EXHIBIT 99.1
LOAN AND SECURITY AGREEMENT
DATED AS OF NOVEMBER 10, 1997
BETWEEN
▇▇▇▇▇▇ SNOWBOARDS, INC.,
AS BORROWER
AND
LASALLE BUSINESS CREDIT, INC.,
AS LENDER
$18,000,000
CONTENTS
1. DEFINITIONS................................................. 1
(a) General Definitions.................................... 1
(b) Accounting Terms and Definitions....................... 12
2. REVOLVING LOANS............................................. 12
3. TERM LOAN................................................... 13
4. LETTERS OF CREDIT........................................... 14
5. INTEREST, FEES AND CHARGES.................................. 14
(a) Rates of Interest...................................... 14
(b) Computation of Interest and Fees....................... 15
(c) Maximum Interest....................................... 15
(d) Letter of Credit Fees.................................. 15
(e) Closing Fee............................................ 16
(f) Unused Line Fee........................................ 16
(g) Appraisal Fees and Other Costs......................... 16
(h) Capital Adequacy Charge................................ 16
6. LOAN ADMINISTRATION......................................... 17
(a) Loan Requests.......................................... 17
(b) Disbursement........................................... 18
(c) Notice of Continuation and Notice of Conversion........ 18
7. GRANT OF SECURITY INTEREST TO LaSALLE....................... 20
8. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY
INTERESTS THEREIN........................................... 21
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9. POSSESSION OF COLLATERAL AND RELATED MATTERS................ 22
10. COLLECTIONS................................................. 22
11. SCHEDULES AND REPORTS....................................... 24
12. TERMINATION................................................. 25
13. REPRESENTATIONS AND WARRANTIES.............................. 26
14. COVENANTS................................................... 30
15. CONDITIONS PRECEDENT........................................ 36
16. DEFAULT..................................................... 37
17. REMEDIES UPON AN EVENT OF DEFAULT........................... 39
18. INDEMNIFICATION............................................. 40
19. NOTICES..................................................... 41
20. CHOICE OF GOVERNING LAW AND CONSTRUCTION.................... 41
21. FORUM SELECTION............................................. 41
22. MODIFICATION AND BENEFIT OF AGREEMENT....................... 41
23. HEADINGS OF SUBDIVISIONS.................................... 42
24. POWER OF ATTORNEY........................................... 42
25. ADVERTISING................................................. 42
26. WAIVER OF JURY TRIAL; OTHER WAIVERS; CONFIDENTIALITY........ 42
27. OREGON STATUTORY NOTICE..................................... 43
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EXHIBITS AND SCHEDULES
Exhibit A - Business and Collateral Locations
Exhibit B - Reporting Requirement
Exhibit C - Compliance Certificate
Schedule 1 - Permitted Liens
Schedule 13(i) - Pending Litigation
Schedule 13(m) - Other Names
Schedule 13(q) - Permitted Indebtedness
Schedule 13(s) - List of Parents and Subsidiaries
Schedule 14 - Covenant Disclosures
Schedule 15(i) - Closing Document List
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of November 10,
1997, by and among LASALLE BUSINESS CREDIT, INC., a Delaware corporation
("LaSalle"), with its principal office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇ SNOWBOARDS, INC., an Oregon corporation ("Borrower"),
with its principal office at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇.
WITNESSETH:
WHEREAS, from time to time Borrower may request LaSalle to make loans and
advances to and extend certain credit accommodations to Borrower, and the
parties wish to provide for the terms and conditions upon which such loans,
advances and credit accommodations shall be made;
NOW, THEREFORE, in consideration of any loans, advances and credit
accommodations (including any loans by renewal or extension) hereafter made to
Borrower by LaSalle, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by Borrower, the parties agree
as follows:
1. DEFINITIONS.
(a) GENERAL DEFINITIONS
"ACCOUNT," "ACCOUNT DEBTOR," "CHATTEL PAPER," "DEPOSIT ACCOUNTS,"
"DOCUMENTS," "EQUIPMENT," "GENERAL INTANGIBLES," "GOODS," "INSTRUMENTS,"
"INVENTORY," AND "INVESTMENT PROPERTY" shall have the respective meanings
assigned to such terms, as of the date of this Agreement, in the Oregon Uniform
Commercial Code.
"ACQUISITION" shall mean the proposed acquisition by Borrower of Westbeach
Snowboard Canada Limited.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by or under common control with Borrower.
"A/R ADVANCE RATE" means, at any time, the percentage set forth below
opposite the applicable average Dilution of Borrower's Accounts for the twelve
months preceding the time of such determination:
Dilution A/R Advance Rate
0-5% 85%
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Dilution A/R Advance Rate
5.1-6% 83%
6.1-7% 81%
7.1-8% 79%
8.1-9% 77%
9.1-10% 75%
More than 10% Rate determined by LaSalle in the
exercise of its sole credit judgment
"BORROWING BASE" means, as of any date of determination, an amount equal to
the following amount:
(i) the A/R Advance Rate applied to an amount equal to (A) the face
amount of the then outstanding Eligible Accounts less (B) sales, excise or
similar taxes included in the amount thereof and less (C) returns,
discounts, claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed with respect thereto;
(ii) plus the lesser of (A) $4,000,000 if the date of determination is
during the months of September through February and $8,000,000 if the date
of determination is during the months of March through August or (B) the
applicable Inventory Advance Rates applied, with respect to the applicable
category of Eligible Inventory, to the then amount of such Eligible
Inventory valued at the lower of cost (determined on a "first in, first
out" basis) or market value; and
(iii) less all Borrowing Base Reserves.
"BORROWING BASE RESERVES" means, as of any date of determination, such
amounts (expressed as either a specified amount or as a percentage of a
specified category or item) as LaSalle, in its sole discretion, may from time to
time establish in determining the Borrowing Base to reflect contingencies or
risks which may affect the Collateral, the business, business prospects or
financial condition of Borrower, or the security of the Loans.
"BREAKAGE COSTS" shall have the meaning specified in paragraph 6(c)(iv)
hereof.
"BUSINESS DAY" shall mean (i) any day other than a Saturday, Sunday, or
such other day as banks in Chicago, Illinois are authorized or required to be
closed for business, and (ii) with respect to notices and determinations in
connection with LIBOR Loans, any day included in (i) above and which is also a
day for trading by and between banks in U.S. dollar deposits in London, England.
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"CAPITAL EXPENDITURES" shall mean, with respect to any period, excluding
the Acquisition the aggregate of all expenditures (whether paid in cash or
accrued as liabilities and including expenditures for capitalized lease
obligations) by Borrower during such period that are required by GAAP to be
included in or reflected by the property, plant or equipment or similar fixed
asset accounts (or in intangible accounts subject to amortization) in the
balance sheet of Borrower.
"CLOSING DATE" shall mean the date first stated above.
"CLOSING DOCUMENT LIST" shall have the meaning specified in paragraph 15
hereof.
"COLLATERAL" shall mean all of Borrower's property described in paragraph 7
hereof and all of Borrower's real property described in the Mortgage.
"CONTINUATION" shall have the meaning specified in paragraph 6 hereof.
"CONVERSION" shall have the meaning specified in paragraph 6 hereof.
"DEBT SERVICE COVERAGE RATIO" shall mean, with respect to any period, the
ratio of (i) net income after taxes for such period (excluding any after-tax
gains on the sale of assets (other than the sale of Inventory in the ordinary
course of business) and excluding other after-tax extraordinary gains), plus
deferred taxes, plus depreciation and amortization deducted in determining net
income for such period, minus Capital Expenditures for such period not financed,
minus any cash dividends paid or accrued and cash withdrawals paid or accrued to
shareholders or other Affiliates for such period which were not calculated in
determining net income after taxes, and plus the after-tax increase in LIFO
reserves or minus the after tax decrease in LIFO reserves, to (ii) current
principal maturities of long term debt and capitalized leases paid or scheduled
to be paid during such period, plus any prepayments on indebtedness owed to any
Person (except trade payables and revolving loans) and paid during such period.
"DEFAULT" shall mean an Event of Default or any event, condition or default
which with the giving of notice, the lapse of time or both would be an Event of
Default.
"DILUTION" shall mean, with respect to any period, the percentage obtained
by dividing: (a) the sum of non-cash credits against Accounts of Borrower for
such period, plus pending or probable, but not yet applied, non-cash credits
against Accounts of Borrower for such period, as determined by LaSalle, by (b)
gross invoiced sales of Borrower for such period.
"EBITDA" shall mean, with respect to any period, net income after taxes for
such period (excluding any after-tax gains on the sale of assets (other than
inventory sold in the ordinary course of business) and excluding other after-tax
extraordinary gains) plus
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interest expense, income tax expense, depreciation and amortization for such
period, plus or minus any other non-cash charges or gains which have been
subtracted or added in calculating net income after taxes for such period.
