. Automotive
Manufacturing, Inc., with offices located at ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Borrower" or the "Company"), and
_________________, having an address at ________________(the "Lender").
WHEREAS, the Borrower has requested that the Lender make available from
time to time to the Borrower up to an aggregate amount of Two Million
($2,000,000) Dollars; and
WHEREAS, subject to the terms and conditions hereinafter set forth, the
Lender is willing to make such funds available to the Borrower;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
Section 1. THE CREDIT FACILITY
1.1 Advances.
(a) The Lender agrees, subject to the terms and conditions hereinafter
set forth, to advance (an "Advance") to Borrower from time to time in an
aggregate principal amount outstanding at any one time not to exceed
$2,000,000 (the "Credit Facility"), which is being drawn down by Borrower
to the extent of $300,000 on the date hereof (the "Initial Borrowing Date")
and may be further drawn down by Borrower, and shall be provided by Lender,
from time to time as the proceeds of prior draw downs are expended as
contemplated hereby on five (5) business days' notice to Lender from the
Borrower.
(b) Notwithstanding anything to the contrary contained in subparagraph
1.1(a) above, Borrower acknowledges that Lender may not be able to Advance
up to the full amount of the Credit Facility to Borrower and waives any
obligation for Lender to do so; provided, however, that Lender covenants
and agrees to make available to Borrower Advances of not less than
$1,000,000 in the aggregate at any time during the term of this Credit
Facility.
1.2 Security Interest/Collateral.
(a) The Credit Facility creates in favor of the Lender a general
security interest in the assets of the Company as well as a first security
interest (prior to all other liens) in and to the Company's property
located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (collectively, the
"Collateral").
(b) The Company authorizes the Lender to sign and file on its behalf
one or more financing statements with respect to the Collateral pursuant to
the Uniform Commercial Code. At any time and from time to time, upon
request of the Lender, the Company shall give, execute, file and/or record
any notice, financing statement, statement, instrument, document or
agreement that the Lender considers necessary to create, preserve,
continue, perfect or validate any security interest granted hereunder or
which the Lender considers necessary or desirable to exercise or enforce
the Lender's rights hereunder with respect to such security interest,
naming the Company as debtor and the Lender as secured party.
1.3 Promissory Note. Borrower's obligation to repay each Advance, together
with accrued interest thereon, will be evidenced by a Revolving Credit Note in
the form attached hereto (the "Note") to be executed by Borrower and delivered
to Lender concurrently with Borrower's acceptance of this Agreement.
1.4 Interest. Interest at the rate of eleven percent (11%) per annum shall
be payable in arrears monthly, commencing August 1, 1998, on all outstanding
Advances.
1.5 Payment. All Advances made pursuant to this Credit Facility shall be
due three (3) business days after the earlier of: (i) the second anniversary
from the Initial Borrowing Date (the "Maturity Date") or (ii) the transfer by
the Company to its wholly-owned subsidiary, Quality Automotive Company, of any
part of the Collateral which has the effect of reducing the aggregate value of
the Collateral (excluding that value of any Collateral subject to a prior lien)
to less than 150% of the Credit Facility.
1.6 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made as of the date delivered, if delivered personally, or one (1) business day
after having been deposited with a courier, if sent by overnight courier or
having been sent by telecopy, if sent by telecopy (receipt confirmed), or three
(3) business days after having been mailed, if mailed by registered or certified
mail, postage prepaid, return receipt requested, to the addresses of the parties
first set forth above or to such other address as any party shall have
designated by like notice to the other parties hereto (except that a notice of
change of address shall only be effective upon receipt). A copy of notice to
Borrower shall also be sent to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.).
1.7 Use of Proceeds. The Borrower agrees that the proceeds of the Loan
shall be used to finance the working capital requirements of Borrower.
