EXHIBIT 10.37
SEVENTH AMENDMENT AND WAIVER
TO CREDIT AGREEMENT
     THIS SEVENTH AMENDMENT AND WAIVER TO CREDIT AGREEMENT (“Seventh
Amendment”), dated as of June 27, 2007, is made and entered into by and between
MOTORCAR PARTS OF AMERICA, INC., a New York corporation (“Borrower”), and UNION
BANK OF CALIFORNIA, N.A., a national banking association (“Bank”).
RECITALS:
     A. Borrower and Bank are parties to that certain Credit Agreement dated as
of May 28, 2004, as amended or otherwise modified by (i) that certain First
Amendment dated as of November 8, 2005, (ii) that certain Second Amendment dated
as of April 5, 2006, (iii) that certain Third Amendment dated as of April 10,
2006, (iv) that certain Fourth Amendment dated as of August 8, 2006, (v) that
certain Fifth Amendment dated as of November 10, 2006, (vi) that certain Sixth
Amendment dated as of March 21, 2007 and (vii) that certain side letter dated
March 21, 2007 (as so amended, the “Agreement”), pursuant to which Bank agreed
to make various credit facilities available to Borrower, all as more
specifically provided for in the Agreement.
     B. Pursuant to Section 6.5 of the Agreement, Borrower agreed, among other
things, that as of the last day of each fiscal quarter, commencing with the
fiscal quarter ended June 30, 2004, Borrower and its Subsidiaries would achieve
Tangible Net Worth that increased from the minimum Tangible Net Worth required
under the Agreement as of the last day of the prior fiscal quarter by an amount
not less than seventy-five percent (75%) of the positive Net Profit After Taxes
of Borrower and its Subsidiaries for such prior fiscal quarter. Borrower and its
Subsidiaries failed to achieve Tangible Net Worth of not less than Forty-Eight
Million Six Hundred Eighty-Two Thousand Dollars ($48,682,000) for the fiscal
quarter ended March 31, 2007, which failure constituted an Event of Default
under Section 8.1(c) of the Agreement.
     C. Pursuant to Section 6.6(a) of the Agreement, Borrower agreed that
Borrower and its Subsidiaries would achieve EBITDA of not less than Three
Million Dollars ($3,000,000) for each fiscal quarter of each fiscal year.
Borrower and its Subsidiaries failed to achieve EBITDA of not less than Three
Million Dollars ($3,000,000) for the fiscal quarter ended March 31, 2007, which
failure constituted an Event of Default under Section 8.1(c) of the Agreement.
     D. Pursuant to Section 6.6(b) of the Agreement, Borrower agreed that
Borrower and its Subsidiaries would achieve EBITDA, as of the last day of each
fiscal quarter for the four (4) consecutive fiscal quarters ended on such date,
of not less than Thirteen Million Dollars ($13,000,000). Borrower and its
Subsidiaries failed to achieve EBITDA, as of the last day of the fiscal quarter
(and fiscal year) ended March 31, 2007, for the four (4) consecutive fiscal
quarters ended on such date, of not less than Thirteen Million Dollars
($13,000,000), which failure constituted an Event of Default under
Section 8.1(c) of the Agreement.
     E. Pursuant to Section 6.8 of the Agreement, Borrower agreed that Borrower
and its Subsidiaries would maintain a ratio of Current Assets to Current
Liabilities of not less than 1.20 to 1.00 as of the close of each fiscal
quarter, commencing with the fiscal quarter ended September 30, 2006. Borrower
and its Subsidiaries failed to maintain a ratio of Current Assets to Current
Liabilities of not less than 1.20 to 1.00 as of the close of the fiscal quarter
(and fiscal year) ended March 31, 2007, which failure constituted an Event of
Default under Section 8.1(c) of the Agreement.
     F. Pursuant to Section 6.19(c) of the Agreement, Borrower agreed that
Borrower and its Subsidiaries would maintain a Leverage Ratio as of the last day
of the fiscal quarter ended March 31, 2007 of not greater than 2.25 to 1.00.
Borrower and its Subsidiaries failed to maintain a Leverage Ratio as of the last
day of the fiscal quarter ended March 31, 2007 of not greater than 2.25 to 1.00,
which failure constituted an Event of Default under Section 8.1(c) of the
Agreement.
     G. Pursuant to Section 7.11 of the Agreement, Borrower agreed that Borrower
and its Subsidiaries would not permit their lease payments, as lessees, under
existing and future operating leases to exceed Three Million Dollars
($3,000,000) in the aggregate in any one fiscal year. Borrower and its
Subsidiaries failed to comply with Section 7.11 of the Agreement for the fiscal
year ended March 31, 2007, which failure constituted an Event of Default under
Section 8.1(c) of the Agreement.
     H. Borrower has requested that Bank agree to waive the Events of Default
described in Recitals B, C, D, E, F and G hereinabove. Bank is willing to so
waive such Events of Default, subject, however, to the terms and conditions of
this Seventh Amendment.
     I. In addition to the foregoing, Borrower has requested that Bank agree to
amend the Agreement in certain respects. Bank is willing to agree to so amend
the Agreement, subject, however, to the terms and conditions of this Seventh
Amendment.