"ELIGIBLE ACCOUNT" shall mean an Account owing to Borrower which is
acceptable to LaSalle in its sole discretion for lending purposes. LaSalle
shall, in general, consider an Account to be an Eligible Account if it meets,
and so long as it continues to meet, the following requirements:
(i) it is genuine and in all respects is what it purports to be;
(ii) it is owned by Borrower and Borrower has the right to subject it to a
security interest in favor of LaSalle;
(iii) it arises from (A) the performance of services by Borrower and such
services have been fully performed and acknowledged and accepted by
the Account Debtor thereunder; or (B) the sale of Goods by Borrower,
and such Goods have been completed in accordance with the Account
Debtor's specifications (if any) and delivered to and accepted by the
Account Debtor, such Account Debtor has not refused to accept and has
not returned or offered to return any of the Goods, or has not
refused to accept any of the services, which are the subject of such
Account, and Borrower has possession of, or has delivered to LaSalle
at LaSalle's request, shipping and delivery receipts evidencing
delivery of such Goods;
(iv) it is evidenced by an invoice rendered to the Account Debtor
thereunder, is due and payable within 180 days after the stated
invoice date thereof and does not remain unpaid more than 60 days
past the stated payment date if the stated payment date is not more
than 90 days after the stated invoice date or does not remain unpaid
more than 30 days past the stated payment date if the stated payment
date is more than 90 days after the stated invoice date; provided,
however, that if more than 25% of the aggregate dollar amount of
invoices owing by a particular Account Debtor remain unpaid beyond
the periods described above in this item (iv), then all Accounts
owing to Borrower by that Account Debtor shall be deemed ineligible;
(v) it is not subject to any prior assignment, claim, lien, security
interest or encumbrance whatsoever, other than Permitted Liens;
(vi) it is a valid, legally enforceable and unconditional obligation of
the Account Debtor thereunder, and is not subject to setoff,
counterclaim, credit, allowance or adjustment by such Account Debtor,
or to any claim by such Account Debtor denying liability thereunder
in whole or in part;
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(vii) it does not arise out of a contract or order which fails in any
material respect to comply with the requirements of applicable law;
(viii) the Account Debtor thereunder is not a director, officer, employee
or agent of Borrower, or a Subsidiary, Parent or Affiliate of
Borrower;
(ix) it is not an Account with respect to which the Account Debtor is the
United States of America or any department, agency or
instrumentality thereof, unless Borrower assigns its right to
payment of such Account to LaSalle pursuant to, and in full
compliance with, the Assignment of Claims Act of 1940, as amended;
(x) it is not an Account with respect to which the Account Debtor is
located in a jurisdiction which requires Borrower, as a precondition
to commencing or maintaining an action in the courts of that
jurisdiction, either to (A) receive a certificate of authority to do
business and be in good standing in such state, or (B) file a notice
of business activities report or similar report with such state's
taxing authority, unless (x) Borrower has taken one of the actions
described in clauses (A) or (B), (y) the failure to take one of the
actions described in either clause (A) or (B) may be cured
retroactively by Borrower at its election, or (z) Borrower has
proven, to LaSalle's satisfaction, that it is exempt from any such
requirements under any such state's laws;
(xi) it is an Account which arises out of a sale made in the ordinary
course of Borrower's business;
(xii) the Account Debtor is a resident or citizen of, and is located
within, the United States of America or Canada or if the Account
Debtor is not a resident of the United States or Canada, either (A)
the Account Debtor has supplied Borrower with an irrevocable
commercial letter of credit issued by a financial institution and in
form and substance satisfactory to Lender, and, if so requested by
Lender, delivered to Lender or its agent in pledge for negotiation
and presentment, or (B) the Account is covered by credit insurance
acceptable to LaSalle;
(xiii) it is not an Account with respect to which the Account Debtor's
obligation to pay is conditional upon the Account Debtor's approval
of the Goods or services or is otherwise subject to any repurchase
obligation or return right, as with sales made on a ▇▇▇▇-and-hold,
guaranteed sale, sale on approval, sale or return or consignment
basis;
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(xiv) it is not an Account (A) with respect to which any representation or
warranty contained in this Agreement is untrue or (B) which violates
any of the covenants of Borrower contained in this Agreement;
(xv) it is not an Account which, when added to a particular Account
Debtor's other indebtedness to Borrower, exceeds the lesser of 10% of
the aggregate of Borrower's Accounts or a credit limit determined by
LaSalle in its sole judgment for that Account Debtor, provided,
however, that Accounts excluded from Eligible Accounts solely by
reason of this paragraph (xv) shall be Eligible Accounts to the
extent of such credit limit, and provided, further, that this
paragraph (xv) shall not be applicable to Accounts supported by
letter(s) of credit acceptable to LaSalle; and
(xvi) it is not an Account with respect to which the prospect of payment
or performance by the Account Debtor is or will be impaired, as
determined by LaSalle in its sole discretion.
"ELIGIBLE INVENTORY" shall mean Inventory of Borrower which is finished
goods or raw materials and which is acceptable to LaSalle in its sole
discretion. Without limiting LaSalle's discretion, LaSalle shall, in general,
consider Inventory to be Eligible Inventory if it meets, and so long as it
continues to meet, the following requirements:
(i) it is owned by Borrower and Borrower has the right to subject it to a
security interest in favor of LaSalle;
(ii) it is located on the premises listed on Exhibit A (and LaSalle has
received a landlord's waiver acceptable to LaSalle with respect to
such premises if such premises are not owned by Borrower) and is not
in transit;
(iii) it is not subject to any prior assignment, claim, lien, security
interest or encumbrance whatsoever, other than Permitted Liens;
(iv) it is not work in process and is held for sale or furnishing under
contracts of service, it is (except as LaSalle may otherwise consent
in writing) new and unused and free from defects which would, in
LaSalle's sole determination, affect its market value;
(v) it is not stored with a bailee, consignee, warehouseman, processor or
similar party unless LaSalle has given its prior written approval and
Borrower has caused any such bailee, consignee, warehouseman,
processor or similar party to issue and deliver to LaSalle, in form
and substance acceptable to LaSalle, such UCC financing statements,
warehouse receipts, waivers and other documents as LaSalle shall
require;
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(vi) LaSalle has determined in accordance with LaSalle's customary
business practices that it is not unacceptable due to age, type,
category or quantity;
(vii) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement are
untrue or (B) which violates any of the covenants of Borrower
contained in this Agreement; and
(viii) at no time will more than $1,500,000 of finished goods for retail
sale shall be considered Eligible Inventory.
Eligible Inventory shall be deemed to include as finished goods an amount equal
to all Letters of Credit which are documentary letters of credit issued in
connection with the acquisition by Borrower of Goods which upon receipt by
Borrower will be finished goods meeting the requirements listed above.
"EVENT OF DEFAULT" shall have the meaning specified in paragraph 16 hereof.
"EXCESS AVAILABILITY" shall mean, as of any date of determination by
LaSalle, the excess, if any, of (i) the Borrowing Base over (ii) the outstanding
Revolving Loans and Letter of Credit Obligations, in each case as of the close
of business on such date. For purposes of calculating Borrower's Excess
Availability and the amount of the Borrowing Base relating thereto, all of
Borrower's trade payables and outstanding debt, other than the Liabilities
hereunder, which remain unpaid more than thirty (30) days after the due dates
thereof shall, on the date of the determination of Excess Availability, be
deemed to have been paid by Borrower.
"GAAP" shall mean generally accepted accounting principles and policies in
the United States as in effect from time to time.
"INDEMNIFIED PARTY" shall have the meaning specified in paragraph 18
hereof.
"INTEREST PERIOD" shall mean for any LIBOR Rate Loan the period commencing
on the date of the borrowing thereof and ending one or three months thereafter;
provided, however, that Borrower may not select any Interest Period that ends
after the Original Term, or if applicable, the Renewal Term. Whenever the last
day of an Interest Period would otherwise occur on a day other than a Business
Day, the last day of such Interest Period shall be extended to occur on the next
succeeding Business Day; provided, that if such extension would cause the last
day of such Interest Period to occur in the next following calendar month, the
last day of such Interest Period shall occur on the next preceding Business Day.
"INVENTORY ADVANCE RATES" means: (i) with respect to raw materials, 20%
during the months of May and June, 10% during the months of April and July and
0% during all other months; and (ii) with respect to finished goods, 65% during
the months of May and
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June, 60% during the months of April and July, during the month of August, 60%
until the first Monday in August and as of the first Monday in August the rate
shall be 58% and as of each subsequent Monday in August the rate shall reduce by
two percentage points from the rate previously in effect but in no event to a
rate less than 50%, and at all other times the rate shall be 50%.
"KIND" shall mean, with respect to any Loan, whether such Loan is a
Revolving Loan or a Term Loan.
"LETTERS OF CREDIT" shall mean those documentary or stand-by letters of
credit issued for Borrower's account in accordance with the terms of paragraph 4
hereof.
"LETTER OF CREDIT OBLIGATIONS" shall mean, as of any date of determination,
the sum of (i) the aggregate undrawn face amount of all Letters of Credit and
(ii) the aggregate unreimbursed amount of all drawn Letters of Credit not
already converted to a Loan hereunder.
"LIABILITIES" shall mean any and all obligations, liabilities and
indebtedness of Borrower to LaSalle or to any parent, affiliate or subsidiary of
LaSalle of any and every kind and nature, howsoever created, arising or
evidenced and howsoever owned, held or acquired, whether now or hereafter
existing, whether now due or to become due, whether primary, secondary, direct,
indirect, absolute, contingent or otherwise (including, without limitation,
obligations of performance), whether several, joint or joint and several, and
whether arising or existing under written or oral agreement or by operation of
law.
"LIBOR RATE" shall mean, with respect to the Interest Period applicable to
the borrowing of a LIBOR Rate Loan, the rate obtained (rounded upwards to the
nearest 1/100 of 1%) by dividing (i) the rate of interest per annum offered to
LaSalle in the London interbank foreign currency deposits market as of
approximately 11:00 A.M. (Greenwich Mean Time) two (2) Business Days prior to
the commencement of such Interest Period for U.S. dollar deposits of amounts in
immediately available funds comparable to the principal amount of the LIBOR Rate
Loan for which the LIBOR Rate is being determined with maturities comparable to
the Interest Period for which such LIBOR Rate will apply, by (ii) a percentage
equal to 1 minus the stated reserve (expressed as a decimal), if any, required
to be maintained against "Eurocurrency liabilities" as specified in Regulation D
of the Board of Governors of the Federal Reserve System as from time to time
shall be in effect (or against any other category of liabilities, which includes
deposits, by reference to which the interest rate on LIBOR Rate Loans is
determined or any category of extensions of credit on other assets, which
includes loans by a non-U.S. office of LaSalle to U.S. Residents). In the
absence of manifest error, each determination by LaSalle of the applicable LIBOR
Rate shall be deemed conclusive.
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"LIBOR RATE LOAN" shall mean a Revolving Loan or portion of the Term Loan
that bears interest based on the LIBOR Rate.
"LIBOR RATE REVOLVING LOAN" shall mean a Revolving Loan that bears interest
based on the LIBOR Rate.
"LIBOR RATE TERM LOAN" shall mean that portion of the Term Loan that bears
interest based on the LIBOR Rate.