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Section 2. ADDITIONAL CONSIDERATION
2.1 Grant of Initial Warrants.
(a) Subject to Section 2.3 hereof, Borrower shall simultaneously herewith
issue to Lender five year warrants ("Initial Warrants") to purchase up to
200,000 shares ("Initial Warrant Shares") of the common stock, $.001 par value,
of the Company (the "Common Stock"). exercisable any time after the one year
anniversary of the Initial Borrowing Date at an exercise price equal to eighty
percent (80%) of the average Current Market Price (as defined in paragraph (b)
below) of the Common Stock for the twenty (20) trading days preceding such one
year anniversary date.
(b) For purposes of this Agreement, "Current Market Price," when used with
references to shares of Common Stock or other securities for any period shall
mean the average of the daily closing prices per share of Common Stock or such
other securities for such period. The closing price for each day shall be the
last quoted sale price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc., Automated Quotation System or such
other system then in use, or, on any such date the Common Stock or such other
securities are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Common Stock or such other securities selected by the Board of Directors
of the Corporation. If the Common Stock is listed or admitted to trading on a
national securities exchange, the closing price shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Common
Stock on such other securities are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Common Stock or such other securities are
listed or admitted to trading. If the Common Stock or such other securities are
not publicly held or so listed or publicly traded, "Current Market Price" shall
mean the Fair Market Value per share of Common Stock or of such other securities
as determined in good faith by the Board of Directors of the Corporation based
on an opinion of an independent investment banking firm with an established
national reputation as a valuer of securities, which opinion may be based on
such assumptions as such firm shall deem to be necessary and appropriate.
2.2 Additional Grant of Warrants.
(a) Subject to Section 2.3 and paragraphs (b) and (c) below, Borrower shall
grant to Lender five year warrants (the "Warrants") to purchase up to 600,000
shares of Common Stock (the
"Warrant Shares"), or a portion thereof which Warrants shall be granted on each
of the dates below (each, a "Grant Date"), as follows:
(1) at September 30, 1997, Warrants to purchase up to 200,000 Warrant
Shares, exercisable any time after the one year anniversary of the
Initial Borrowing Date at an exercise price equal to eighty percent
(80%) of the average Current Market Price of the Common Stock for the
twenty (20) trading days preceding such one year anniversary date.
(2) at March 31, 1999, Warrants to purchase up to 100,000 Warrant Shares,
exercisable any time after such Grant Date at an exercise price equal
to eighty percent (80%) of the average Current Market Price of the
Common Stock for the twenty (20) trading days preceding such Grant
Date.
(3) at June 30, 1999, Warrants to purchase up to 100,000 Warrant Shares,
exercisable any time after the date such Grant Date at an exercise
price equal to eighty percent (80%) of the average Current Market
Price of the Common Stock for the twenty (20) trading days preceding
such Grant Date.
(4) at September 30, 1999, Warrants to purchase up to 100,000 Warrant
Shares, exercisable any time after the date such Grant Date at an
exercise price equal to eighty percent (80%) of the average Current
Market Price of the Common Stock for the twenty (20) trading days
preceding such Grant Date.
(5) at December 31, 1999, Warrants to purchase up to 100,000 Warrant
Shares, exercisable any time after the date such Grant Date at an
exercise price equal to eighty percent (80%) of the average Current
Market Price of the Common Stock for the twenty (20) trading days
preceding such Grant Date.
(b) Notwithstanding anything to the contrary contained in this Agreement,
in the event that, on or before the six month anniversary of the Initial
Borrowing Date, Borrower indefeasibly pays in full all Advances outstanding
under this Credit Facility (together with interest thereon), the Borrower shall
be under no further obligation to grant to Lender, and the Lender shall not be
entitled to any Warrants pursuant to this Section 2.2.
(c) Notwithstanding anything to the contrary contained in this Agreement,
in the event that, any time prior to the Maturity Date but subsequent to the six
month anniversary of the Initial Borrowing Date (the "Early Payment Date"), the
Borrower
indefeasibly pays in full all Advances outstanding under this Credit Facility
(together with interest thereon), the Borrower shall be under no obligation to
grant to Lender, and the Lender shall not be entitled to, any Warrants which
would otherwise be granted to Lender subsequent to the Early Payment Date
pursuant to this Section 2.2.