 

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AGREEMENT:
     In consideration of the above recitals and of the mutual covenants and
conditions contained herein, Borrower and Bank agree as follows:
1. Defined Terms. Initially capitalized terms used herein which are not
otherwise defined shall have the meanings assigned thereto in the Agreement.
2. Waivers. Subject to the terms and conditions set forth in this Seventh
Amendment, Bank hereby waives the Events of Default that occurred under
Section 8.1(c) of the Agreement as a result of Borrower’s failure to comply with
Sections 6.5, 6.6(a), 6.6(b), 6.8, 6.19(c) and 7.11 of the Agreement, as
described in Recitals B, C, D, E, F and G hereinabove.
3. Waivers Limited. The waivers provided for in Section 2 of this Seventh
Amendment are limited precisely as written and shall not be deemed to excuse
Borrower’s further performance of Sections 6.5, 6.6(a), 6.6(b), 6.8, 6.19(c) or
7.11 of the Agreement, as at any time amended, or any other condition, covenant
or term contained in the Agreement or any other Loan Document. Any failure or
delay on the part of Bank in the exercise of any right, power or privilege under
the Agreement, as at any time amended, or any other Loan Document shall not
operate as a waiver thereof.
4. Amendments to the Agreement.
     (a) Section 6.7 of the Agreement is hereby amended to read in full as
follows:
          “6.7 Fixed Charge Coverage Ratio. Borrower and its Subsidiaries shall
maintain a Fixed Charge Coverage Ratio of not less than 2.00 to 1.00 as of the
last day of each fiscal quarter. For the purpose of determining Borrower’s
compliance with this Section 6.7 as of the last day of any fiscal quarter for
the four (4) consecutive fiscal quarters ended on such date (with such
determination of compliance to commence with the fiscal quarter ended March 31,
2007), the actual EBITDA of Borrower and its Subsidiaries achieved for the
fiscal quarter ended September 30, 2006 shall be increased by Eight Million
Sixty-Two Thousand Dollars ($8,062,000), which amount represents the adjustment
made to Borrower’s long-term core deposit for the fiscal quarter ended on such
date (as shown on Borrower’s Financial Statement for such fiscal quarter).”
     (b) Section 6.19 of the Agreement is hereby amended to read in full as
follows:
          “6.19 Leverage Ratio. Borrower and its Subsidiaries shall maintain a
Leverage Ratio as of the last day of each fiscal quarter of not greater than
2.00 to 1.00. For the purpose of determining Borrower’s compliance with this
Section 6.19 as of the last day of any fiscal quarter, the actual EBITDA of
Borrower and its Subsidiaries achieved for the fiscal quarter ended September
30, 2006 shall be increased by Eight Million Sixty-Two Thousand Dollars
($8,062,000), which amount represents the adjustment made to Borrower’s
long-term core deposit for the fiscal quarter ended on such date (as shown on
Borrower’s Financial Statement for such fiscal quarter).”
5. Effectiveness of this Seventh Amendment. This Seventh Amendment shall become
effective as of the date hereof when, and only when, Bank shall have received
all of the following, in form and substance satisfactory to Bank:
     (a) A counterpart of this Seventh Amendment, duly executed by Borrower;
     (b) A waiver and amendment fee in the sum of Seventeen Thousand Five
Hundred Dollars ($17,500) in connection with the waivers and amendments to the
Agreement provided for herein, which waiver and amendment fee shall be
nonrefundable;
     (c) A legal documentation fee in the sum of One Thousand Dollars ($1,000),
which legal documentation fee shall be nonrefundable; and
     (d) Such other documents, instruments or agreements as Bank may reasonably
deem necessary in order to effect fully the purposes of this Seventh Amendment.
6. Ratification.
     (a) Except as specifically amended hereinabove, the Agreement shall remain
in full force and effect and is hereby ratified and confirmed; and
     (b) Upon the effectiveness of this Seventh Amendment, each reference in the
Agreement to “this Agreement”, “hereunder”, “herein”, “hereof” or words of like
import referring to the Agreement shall mean and be a reference to the Agreement
as amended by this Seventh Amendment.

 

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7. Representations and Warranties. Borrower represents and warrants as follows:
     (a) Each of the representations and warranties contained in Section 5 of
the Agreement, as amended hereby, is hereby reaffirmed as of the date hereof,
each as if set forth herein;
     (b) The execution, delivery and performance of this Seventh Amendment are
within Borrower’s corporate powers, have been duly authorized by all necessary
corporate action, have received all necessary approvals, if any, and do not
contravene any law or any contractual restriction binding on Borrower;
     (c) This Seventh Amendment is the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms; and
     (d) No event has occurred and is continuing or would result from this
Seventh Amendment which constitutes an Event of Default under the Agreement, or
would constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
8. Governing Law. This Seventh Amendment shall be deemed a contract under and
subject to, and shall be construed for all purposes and in accordance with, the
laws of the State of California.
9. Counterparts. This Seventh Amendment may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.

 

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     WITNESS the due execution hereof as of the date first above written.
“Borrower”
MOTORCAR PARTS OF AMERICA, INC.

         
By:
  /s/ Selwyn Joffe
 
Selwyn H. Joffe
Chairman, President and
Chief Executive Officer    

“Bank”
UNION BANK OF CALIFORNIA, N.A.

         
By:
  /s/ Philip Roesner
 
Philip M. Roesner
Vice President