"LOAN" or "LOANS" shall mean any and all Revolving Loans and the Term Loan
made by LaSalle to Borrower pursuant to paragraphs 2 and 3 hereof and all other
loans, advances and financial accommodations made by LaSalle to or on behalf of
Borrower hereunder.
"LOCK BOX" and "BLOCKED ACCOUNT" shall have the meanings specified in
paragraph 10 hereof.
"MATERIAL ADVERSE EFFECT" shall mean with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon, Borrower's
business, property, assets, operations, condition (financial or otherwise) or
prospects.
"MORTGAGE" shall mean each mortgage or deed of trust executed by Borrower
in favor of LaSalle to secure the Liabilities.
"NOTE" shall mean the Revolving Note or the Term Note.
"OBLIGOR" shall mean Borrower and each Person who is or shall become
primarily or secondarily liable for any of the Liabilities; provided, however,
that such term shall not include any Account Debtor.
"ORIGINAL TERM" shall have the meaning specified in paragraph 12 hereof.
"OTHER AGREEMENTS" shall mean all agreements, instruments and documents
including, without limitation, guaranties, mortgages, trust deeds, pledges,
powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other writings heretofore, now
or from time to time hereafter executed by or on behalf of Borrower or any other
Person and delivered to LaSalle or to any parent, affiliate or subsidiary of
LaSalle in connection with the Liabilities or the transactions contemplated
hereby.
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"PARENT" shall mean any Person now or at any time or times hereafter owning
or controlling (alone or with any other Person) at least a majority of the
issued and outstanding stock or other similar ownership interest of Borrower or
any Subsidiary.
"PERMITTED LIENS" shall mean (i) purchase money security interests securing
indebtedness (a) in any one transaction of no more than $50,000 and (b) in any
aggregate 12-month period of no more than $250,000, (ii) statutory liens of
landlords, carriers, warehousemen, mechanics, materialmen or suppliers incurred
in the ordinary course of business and securing amounts not yet due or declared
to be due by the claimant thereunder, (iii) liens or security interests in favor
of LaSalle, (iv) zoning restrictions and easements, rights of way, licenses,
covenants and other restrictions affecting the use of real property that do not
individually or in the aggregate have a Material Adverse Effect on Borrower's
ability to use such real property for its intended purpose in connection with
Borrower's business, (v) liens securing the payment of taxes or other
governmental charges not yet delinquent or being contested in good faith and by
appropriate proceedings, (vi) liens incurred or deposits made in the ordinary
course of Borrower's business in connection with capitalized leases or purchase
money security interests for purchase of, and applying only to, Equipment
included in the permitted borrowings under paragraph 13(q) or permitted as
Capital Expenditures under paragraph 14(n)(iv), the documents relating to such
liens to be in form and substance acceptable to LaSalle, (vii) liens securing
indebtedness owing by any Subsidiary to Borrower to the extent such indebtedness
is permitted under paragraph 14(i), or to any other Subsidiary of Borrower,
(viii) deposits to secure performance of bids, trade contracts, leases and
statutory obligations (to the extent not excepted elsewhere herein); (ix) liens
specifically permitted by LaSalle in writing as set forth on Schedule 1 attached
hereto; (x) any lien arising out of the refinancing, extension, renewal or
refunding of any indebtedness secured by an lien permitted by any of the
foregoing subparagraphs (ii) through (ix) inclusive; provided, that (a) such
indebtedness is not secured by any additional assets, and (b) the amount of such
indebtedness is not increased, (xi) pledges or deposits in connection with
worker's compensation, unemployment insurance and other social security
legislation, (xii) securities and other properties held at banks or financial
institutions to secure the payment or reimbursement under overdraft, acceptance
and other facilities, and (xiii) rights of setoff, banker's lien and other
similar rights arising solely by operation of law.
"PERSON" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or foreign or United States
government (whether federal, state, county, city, municipal or otherwise),
including, without limitation, any instrumentality, division, agency, body or
department thereof.
"PRIME RATE" shall mean the publicly announced prime rate of LaSalle
National Bank, Chicago, Illinois, in effect from time to time. The Prime Rate
is not intended to be the lowest or most favorable rate of LaSalle National Bank
in effect at any time.
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"PRIME RATE LOAN" shall mean a Revolving Loan or portion of the Term Loan
that bears interest based on the Prime Rate.
"PRIME RATE REVOLVING LOAN" shall mean a Revolving Loan that bears interest
based on the Prime Rate.
"PRIME RATE TERM LOAN" shall mean that portion of the Term Loan that bears
interest based on the Prime Rate.
"RENEWAL TERM" shall have the meaning specified in paragraph 12 hereof.
"REVOLVER MAXIMUM AMOUNT" means $14,000,000 during the period beginning
March 1 and ending October 14 of each year and $7,000,000 at all other times.
"REVOLVING LOANS" shall have the meaning specified in paragraph 2 hereof.
"REVOLVING NOTE" shall mean the promissory note in the original principal
amount of $14,000,000, executed by Borrower to the order of LaSalle, dated as of
the Closing Date.
"SUBSIDIARY" shall mean any corporation of which more than 50% of the
outstanding capital stock having ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether at the time
stock of any other class of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly or
indirectly, owned by Borrower or by any partnership or joint venture of which
more than fifty 50% of the outstanding equity interests are at the time,
directly or indirectly, owned by Borrower.
"TERM LOAN" shall have the meaning specified in paragraph 3 hereof.
"TERM LOAN CONDITIONS" means the occurrence of all of the following events:
(i) receipt by LaSalle of an appraisal of the orderly liquidation value of
Borrower's Equipment which is satisfactory to LaSalle; (ii) receipt by LaSalle
of an appraisal of the fair market value of Borrower's real property which is
subject to a Mortgage, which appraisal is satisfactory to LaSalle; (iii)
environmental due diligence satisfactory to LaSalle has been completed with
respect to the real property which is the subject of the Mortgage; (iv) LaSalle
has received Borrower's audited annual financial statements for a fiscal year
after 1996 and such financial statements report a pretax profit of at least
$1,000,000; and (v) Obligors shall have executed and delivered to LaSalle all
agreements and documents which LaSalle determines are necessary to consummate
the Term Loan.
"TERM NOTE" shall mean the promissory note in the original principal amount
equal to the amount of the Term Loan, executed by Borrower to the order of
LaSalle and dated as of the Closing Date.
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"TYPE" shall mean, with respect to any (i) Revolving Loan, whether such
Revolving Loan is a LIBOR Rate Revolving Loan or a Prime Rate Revolving Loan and
(ii) Term Loan, whether any portion thereof is a LIBOR Rate Term Loan or a Prime
Rate Term Loan.
(b) ACCOUNTING TERMS AND DEFINITIONS
Unless otherwise defined or specified herein, all accounting terms used in
this Agreement shall be construed in accordance with GAAP, applied on a basis
consistent in all material respects with the financial statements delivered by
Borrower to LaSalle on or before the Closing Date. All accounting
determinations for purposes of determining compliance with the financial
covenants contained in paragraph 14(n) shall be made in accordance with GAAP as
in effect on the Closing Date and applied on a basis consistent in all material
respects with the audited financial statements delivered to LaSalle by Borrower
on or before the Closing Date. The financial statements required to be
delivered hereunder from and after the Closing Date, and all financial records,
shall be maintained in accordance with GAAP. If GAAP shall change from the
basis used in preparing the audited financial statements delivered to LaSalle by
Borrower on or before the Closing Date, the certificates required to be
delivered pursuant to paragraph 14(b) demonstrating compliance with the
covenants contained herein shall include, at the election of Borrower or upon
the request of LaSalle, calculations setting forth the adjustments necessary to
demonstrate how Borrower is in compliance with the financial covenants based
upon GAAP as in effect on the Closing Date.
2. REVOLVING LOANS
Subject to the terms and conditions of this Agreement and the Other
Agreements, during the Original Term and any Renewal Term: LaSalle may, in its
sole discretion, from time to time make such revolving loans and advances (the
"Revolving Loans") to Borrower as Borrower may from time to time request in
accordance with the terms hereof. The aggregate unpaid principal amount of all
Revolving Loans outstanding at any one time made to Borrower shall not exceed
the lesser of (i) the Borrowing Base or (ii) the Revolver Maximum Amount, in
each case minus the outstanding Letter of Credit Obligations. All Revolving
Loans shall be repaid in full upon the earlier to occur of (A) the end of the
Original Term or any Renewal Term, if either LaSalle or Borrower elects to
terminate this Agreement as of the end of any such term and (B) the acceleration
of the Liabilities pursuant to paragraph 17 of this Agreement. If at any time
the total of the outstanding principal balance of the Revolving Loans plus the
Letter of Credit Obligations exceeds the lesser of (i) the Borrowing Base or
(ii) the Revolver Maximum Amount; Borrower shall immediately, and without the
necessity of a demand by LaSalle, pay to LaSalle such amount as may be necessary
to eliminate such excess, and LaSalle shall apply such payment first against the
outstanding principal balance of the Revolving Loans. Borrower hereby
authorizes LaSalle to charge any of Borrower's accounts to
Page 12
make any payments of principal, interest, fees or reimbursable expenses required
or provided for by this Agreement. All Revolving Loans shall, in LaSalle's sole
discretion, be evidenced by one or more promissory notes in form and substance
satisfactory to LaSalle. However, if such Revolving Loans are not so evidenced,
such Revolving Loans may be evidenced solely by entries upon the books and
records maintained by LaSalle.