2.3 Limitations. Notwithstanding anything to the contrary contained in this
Agreement, if the aggregate amount of Advances on or before the forty-fifth day
after the Initial Borrowing Date (the "Forty-Five Day Anniversary") is less than
$2,000,000, then
(a) the total number of Initial Warrant Shares to be granted under
Section 2.1 hereof shall be reduced to the amount of Initial Warrant Shares
equal to the product obtained by multiplying: (i) ten percent (10%) by (ii)
the aggregate dollar amount of any Advances having been made by Lender to
Borrower within such forty-five day period. Anything to the contrary
contained herein notwithstanding, in no event shall the aggregate number of
Initial Warrant Shares issued pursuant to Section 2.1 hereof exceed 200,000
shares of Common Stock; and
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(b) the total number of Warrant Shares to be granted under Section 2.2
hereof shall be reduced to the amount of Warrant Shares (the "Adjusted
Warrant Total") equal to the product obtained by multiplying: (i) 600,000
by (ii) that percentage, the numerator of which is the aggregate dollar
amount of the Advances made by the Lender at the Forty-Five Day Anniversary
and the denominator of which is $2,000,000. In the event of any adjustment
pursuant to this paragraph (b), the number of Warrants to be granted
pursuant to Section 2.2 hereof shall be adjusted pro ratably and the
Borrower shall be under no obligation to grant to Lender, and the Lender
shall not be entitled to, any Warrant Shares in excess of such Adjusted
Warrant Total.
2.4 Registration Rights. The Company shall grant the Lender or its assigns
"piggyback" registration rights with respect to the Initial Warrant Shares and
the Warrant Shares, as adjusted pursuant to Section 2.1 hereof. The Initial
Warrants and the Warrants received under the terms of this agreement may be
sold, transferred, hypothecated or assigned at the option of the Lender.
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2.5 Company Information. The Company has heretofore made available to the
Lender and the Lender has received, or had access to, the Borrower's reports on
Form 10-K for the year ended December 31, 1996 and Form 10-Q for the quarter
ended September 30, 1997 and such supplemental information pertaining to the
Company and its management as at the date hereof (including the Audited
Financial Statements for the year ended December 31, 1997).
2.6 Investment Representatives.
The Lender hereby represents, warrants and covenants as follows:
(a) The Lender understands that (A) neither the Warrants, Initial
Warrant Shares nor Warrant Shares have not been registered under the
Securities Act of 1933, as amended (the "Act"), or the securities laws of
any state, based upon applicable exemptions from such registration
requirements; (B) the Warrants, the Initial Warrant Shares and Warrant
Shares are "restricted securities," as said term is defined in Rule 144 of
the Rules and Regulations promulgated under the Act; (C) the Warrants,
Initial Warrant Shares and Warrant Shares may not be sold or otherwise
transferred unless they have been first registered under the Act and all
applicable state securities laws, or unless exemptions from such
registration provisions are available with respect to said resale or
transfer; (D) a legend (in the form of Schedule A hereto) to the foregoing
effect will be placed on the certificate or certificates representing the
Warrants, Initial Warrant Shares and Warrant Shares; and (E) stop transfer
instructions with respect to the foregoing will be placed with the transfer
agent for the Warrants, Initial Warrant Shares and Warrant Shares;
(b) The Lender is acquiring the Warrants, Initial Warrant Shares and
Warrant Shares solely for the account of the Lender for investment purposes
only, and not with a current view towards the distribution thereof;
(c) The Lender shall not sell, transfer, hypothecate or otherwise
dispose of the Warrants, Initial Warrant Shares or Warrant Shares other
than pursuant to an effective registration statement under the Act unless
prior thereto the Company receives either an opinion, in form and substance
reasonably acceptable to the Company, of the Company's counsel or counsel
for the Lender reasonably acceptable to the Company, that the proposed
transaction may be effected without compliance with the registration
provisions of the Act;
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(d) The Lender has had a reasonable opportunity to ask questions of
and receive answers from the Company, or a person or persons acting on
behalf of the Company, concerning the Company and its financial condition,
and all such questions, if any, have been answered to the full satisfaction
of the Lender;
(e) The Lender is not an "affiliate" of the Company, as such terms are
defined under the Act; and
(f) The Lender shall indemnify the Company and hold it harmless from
and against any and all losses, damages, liabilities, costs and expenses
which it may sustain or incur in connection with the breach by the Lender
of any representation, warranty or covenant made by the Lender herein;
2.7 Transfer Instructions. To enable the Company to enforce the Lender's
covenants contained in Section 2.4 above, the Lender consents to the Company
imposing transfer instructions consistent hereto with the transfer agent of the
Company's securities with respect to any Warrants, Initial Warrant Shares and
Warrant Shares until the end of such period.