3. TERM LOAN
(a) Upon satisfaction of the Term Loan Conditions and provided no Default
exists, LaSalle, upon Borrower's request, will make a term loan to Borrower (the
"Term Loan") in the original principal amount requested by Borrower but not more
than the lesser of (i) $4,000,000 or (ii) an amount equal to 80% of the orderly
liquidation value of Borrower's Equipment which LaSalle deems eligible for
lending purposes plus 70% of the appraised fair market value of Borrower's real
property which LaSalle deems eligible for lending purposes. Principal payable
on account of the Term Loan shall be payable in successive equal monthly
installments each in an amount equal to 1.1905% of the original principal amount
of the Term Loan with the first installment due and payable on the first day of
the month immediately following the 30th day after disbursement of the Term
Loan; provided, however, that the entire unpaid principal balance of the Term
Loan shall be due and payable in full upon the expiration of the Original Term
of this Agreement; and, provided further, that in the event that the Original
Term of this Agreement is initially or subsequently renewed in accordance with
paragraph 12 hereof, then Borrower shall continue to make such equal and level
monthly payments, with a final installment equal to the unpaid principal balance
and any other amounts outstanding due and payable upon the expiration of the
Renewal Term. Notwithstanding anything hereinabove to the contrary, the entire
unpaid principal balance of the Term Loan, and any accrued and unpaid interest
thereon, shall be immediately due and payable upon the earlier to occur of (i)
the last day of the Original Term or the last day of any Renewal Term, if either
LaSalle or Borrower elects to terminate this Agreement as of the end of any such
Original or Renewal Term and (ii) the acceleration of the Liabilities pursuant
to paragraph 17 of this Agreement.
(b) If at any time after the Term Loan is disbursed to Borrower, Borrower
sells any Equipment, or any real property subject to a Mortgage or if any
Equipment or such real property is damaged, destroyed or taken by condemnation,
Borrower shall pay to LaSalle, unless otherwise specifically provided herein or
otherwise agreed to by LaSalle, as and when received by Borrower and as a
mandatory prepayment of the Term Loan, to be applied against the last maturing
installments of principal thereof, in the inverse order thereof (or, at
LaSalle's option, such of the other Liabilities of Borrower as LaSalle may
elect), a sum equal to the proceeds received by Borrower from (i) such sale or
(ii) such damage, destruction or condemnation; provided, however, that without
LaSalle's consent, unless and until an Event of Default has occurred and is
continuing:
Page 13
(i) obsolete or worn out Equipment may be sold or otherwise disposed
of by Borrower and the proceeds thereof may be retained by Borrower,
so long as the fair market value of any such Equipment sold or
otherwise disposed of in any single transaction is less than $5,000,
and the fair market value, in the aggregate, of all such Equipment
sold or otherwise disposed of by Borrower during any twelve-month
period is less than $25,000; and
(ii) proceeds arising from any such damage, destruction or
condemnation may be retained by Borrower and used by Borrower to
repair, restore or replace the damaged, destroyed or condemned
property, so long as the fair market value of any such damaged,
destroyed or condemned property in any single incident is less than
$25,000; and the fair market value, in the aggregate, of all such
property damaged, destroyed or condemned during any twelve-month
period is less than $50,000.
4. LETTERS OF CREDIT
Subject to the terms and conditions of this Agreement, and the Other
Agreements, during the term of this Agreement, LaSalle may, in its sole
discretion, from time to time cause the issuance of and co-sign for, upon
Borrower's request, Letters of Credit; provided, that the Letters of Credit
shall be in form and substance acceptable to LaSalle in its sole discretion and
that the aggregate undrawn face amount of all such Letters of Credit shall at no
time exceed $5,000,000; and provided further, that no Letter of Credit shall
have an expiry date (a) more than 365 days from the date of issuance or (b)
beyond five (5) days prior to the expiration of the Original Term or the Renewal
Term, as the case may be. Borrower's reimbursement obligation in respect of the
Letters of Credit shall automatically reduce, dollar for dollar, the amount
which Borrower may borrow based upon the Borrowing Base. Any payment made by
LaSalle to any Person on account of any Letter of Credit shall constitute a
Revolving Loan hereunder. At no time shall the aggregate sum of the Revolving
Loans plus the Letter of Credit Obligations be in excess of the lesser of the
Borrowing Base or the Revolver Maximum Amount.
5. INTEREST, FEES AND CHARGES
(a) RATES OF INTEREST
Interest accrued on all Loans shall be due on the earliest of: (i) the
first day of each month (for the immediately preceding month), computed through
the last calendar day of the preceding month, and also, in the case of a LIBOR
Rate Loan, in addition to monthly, at the end of the Interest Period applicable
thereto; (ii) the occurrence of an Event of Default in consequence of which
LaSalle elects to accelerate the maturity and payment of the Liabilities; or
(iii) termination of this Agreement pursuant to paragraph 12 hereof. At
Borrower's election, except as otherwise provided in paragraph 6 (c) hereof,
interest shall accrue on: (A) the unpaid principal balance of the Term Loan
made to
Page 14
Borrower outstanding at the end of each day at (x) a fluctuating rate
per annum equal to 25 basis points above the Prime Rate or (y) a fixed rate per
annum equal to 275 basis points above the LIBOR Rate; and (B) the principal
amount of the Revolving Loans made to Borrower outstanding at the end of each
day at (x) a fluctuating rate per annum equal to 25 basis points above the Prime
Rate or (y) a fixed rate per annum equal to 275 basis points above the LIBOR
Rate. The rate of interest payable on Prime Rate Loans shall increase or
decrease by an amount equal to any increase or decrease in the Prime Rate,
effective as of the opening of business on the day that any such change in the
Prime Rate occurs. Beginning on the first day of the month after receipt by
LaSalle of Borrower's audited annual financial statements for a fiscal year
after 1996 reporting a pretax profit of at least $1,000,000, provided no Default
exists as of such date, each of the interest rates set forth above shall be
permanently reduced as of such date by 25 basis points. Upon and after the
occurrence of an Event of Default, and during the continuation thereof, the
principal amount of all Loans shall bear interest on demand at the rates per
annum set forth above, plus 200 basis points.
(b) COMPUTATION OF INTEREST AND FEES
Interest and collection charges hereunder shall be calculated daily and
shall be computed on the actual number of days elapsed over a year consisting of
three hundred and sixty (360) days. For the purpose of computing interest
hereunder, all items of payment received by LaSalle shall be deemed applied by
LaSalle on account of the Liabilities (subject to final payment of such items)
on the next Business Day after receipt by LaSalle of good funds in LaSalle's
account located in Chicago, Illinois.
(c) MAXIMUM INTEREST
It is the intent of the parties that the rate of interest and the other
charges to Borrower under this Agreement shall be lawful; therefore, if for any
reason the interest or other charges payable under this Agreement are found by a
court of competent jurisdiction, in a final determination, to exceed the limit
which LaSalle may lawfully charge Borrower, then the obligation to pay interest
and other charges shall automatically be reduced to such limit and, if any
amount in excess of such limit shall have been paid, then such excess amount
shall be refunded to Borrower.
(d) LETTER OF CREDIT FEES
Borrower shall remit to LaSalle a Letter of Credit fee equal to 1.5% per
annum on the aggregate undrawn face amount of all outstanding Letters of Credit
issued for the account of Borrower, which fee shall be payable monthly in
arrears on each day that interest is payable hereunder. Borrower shall also pay
on demand the normal and customary administrative charges for issuance,
amendment, negotiation, renewal or extension of any Letter of Credit imposed by
the bank issuing such Letter of Credit. Upon the occurrence and during the
continuance of an Event of Default, all Letter of
Page 15
Credit fees shall be payable on demand at a rate equal to 3.5% per annum on the
aggregate undrawn face amount thereof.
(e) CLOSING FEE
Borrower shall pay to LaSalle a closing fee of $52,500, which shall be
fully earned, nonrefundable and due on the Closing Date. Upon disbursement of
the Term Loan, Borrower shall pay to LaSalle an additional closing fee equal to
0.375% of the original principal amount of the Term Loan.
(f) UNUSED LINE FEE
Borrower shall pay to LaSalle at the end of each month, in arrears, an
Unused Line Fee equal to 0.25% per annum on the daily average amount by which
the sum of (i) the outstanding principal balance of the Revolving Loans and (ii)
the outstanding Letter of Credit Obligations is less than the Revolver Maximum
Amount. The Unused Line Fee shall accrue from the Closing Date until the last
day of the Original Term, and if applicable, from the first day to the last day
of each Renewal Term.
(g) APPRAISAL FEES AND OTHER COSTS
In addition to the costs and expenses described in paragraph 14(o) hereof,
Borrower shall reimburse LaSalle for any costs and expenses incurred by LaSalle
with respect to any appraisals and any environmental due diligence performed or
obtained in connection with the satisfaction of the Term Loan Conditions.
(h) CAPITAL ADEQUACY CHARGE
If LaSalle shall have determined that the adoption of any law, rule or
regulation regarding capital adequacy, or any change therein or in the
interpretation or application thereof, or compliance by LaSalle with any request
or directive regarding capital adequacy (whether or not having the force of law)
from any central bank or governmental authority enacted after the Closing Date,
does or shall have the effect of reducing the rate of return on LaSalle's
capital as a consequence of its obligations hereunder to a level below that
which LaSalle could have achieved but for such adoption, change or compliance
(taking into consideration LaSalle's policies with respect to capital adequacy)
by a material amount, then from time to time, after submission by LaSalle to
Borrower of a written demand therefor ("Capital Adequacy Demand") together with
the certificate described below, Borrower shall pay to LaSalle such additional
amount or amounts ("Capital Adequacy Charge") as will compensate LaSalle for
such reduction, such Capital Adequacy Demand to be made with reasonable
promptness following such determination. A certificate of LaSalle claiming
entitlement to payment as set forth above shall be conclusive in the absence of
manifest error. Such certificate shall set forth the nature of the occurrence
giving rise to such reduction, the amount of the Capital Adequacy Charge
Page 16
to be paid to LaSalle, and the method by which such amount was determined. In
determining such amount, LaSalle may use any reasonable averaging and
attribution method, applied on a non-discriminatory basis.
Borrower shall have ninety (90) days from receipt of the Capital Adequacy
Demand to seek and obtain replacement financing and will be entitled to apply
the proceeds of such financing to payment in full of all Liabilities. In the
event Borrower chooses this option the provisions of Section 12(b) shall not
apply.
6. LOAN ADMINISTRATION
(a) LOAN REQUESTS
A request for a Revolving Loan shall be made or shall be deemed to be made,
each in the following manner: (i) Borrower shall give LaSalle same day notice,
no later than 10:30 A.M. (Portland time) of such day, of its intention to borrow
a Prime Rate Revolving Loan, and at least three (3) Business Days prior notice
of its intention to borrow a LIBOR Rate Revolving Loan, in which notice Borrower
shall specify the amount of the proposed borrowing and the proposed borrowing
date; provided, however, that no such request may be made at a time when there
exists a Default; and (ii) the coming due of any amount required to be paid
under this Agreement or any Note, whether on account of interest or for any
other Liability, shall be deemed irrevocably to be a request for a Prime Rate
Revolving Loan on the due date thereof in the amount required to pay such
interest or other Liability. As an accommodation to Borrower, LaSalle may permit
telephone requests for Revolving Loans and electronic transmittal of
instructions, authorizations, agreements or reports to LaSalle by Borrower.
Unless Borrower specifically directs LaSalle in writing not to accept or act
upon telephonic or electronic communications from Borrower, LaSalle shall have
no liability to Borrower for any loss or damage suffered by Borrower as a result
of LaSalle's honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to it
telephonically or electronically and purporting to have been sent to LaSalle by
Borrower. LaSalle shall have no duty to verify the origin of any such
communication or the authority of the Person sending it. Each notice of
borrowing shall be irrevocable by and binding on Borrower, and if such notice
requests the borrowing of a LIBOR Rate Revolving Loan, such notice shall state
the Interest Period with respect thereto. Borrower, at its option, may choose
Prime Rate Revolving Loans or LIBOR Rate Revolving Loans; provided, that any
LIBOR Rate Revolving Loan shall be in a minimum amount of $500,000 or an
integral multiple of $100,000 in excess thereof; and provided further, that the
right of Borrower to choose any LIBOR Rate Loan is subject to the provisions of
paragraph 6(c) hereof.
Page 17
(b) DISBURSEMENT
Borrower hereby irrevocably authorizes LaSalle to disburse the proceeds of
each Revolving Loan requested by Borrower, or deemed to be requested by
Borrower, as follows: (i) the proceeds of each Revolving Loan requested under
paragraph 6(a)(i) shall be disbursed by LaSalle in lawful money of the United
States of America in immediately available funds, in the case of the initial
borrowing, in accordance with the terms of the written disbursement letter from
Borrower, and in the case of each subsequent borrowing, by wire transfer to such
bank account as may be agreed upon by Borrower and LaSalle from time to time, or
elsewhere if pursuant to a written direction from Borrower; and (ii) the
proceeds of each Revolving Loan requested under paragraph 6(a)(ii) shall be
disbursed by LaSalle by way of direct payment of the relevant interest or other
Liability.
(c) NOTICE OF CONTINUATION AND NOTICE OF CONVERSION
(i) Subject to the provisions of subparagraph (iii) hereof, Borrower
may elect to maintain any borrowing by it consisting of the same Kind
of LIBOR Rate Loans, or any portion thereof, as a LIBOR Rate Loan by
selecting a new Interest Period for such borrowing, which new Interest
Period shall commence on the last day of the then existing Interest
Period. Each selection of a new Interest Period (a "Continuation")
shall be made on three (3) Business Days prior notice, given by
Borrower to LaSalle not later than 8:30 A.M. (Portland time) on the
third Business Day preceding the date of any proposed Continuation. If
Borrower elects to maintain more than one borrowing consisting of
LIBOR Rate Loans of the same Kind by combining such borrowings into
one borrowing and selecting a new Interest Period pursuant to this
clause, each of the borrowings so combined shall consist of Loans of
the same Kind having Interest Periods ending on the same date. If
Borrower shall fail to select a new Interest Period for any borrowing
by it consisting of LIBOR Rate Loans of the same Kind in accordance
with this clause, such LIBOR Rate Loans will automatically convert
into Prime Rate Loans.
(ii) Subject to the provisions of subparagraph (iii) hereof, Borrower
may on three (3) Business Days prior notice given to LaSalle convert
the entire amount of or a portion of all Loans of the same Kind and
Type into Loans of the same Kind and another Type (a "Conversion");
provided, that no Default shall have occurred and be continuing; and
provided further, that any Conversion of any LIBOR Rate Loans into
Prime Rate Loans may only be made on the last day of the Interest
Period for such LIBOR Rate Loans, and upon Conversion of any Prime
Rate Loans into LIBOR Rate Loans, Borrower shall pay accrued interest
to the date of Conversion on the principal amount converted on the
first day of the following month. Each
Page 18
such notice shall be given not later than 8:30 A.M. (Portland time) on
the third Business Day preceding the date of any proposed Conversion.
Each Conversion shall be in an aggregate amount of not less than
$500,000 or an integral multiple of $100,000 in excess thereof.
Borrower may elect to convert the entire amount of or a portion of all
Loans made to Borrower of the same Kind and Type comprising more than
one borrowing into Loans of the same Kind and another Type by
combining such borrowings into one borrowing consisting of Loans of
the same Kind and another Type; provided, however, that if the
borrowings so combined consist of LIBOR Rate Loans, such LIBOR Rate
Loans shall have Interest Periods ending on the same date.
(iii) Notwithstanding anything contained in paragraph 5(a) hereof or
contained in subparagraphs (i) and (ii) above to the contrary:
A. if LaSalle is unable to determine the LIBOR Rate for LIBOR Rate
Loans comprising any requested borrowing, Continuation or
Conversion, the right of Borrower to select or maintain LIBOR
Rate Loans for such borrowing or any subsequent borrowing shall
be suspended until LaSalle shall notify Borrower that the
circumstances causing such suspension no longer exist, and each
Loan comprising such borrowing shall be automatically converted
into a Prime Rate Loan;
B. if at any time LaSalle shall notify Borrower that the LIBOR Rate
for Loans comprising such borrowing by Borrower will not
adequately reflect the cost to LaSalle of making such Loans, the
right of Borrower to select, maintain, continue or convert to
LIBOR Rate Loans for such borrowing shall be suspended until
LaSalle shall notify Borrower that the circumstances causing such
suspension no longer exist, and each Loan comprising such
borrowing shall be automatically converted into a Prime Rate
Loan;
C. there shall not be outstanding at any one time more than an
aggregate of four (4) LIBOR Rate Revolving Loans and two LIBOR
Rate Term Loans;
D. any LIBOR Rate Term Loan shall be in a minimum amount of
$1,000,000 or an integral multiple of $100,000 in excess thereof;
and
E. the amount of interest payable by Borrower during any Interest
Period shall be calculated on the full amount of each LIBOR Rate
Loan borrowed by Borrower at the commencement of the applicable
Interest Period, regardless of any reductions in the principal
amount
Page 19
of such LIBOR Rate Loan which occur during such Interest Period,
and Borrower shall not be credited for any part of such interest
until such interest is actually paid by Borrower. To the extent
the aggregate repayments of principal on Revolving Loans received
by LaSalle during the pendency of an Interest Period applicable
to a then outstanding LIBOR Rate Revolving Loan exceed the
aggregate unpaid principal amount of all Prime Rate Revolving
Loans outstanding during such Interest Period, LaSalle shall, to
the extent of such excess, credit to a special suspense account
the amount of such repayments received during such Interest
Period, and at the expiration of such Interest Period, LaSalle
shall apply all such amounts credited to such account against the
unpaid principal balance of the LIBOR Rate Revolving Loans then
outstanding. Borrower shall not earn interest on any credit
balance which may be deemed to exist in favor of Borrower by
virtue of this subparagraph (E).
(iv) Each notice of Continuation or Conversion shall be irrevocable
and binding on Borrower. In the case of (A) any borrowing of a Loan,
Continuation, or Conversion that the related notice of borrowing,
notice of Continuation or notice of Conversion specifies is to be
comprised of LIBOR Rate Loans, or (B) any payment of principal of, or
Conversion or Continuation of, any LIBOR Rate Loan made other than on
the last day of the Interest Period for such Loan as a result of a
payment, prepayment, Conversion or Continuation of such Loan or
acceleration of the maturity of any of the Liabilities pursuant to
paragraph 17 hereof, or for any other reason, then in any such case,
upon LaSalle's demand, Borrower shall pay to LaSalle and indemnify
LaSalle from and against the following (collectively "Breakage
Costs"): (x) any loss, cost or expense incurred by LaSalle as a result
of any failure to fulfill, on or before the date for such borrowing,
Continuation or Conversion, the applicable conditions set forth in
paragraph 15 hereof, and (y) any additional losses, costs or expenses
which it may reasonably incur as a result of such payment, including,
without limitation in each such case, any loss (excluding loss of
anticipated profits), cost or expense incurred by reason of the
liquidation or redeployment of deposits or other funds acquired by
LaSalle to fund the Loan to be made as part of such borrowing,
Continuation or Conversion.
7. GRANT OF SECURITY INTEREST TO LASALLE
As security for the payment of all Loans now or in the future made by
LaSalle to Borrower hereunder and for the payment or other satisfaction of all
other Liabilities, Borrower hereby assigns to LaSalle and grants to LaSalle a
continuing security interest in
Page 20
the following property of Borrower, whether now or hereafter owned, existing,
acquired or arising and wherever now or hereafter located: (a) all Accounts
(whether or not Eligible Accounts) and all Goods whose sale, lease or other
disposition by Borrower has given rise to Accounts and have been returned to or
repossessed or stopped in transit by Borrower; (b) all Chattel Paper,
Instruments, Documents and General Intangibles (including, without limitation,
all patents, patent applications, trademarks, trademark applications,
tradenames, trade secrets, goodwill, copyrights, registrations, licenses,
franchises, customer lists, tax refund claims, claims against carriers and
shippers, guarantee claims, contract rights, security interests, security
deposits and any rights to indemnification); (c) all Inventory; (d) all Goods
(other than Inventory) including, without limitation, Equipment, vehicles and
fixtures; (e) all Deposit Accounts; (f) all Investment Property; (g) all
deposits and cash and any other property of Borrower now or hereafter in the
possession, custody or control of LaSalle or any agent or any parent, affiliate
or subsidiary of LaSalle or any participant with LaSalle in the Loans for any
purpose (whether for safekeeping, deposit, collection, custody, pledge,
transmission or otherwise); and (h) all additions and accessions to,
substitutions for, and replacements, products and proceeds of the foregoing
property, including, without limitation, proceeds of all insurance policies
insuring the foregoing property, and all of Borrower's books and records
relating to any of the foregoing and to Borrower's business.
8. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN
Borrower shall, at LaSalle's request, at any time and from time to time,
execute and deliver to LaSalle such financing statements, documents and other
agreements and instruments (and pay the cost of filing or recording the same in
all public offices deemed reasonably necessary or desirable by LaSalle) and do
such other acts and things as LaSalle may deem necessary or desirable in order
to establish and maintain a valid, attached and perfected security interest in
the Collateral in favor of LaSalle (free and clear of all other liens, claims
and rights of third parties whatsoever, whether voluntarily or involuntarily
created, except Permitted Liens) to secure payment of the Liabilities, and in
order to facilitate the collection of the Collateral. Borrower irrevocably
hereby makes, constitutes and appoints LaSalle (and all Persons designated by
LaSalle for that purpose) as Borrower's true and lawful attorney and agent-in-
fact to execute such financing statements, documents and other agreements and
instruments and do such other acts and things as may be necessary to preserve
and perfect LaSalle's security interest in the Collateral. Borrower further
agrees that a carbon, photographic, photostatic or other reproduction of this
Agreement or of a financing statement shall be sufficient as a financing
statement.
Page 21
9. POSSESSION OF COLLATERAL AND RELATED MATTERS
Until an Event of Default has occurred, Borrower shall have the right,
except as otherwise provided in this Agreement, in the ordinary course of
Borrower's business, to (a) sell, lease or furnish under contracts of service
any of Borrower's Inventory normally held by Borrower for any such purpose, and
(b) use and consume any raw materials, work in process or other materials
normally held by Borrower for such purpose; provided, however, that a sale in
the ordinary course of business shall not include any transfer or sale in
satisfaction, partial or complete, of a debt owed by Borrower.
10. COLLECTIONS
(a) At LaSalle's request, Borrower shall direct all of its Account Debtors
to make all payments on the Accounts directly to a post office box ("LOCK BOX")
with a financial institution acceptable to, and in the name and under exclusive
control of, LaSalle. Borrower shall establish an account ("BLOCKED ACCOUNT") in
LaSalle's name for the benefit of Borrower with a financial institution
acceptable to LaSalle, into which all payments received in the Lock Box shall be
deposited, and into which Borrower will immediately deposit all payments made
for Inventory or services sold or rendered by Borrower and received by Borrower
in the identical form in which such payments were made, whether by cash or
check. If Borrower, any Affiliate or Subsidiary of Borrower, or any
shareholder, officer, director, employee or agent of Borrower or any Affiliate
or Subsidiary, or any other Person acting for or in concert with Borrower shall
receive any monies, checks, notes, drafts or other payments relating to or as
proceeds of Accounts or other Collateral, Borrower and each such Person shall
receive all such items in trust for, and as the sole and exclusive property of,
LaSalle and, immediately upon receipt thereof, shall remit the same (or cause
the same to be remitted) in kind to the Blocked Account. Each financial
institution with which a Lock Box and Blocked Account are established shall
acknowledge and agree, in a manner satisfactory to LaSalle, that the amounts on
deposit in such Lock Box and Blocked Account are the sole and exclusive property
of LaSalle, that such financial institution has no right to setoff against such
Lock Box or Blocked Account or against any other account maintained by such
financial institution into which the contents of such Blocked Account are
transferred, and that such financial institution shall wire (and shall permit
LaSalle to initiate such wires), or otherwise transfer in immediately available
funds in a manner satisfactory to LaSalle, funds deposited in the Blocked
Account on a daily basis as such funds are collected. Borrower agrees that all
payments made to the Blocked Account established by Borrower or otherwise
received by LaSalle, whether in respect of the Accounts of Borrower or as
proceeds of other Collateral of Borrower or otherwise, will be applied on
account of the Liabilities of Borrower in accordance with the terms of this
Agreement. Borrower agrees to pay all fees, costs and expenses which Borrower
incurs in connection with opening and maintaining a Lock Box and Blocked
Account. All of such fees, costs and expenses which remain unpaid by Borrower
pursuant to any Lock Box or Blocked Account
Page 22
Agreement with Borrower, to the extent same shall have been paid by LaSalle
hereunder, shall constitute Revolving Loans hereunder, shall be payable to
LaSalle by Borrower upon demand, and, until paid, shall bear interest at the
highest rate then applicable to Revolving Loans hereunder. All checks, drafts,
instruments and other items of payment or proceeds of Collateral delivered to
LaSalle in kind shall be endorsed by Borrower to LaSalle, and, if that
endorsement of any such item shall not be made for any reason, LaSalle is hereby
irrevocably authorized to endorse the same on Borrower's behalf. For the purpose
of this paragraph, Borrower irrevocably hereby makes, constitutes and appoints
LaSalle (and all Persons designated by LaSalle for that purpose) as Borrower's
true and lawful attorney and agent-in-fact (i) to endorse Borrower's name upon
said items of payment and/or proceeds of Collateral of Borrower and upon any
Chattel Paper, document, instrument, invoice or similar document or agreement
relating to any Account of Borrower or goods pertaining thereto; (ii) to take
control in any manner of any item of payment or proceeds thereof; (iii) to have
access to any lock box or postal box into which any of Borrower's mail is
deposited; and (iv) open and process all mail addressed to Borrower and
deposited therein; provided, however, that LaSalle shall not exercise any such
powers described in subparagraphs (i), (ii)(except for routine Lock Box
payments/proceeds), and (iv) unless and until an Event of Default has occurred.
(b) LaSalle may, at any time and from time to time after the occurrence of
an Event of Default, whether before or after notification to any Account Debtor
and whether before or after the maturity of any of the Liabilities, (i) enforce
collection of any of Borrower's Accounts or contract rights by suit or
otherwise; (ii) exercise all of Borrower's rights and remedies with respect to
proceedings brought to collect any Accounts; (iii) surrender, release or
exchange all or any part of any Accounts of Borrower, or compromise or extend or
renew for any period (whether or not longer than the original period) any
indebtedness thereunder; (iv) sell or assign any Account of Borrower upon such
terms, for such amount and at such time or times as LaSalle deems advisable; (v)
prepare, file and sign Borrower's name on any proof of claim in bankruptcy or
other similar document against any Account Debtor indebted on an Account of
Borrower; and (vi) do all other acts and things which are necessary, in
LaSalle's sole discretion, to fulfill Borrower's obligations under this
Agreement and to allow LaSalle to collect the Accounts. LaSalle, through its
officers, employees or agents, shall have the right, at any time and from time
to time in LaSalle's name, in the name of a nominee of LaSalle or in Borrower's
name, to verify the validity, amount or any other matter relating to any of
Borrower's Accounts, by mail, telephone, telegraph or otherwise. Borrower shall
reimburse LaSalle, on demand, for all reasonable costs, fees and expenses
incurred by LaSalle in this regard. In addition to any other provision hereof,
LaSalle may at any time on or after the occurrence of an Event of Default, at
Borrower's expense, notify any parties obligated on any of the Accounts of
Borrower to make payment directly to LaSalle of any amounts due or to become due
thereunder.
Page 23
(c) For the purpose of determining Borrower's Borrowing Base hereunder,
LaSalle shall, upon receipt by LaSalle at its office in Chicago, Illinois, of
cash or other immediately available funds from collections of items of payment
and proceeds of any Collateral, apply the whole or any part of such collections
or proceeds against the Liabilities in such order as LaSalle shall determine in
its sole discretion.
(d) In its sole credit judgment, without waiving or releasing any
obligation, liability or duty of Borrower under this Agreement or the Other
Agreements or any Event of Default, at any time or times hereafter, LaSalle may
(but shall not be obligated to) pay, acquire or accept an assignment of any
security interest, lien, encumbrance or claim asserted by any Person in, upon or
against the Collateral. All sums paid by LaSalle in respect thereof and all
costs, fees and expenses (including, without limitation, reasonable attorney
fees for both inside and outside counsel, all court costs and all other charges
relating thereto) incurred by LaSalle shall constitute Revolving Loans, payable
by Borrower to LaSalle on demand and, until paid, shall bear interest at the
highest rate then applicable to Revolving Loans hereunder.
(e) Immediately upon Borrower's receipt of any portion of the Collateral
evidenced by an agreement, Instrument or Document including, without limitation,
any Chattel Paper, Borrower shall deliver the original thereof to LaSalle
together with an appropriate endorsement or other specific evidence of
assignment thereof to LaSalle (in form and substance acceptable to LaSalle). If
an endorsement or assignment of any such items shall not be made for any reason,
LaSalle is hereby irrevocably authorized, as Borrower's attorney and agent-in-
fact, to endorse or assign the same on Borrower's behalf.
11. SCHEDULES AND REPORTS
(a) Borrower shall provide to LaSalle compliance certificates in the form
attached as Exhibit C and the periodic reports and other information and
schedules described on Exhibit B at the times specified on Exhibit B. In
addition, Borrower shall furnish LaSalle with such other statements and reports
as LaSalle may reasonably request from time to time, including, without
limitation, providing the reports, information and schedules listed on Exhibit B
on a more frequent basis than specified on Exhibit B.
(b) Borrower shall immediately notify LaSalle of any event causing loss or
depreciation in value of Borrower's assets (other than normal depreciation
occurring in the ordinary course of business).
(c) All schedules, certificates, reports and assignments and other items
delivered by Borrower to LaSalle hereunder shall be executed by an authorized
representative of Borrower and shall be in such form and contain such
information as LaSalle shall reasonably request. Borrower shall deliver from
time to time such other
Page 24
schedules and reports pertaining to the Collateral of Borrower as LaSalle may
reasonably request.