Section 3. REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents and warrants to Lender, as follows:
3.1 Corporation Existence, Power and Authority of the Borrower. The
Borrower is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and is duly licensed or
qualified in each jurisdiction where the property owned by it or the nature of
the business transacted by it requires such licensing and qualification, except
where such failure to qualify would not have a material adverse effect on the
Company. The Borrower has all requisite corporate power and authority to conduct
business as it is now being conducted and to enter into, consummate and perform
all the provisions of this Agreement, and any instrument, agreement or document
referred to herein to which the Borrower is or shall be a party, having been
duly authorized by all corporate and other required actions.
3.2 No Conflicts. The execution, delivery and performance of the Borrower
of this Agreement, the Promissory Note or any other instrument, agreement or
document referred to herein does not and will not result in any violation of, or
be in conflict with, any terms or provisions of the Certificate of Incorporation
or the by-laws of the Borrower, or any material statute, governmental regulation
or order, judgment, decree, agreement, indenture, or instrument applicable to
the Company.
3.3 Authorizations. All governmental approvals, licenses, authorizations,
consents, filings and registrations, if any are
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required for the delivery and execution of this Agreement, and any applicable
instrument, agreement or document referred to herein as having been obtained or
made, are final and are not subject to review or appeal or, to the knowledge and
belief of the Borrower, the subject of any pending or threatened attack or
appeal to direct proceedings or otherwise.
Section 4. GOVERNING LAW/JURISDICTION
This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of New York
without reference to the principles of conflicts of laws. The Borrower hereby
irrevocably submits to the jurisdiction of the Supreme Court of the State of New
York, County of New York in any action, suit, or proceeding brought against the
Borrower and related to or in connection with this Agreement or any other
instrument, agreement or document referred to herein or any transaction
contemplated hereby.
Section 5. MISCELLANEOUS
5.1 Amendments. This Agreement may only be amended by a written instrument
executed by the Lender and Borrower.
5.2 Notices. All notices, requests and communications to any person
provided for hereunder shall be in writing and shall be given to such person at
the address first set forth above or such other address as either party shall
specify to the other party (and in the case of the Borrower, with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.) Each such notice, request or communication
shall be effective (i) if given by mail, 48 hours after such notice is deposited
in the mails by first class postage prepaid, addressed as aforesaid or (ii) if
given by any other means (including, without limitation, by fax or courier),
when delivered at the address specified above, provided that any such notice
shall not be effective until received.
5.3 Assignment. Neither this Agreement nor any rights, interests or
obligations hereunder may be assigned by any party hereto without the prior
written consent of all of the parties hereto. Any assignment not made in
compliance with this provision shall be null and void.
5.4 Severability. If any provision of this Agreement, or the application of
such provisions to any person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
5.5 Entire Agreement. This Agreement embodies the entire agreement and
understanding between the Company and each other
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party hereto relating to the subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter.
5.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
U.S. AUTOMOTIVE MANUFACTURING, INC.
By:
--------------------------------
Name:
Title:
______________________
[LENDER]
By:
----------------------------
Name:
Title:
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SCHEDULE A
Form of Legend
A. Warrant Shares
"THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO (1) AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT; (II) TO THE EXTENT APPLICABLE, RULE
144 UNDER THE ACT (OR SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES); OR (III) OTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS, SUPPORTED BY
AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
B. Warrants
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE
EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) UPON
THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE."
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