12. TERMINATION
(a) This Agreement shall be in effect from the date hereof until November
10, 2000 ("ORIGINAL TERM") and shall automatically renew itself from year to
year thereafter (each such one year renewal being referred to herein as a
"RENEWAL TERM") unless (i) the due date of the Liabilities is accelerated
pursuant to paragraph 17 hereof; or (ii) Borrower elects or LaSalle elects to
terminate this Agreement at the end of the Original Term or at the end of any
Renewal Term by giving the other party written notice of such election at least
ninety (90) days prior to the end of the Original Term or the then current
Renewal Term, in which case Borrower shall pay all of the Liabilities in full on
the last day of such term. If one or more of the events specified in
subparagraphs (i) or (ii) occurs, this Agreement shall terminate on the date
thereafter that the Liabilities are paid in full; provided, however, that the
security interests and liens created under this Agreement and the Other
Agreements shall survive such termination until the date upon which payment and
satisfaction in full of the Liabilities shall have occurred. At such time as
Borrower has repaid all of the Liabilities and this Agreement has terminated,
(i) Borrower shall deliver to LaSalle a release, in form and substance
reasonably satisfactory to LaSalle, of all obligations and liabilities of
LaSalle and its officers, directors, employees, agents, parents, subsidiaries
and affiliates to Borrower, and if Borrower is obtaining new financing from
another lender, Borrower shall deliver such lender's indemnification of LaSalle,
in form and substance satisfactory to LaSalle, for checks which LaSalle has
credited to Borrower's account, but which subsequently are dishonored for any
reason and (ii) upon Borrower's request, LaSalle shall deliver to Borrower a
release in form and substance reasonably satisfactory to Borrower.
(b) If, during the term of this Agreement, Borrower prepays all of the
Liabilities or any portion of the Term Loan, Borrower agrees to pay to LaSalle,
as a termination fee, in addition to the payment of all other Liabilities owing
by Borrower, an amount equal to (i) in the case of prepayment of the
Liabilities, 1% of the highest Revolver Maximum Amount in effect during the
twelve months preceding the payment or (ii) in the case of prepayment of the
Term Loan, 1% of the amount prepaid on the Term Loan at the time of such payment
if this Agreement is terminated during the Original Term or any Renewal Term;
except: (A) if terminated at the end of the Original Term or any Renewal Term,
pursuant to the terms set forth herein; (B) if such prepayment is the result of
LaSalle's election to terminate the Loan Agreement for any reason other than
Borrower's Default hereunder; or (C) if such prepayment occurs in connection
with an acquisition by Borrower which requires a cash payment by Borrower of at
least $1,000,000 and is closed before LaSalle's receipt of Borrower's audited
financial statement for its year ending December 31, 1998 and as part of that
transaction Borrower requires the Term Loan to finance the acquisition, LaSalle
declines to provide the Term
Page 25
Loan and Borrower consummates the acquisition and receives funding from a lender
pursuant to loan documents which include a term loan and revolving credit
facility comparable to the facilities contemplated by this Agreement.
13. REPRESENTATIONS AND WARRANTIES
Borrower hereby makes the following representations, warranties and
covenants:
(a) the financial statements delivered or to be delivered by Borrower to
LaSalle at or prior to the date of this Agreement and at all times subsequent
thereto accurately reflect the financial condition of Borrower, and since the
date of the Borrower's financial statements delivered to LaSalle most recently
prior to the date of this Agreement, no event or condition has occurred which
has had, or is reasonably likely to have, a Material Adverse Effect;
(b) the office where Borrower keeps its books, records and accounts (or
copies thereof) concerning the Collateral, Borrower's principal place of
business and all of Borrower's other places of business, locations of Collateral
and post office boxes are as set forth in Exhibit A; Borrower shall promptly
(but in no event less than ten (10) days prior thereto) advise LaSalle in
writing of the proposed opening of any new place of business, the closing of any
existing place of business, any change in the location of Borrower's books,
records and accounts (or copies thereof) or the opening or closing of any post
office box of Borrower;
(c) the Collateral, including without limitation the Equipment (except any
part thereof which prior to the date of this Agreement Borrower shall have
advised LaSalle in writing consists of Collateral normally used in more than one
state), is and shall be kept, or, in the case of vehicles, based, only at the
addresses set forth on the first page of this Agreement or on Exhibit A;
(d) Borrower shall immediately give written notice to LaSalle of any use
of any Goods in any jurisdiction other than a jurisdiction in which Borrower has
previously advised LaSalle such Goods shall be used, and such Goods shall not,
unless LaSalle shall otherwise consent in writing, be used in any jurisdiction
in which LaSalle does not have a first perfected security interest in such
Goods;
(e) no security agreement, financing statement or analogous instrument
exists or shall exist with respect to any of the Collateral other than any
security agreement, financing statement or analogous instrument evidencing
Permitted Liens;
(f) each Account or item of Inventory which Borrower shall, expressly or
by implication, request LaSalle to classify as an Eligible Account or as
Eligible Inventory, respectively, shall, as of the time when such request is
made, conform in all respects to the requirements of such classification as set
forth in the respective definitions of Eligible
Page 26
Account and Eligible Inventory and as otherwise established by LaSalle from time
to time, and Borrower shall promptly notify LaSalle in writing if any such
Eligible Account or Eligible Inventory shall subsequently become ineligible;
(g) Borrower is and shall at all times during the Original Term or any
Renewal Term be the lawful owner of all Collateral now purportedly owned or
hereafter purportedly acquired by Borrower, free from all liens, claims,
security interests and encumbrances whatsoever, whether voluntarily or
involuntarily created and whether or not perfected, other than the Permitted
Liens;
(h) Borrower has the right and power and is duly authorized and empowered
to enter into, execute and deliver this Agreement and the Other Agreements and
perform its obligations hereunder and thereunder; Borrower's execution, delivery
and performance of this Agreement and the Other Agreements does not and shall
not conflict with the provisions of any statute, regulation, ordinance or rule
of law, or any agreement, contract or other document which may now or hereafter
be binding on Borrower, and Borrower's execution, delivery and performance of
this Agreement and the Other Agreements shall not result in the imposition of
any lien or other encumbrance upon any of Borrower's property under any existing
indenture, mortgage, deed of trust, loan or credit agreement or other agreement
or instrument by which Borrower or any of its property may be bound or affected;
(i) except as otherwise disclosed on Schedule 13(i), there are no actions
or proceedings which are pending or, to the best of Borrower's knowledge,
threatened against Borrower which are reasonably likely to have a Material
Adverse Effect and Borrower shall, promptly upon becoming aware of any such
pending or threatened action or proceeding, give written notice thereof to
LaSalle;
(j) Borrower has obtained all licenses, authorizations, approvals and
permits, the lack of which would have a Material Adverse Effect on the operation
of its business, and Borrower is and shall remain in compliance in all material
respects with all applicable federal, state, local and foreign statutes, orders,
regulations, rules and ordinances (including, without limitation, statutes,
orders, regulations, rules and ordinances relating to taxes, employer and
employee contributions and similar items, securities, employee retirement and
welfare benefits, employee health and safety or environmental matters), the
failure to comply with which would have a Material Adverse Effect;
(k) all written information now, heretofore or hereafter furnished by
Borrower to LaSalle is and shall be true and correct in all material respects as
of the date with respect to which such information was or is furnished (except
for financial projections, all of which shall be prepared in good faith based
upon reasonable assumptions);
Page 27
(l) Borrower is not conducting, permitting or suffering to be conducted,
nor shall it conduct, permit or suffer to be conducted, any activities pursuant
to or in connection with which any of the Collateral is now, or will (while any
Liabilities remain outstanding) be owned by any Affiliate;
(m) Borrower's name has always been as set forth on the first page of this
Agreement and Borrower uses no tradenames or division names in the operation of
its business, except as otherwise disclosed on Schedule 13(m); Borrower shall
notify LaSalle in writing within ten (10) days of the change of its name or the
use of any tradenames or division names not previously disclosed to LaSalle in
writing;
(n) with respect to Borrower's Equipment: (i) except for Permitted Liens,
Borrower has good and indefeasible and merchantable title to and ownership of
all Equipment; (ii) Borrower shall keep and maintain the Equipment in good
operating condition and repair and shall make all necessary replacements thereof
and renewals thereto so that the value and operating efficiency thereof shall at
all times be preserved and maintained, ordinary wear and tear excepted; (iii)
Borrower shall not permit any such items to become a fixture to real estate or
an accession to other personal property; (iv) from time to time Borrower may
sell, exchange or otherwise dispose of obsolete, unused or worn out Equipment,
but only to the extent provided in paragraph 3 (b)(i) hereof; and (v) Borrower,
immediately on demand by LaSalle, shall deliver to LaSalle any and all evidence
of ownership of, including, without limitation, certificates of title and
applications of title to, any of the Equipment;
(o) this Agreement and the Other Agreements to which Borrower is a party
are the legal, valid and binding obligations of Borrower and are enforceable
against Borrower in accordance with their respective terms, except to the extent
that such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the rights of creditors
generally;
(p) Borrower is solvent, is able to pay its debts as they become due and
has capital sufficient to carry on its business, now owns property having a
value both at fair valuation and at present fair salable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the
execution and delivery of this Agreement or any of the Other Agreements or by
completion of the transactions contemplated hereunder or thereunder;
(q) Borrower is not now obligated, whether directly or indirectly, for any
loans or other indebtedness for borrowed money other than (i) Permitted Liens;
(ii) the Liabilities; (iii) indebtedness disclosed to LaSalle on Schedule 13(q);
(iv) unsecured indebtedness to trade creditors arising in the ordinary course of
Borrower's business; and (v) unsecured indebtedness arising from the endorsement
of drafts and other instruments for collection, in the ordinary course of
Borrower's business;
Page 28
(r) Borrower does not own any margin securities, and none of the proceeds
of the Loans hereunder shall be used for the purpose of purchasing or carrying
any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities or
for any other purpose not permitted by Regulation G or Regulation U of the Board
of Governors of the Federal Reserve System as in effect from time to time;
(s) except as otherwise disclosed on Schedule 13(s), Borrower has no
Parents, Subsidiaries or divisions, nor is Borrower engaged in any joint venture
or partnership with any other Person;
(t) Borrower is duly organized and in good standing in its state of
organization and Borrower is duly qualified and in good standing in all states
where the nature and extent of the business transacted by it or the ownership of
its assets makes such qualification necessary, except for such other states in
which the failure to so qualify would not have a Material Adverse Effect;
(u) Borrower is not in default under any contract, lease or commitment to
which it is a party or by which it is bound, nor does Borrower know of any
dispute regarding any such contract, lease or commitment which, in either event,
has had, or could have a Material Adverse Effect;
(v) there are no controversies pending or threatened between Borrower and
any of its employees, other than employee grievances arising in the ordinary
course of business which are not, in the aggregate, material to the continued
financial success and well-being of Borrower, and Borrower is in compliance in
all material respects with all federal and state laws respecting employment and
employment terms, conditions and practices, except where the failure to so
comply would not have a Material Adverse Effect; and
(w) Borrower possesses, and shall continue to possess, adequate licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles and tradenames to continue to conduct its business as
heretofore conducted by it.
Borrower represents, warrants and covenants to LaSalle that all
representations, warranties and covenants of Borrower contained in this
Agreement (whether appearing in paragraphs 13 or 14 hereof or elsewhere) shall
be true at the time of Borrower's execution of this Agreement, shall survive the
execution, delivery and acceptance hereof by the parties hereto and the closing
of the transactions described herein or related hereto, shall remain true until
the Liabilities are fully performed, paid and satisfied, subject to such changes
as are not prohibited hereby or do not constitute a Default hereunder, and shall
be remade by Borrower at the time each Revolving Loan is made and each Letter of
Credit is issued pursuant to this Agreement.
Page 29
14. COVENANTS
Until payment or satisfaction in full of all Liabilities and termination of
this Agreement, unless set forth on Schedule 14 or Borrower obtains LaSalle's
prior written consent waiving or modifying any of Borrower's covenants hereunder
in any specific instance, Borrower agrees as follows:
(a) Borrower shall at all times keep accurate and complete books, records
and accounts with respect to all of Borrower's business activities, in
accordance with sound accounting practices and GAAP consistently applied, and
shall keep such books, records and accounts, and any copies thereof, only at the
addresses indicated for such purpose on Exhibit A;
(b) Borrower shall deliver compliance certificates to LaSalle in the form
attached as Exhibit C and the various other information, documents, reports and
schedules described in Exhibit B in accordance with the schedule set forth in
Exhibit B, together with such additional information, documents, reports and
schedules as LaSalle may request from time to time, and Borrower agrees to
deliver to LaSalle the following financial information, all of which shall be
prepared in accordance with GAAP consistently applied: (i) no later than thirty
(30) days after each calendar month, copies of internally prepared financial
statements of Borrower and its Subsidiaries, on a consolidated and
consolidating, monthly and year-to-date basis including, without limitation,
balance sheets and statements of income, retained earnings and cash flow of
Borrower and its Subsidiaries, certified by Borrower's chief financial officer
and accompanied by an officer's certificate certifying that no Default exists
hereunder and (ii) no later than ninety (90) days after the end of each of
Borrower's fiscal years, annual financial statements of Borrower and its
Subsidiaries on a consolidated and consolidating basis audited by independent
certified public accountants selected by Borrower and reasonably satisfactory to
LaSalle, together with such accountants' "management letter";
(c) LaSalle, or any Persons designated by it, shall have the right, at any
time, in the exercise of its commercially reasonable credit judgment, to call at
Borrower's places of business at any reasonable times, and, without hindrance or
delay, to inspect the Collateral and to inspect, audit, check and make extracts
from Borrower's books, records, journals, orders, receipts and any
correspondence and other data relating to Borrower's business, the Collateral or
any transactions between the parties hereto, and shall have the right to make
such verification concerning Borrower's business as LaSalle may consider
reasonable under the circumstances. Borrower shall furnish to LaSalle such
information relevant to LaSalle's rights under this Agreement as LaSalle shall
at any time and from time to time reasonably request. Borrower authorizes
LaSalle to discuss the affairs, finances and business of Borrower with any
officers or directors of Borrower or any Affiliate, or with those employees of
Borrower with whom LaSalle has determined in its commercially reasonable
judgment to be necessary or desirable to converse, and to
Page 30
discuss the financial condition of Borrower (after notice to Borrower of
LaSalle's intent) with Borrower's independent public accountants. Any such
discussions shall be without liability to LaSalle or to such accountants.
Borrower shall pay to or reimburse LaSalle for all reasonable fees, costs, and
out-of-pocket expenses incurred by LaSalle in the exercise of its rights
hereunder and all of such costs, fees and expenses shall constitute Revolving
Loans hereunder, shall be payable on demand and, until paid, shall bear interest
at the highest rate then applicable to Loans hereunder;
(d) (i) Borrower shall: keep the Collateral properly housed and shall
keep the Collateral insured against such risks and in such amounts as
are customarily insured against by Persons engaged in businesses
similar to that of Borrower with such companies, in such amounts and
under policies in such form as shall be reasonably satisfactory to
LaSalle. Originals or certified copies of such policies of insurance
have been, or within fifteen days after the Closing Date, shall be,
delivered to LaSalle together with evidence of payment of all premiums
therefor, and shall contain an endorsement, in form and substance
acceptable to LaSalle, showing loss under such insurance policies
payable to LaSalle. Such endorsement, or an independent instrument
furnished to LaSalle, shall provide that the insurance company shall
give LaSalle at least thirty days written notice before any such
policy of insurance is altered or canceled and that no act, whether
willful or negligent, or default of Borrower or any other Person shall
affect the right of LaSalle to recover under such policy of insurance
in case of loss or damage. Borrower hereby directs all insurers under
such policies of insurance to pay all proceeds payable thereunder
directly to LaSalle. Borrower irrevocably, makes, constitutes and
appoints LaSalle (and all officers, employees or agents designated by
LaSalle) as Borrower's true and lawful attorney (and agent-in-fact)
for the purpose of making, settling and adjusting claims under such
policies of insurance, endorsing the name of Borrower on any check,
draft, instrument or other item of payment for the proceeds of such
policies of insurance and making all determinations and decisions with
respect to such policies of insurance; provided, however, that LaSalle
shall exercise such rights only upon the occurrence of an Event of
Default;
(ii) Borrower shall maintain, at its expense, such public liability
and third party property damage insurance as is customary for Persons
engaged in businesses similar to that of Borrower with such companies
and in such amounts, with such deductibles and under policies in such
form as shall be reasonably satisfactory to LaSalle and originals or
certified copies of such policies have been, or within fifteen days
after the Closing Date, shall be, delivered to LaSalle together with
evidence of payment of all premiums therefor; each such policy shall
contain an endorsement showing LaSalle as
Page 31
additional insured thereunder and providing that the insurance company
shall give LaSalle at least thirty days written notice before any such
policy shall be altered or canceled; and
(iii) If Borrower at any time or times hereafter shall fail to obtain
or maintain any of the policies of insurance required above or to pay
any premium in whole or in part relating thereto, then LaSalle,
without waiving or releasing any obligation or default by Borrower
hereunder, may (but shall be under no obligation to) obtain and
maintain such policies of insurance and pay such premiums and take
such other actions with respect thereto as LaSalle deems advisable.
All sums disbursed by LaSalle in connection with any such actions,
including, without limitation, court costs, expenses, other charges
relating thereto and reasonable attorneys' fees, shall constitute
Revolving Loans hereunder and, until paid, shall bear interest at the
highest rate then applicable to Revolving Loans hereunder;
(IV) OREGON STATUTORY NOTICE. THE FOLLOWING IS INSERTED PURSUANT TO
ORS 746.201:
WARNING
UNLESS BORROWER PROVIDES LASALLE WITH EVIDENCE OF THE INSURANCE
COVERAGE AS REQUIRED BY OUR CONTRACT OR LOAN AGREEMENT, LASALLE MAY
PURCHASE INSURANCE AT BORROWER'S EXPENSE TO PROTECT LASALLE'S
INTEREST. THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT BORROWER'S
INTEREST. IF THE COLLATERAL BECOMES DAMAGED, THE COVERAGE LASALLE
PURCHASES MAY NOT PAY ANY CLAIM BORROWER MAKES OR ANY CLAIM MADE
AGAINST IT. BORROWER MAY LATER CANCEL THIS COVERAGE BY PROVIDING
EVIDENCE THAT IT HAS OBTAINED PROPERTY COVERAGE ELSEWHERE.
BORROWER IS RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED
BY LASALLE. THE COST OF THIS INSURANCE MAY BE ADDED TO BORROWER'S
CONTRACT OR LOAN BALANCE. IF THE COST IS ADDED TO BORROWER'S CONTRACT
OR LOAN BALANCE, THE INTEREST RATE ON THE UNDERLYING CONTRACT OR LOAN
WILL APPLY TO THIS ADDED AMOUNT. THE EFFECTIVE DATE OF COVERAGE MAY
BE THE DATE BORROWER'S PRIOR COVERAGE LAPSED OR THE DATE BORROWER
FAILED TO PROVIDE PROOF OF COVERAGE.
THE COVERAGE LASALLE PURCHASES MAY BE CONSIDERABLY MORE EXPENSIVE
THAN INSURANCE BORROWER CAN OBTAIN ON BORROWER'S OWN AND MAY NOT
SATISFY ANY NEED FOR PROPERTY DAMAGE COVERAGE OR ANY MANDATORY
LIABILITY INSURANCE REQUIREMENTS IMPOSED BY APPLICABLE LAW.
Page 32
(e) Borrower shall not use the Collateral, or any part thereof, in any
unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could result in material damage to the
environment or a violation of any applicable environmental laws, rules or
regulations; Borrower shall keep the Collateral in good condition, repair and
order, ordinary wear and tear excepted; Borrower shall not permit the
Collateral, or any part thereof, to be levied upon under execution, attachment,
distraint or other legal process; Borrower shall not sell, lease, grant a
security interest in or otherwise dispose of any of the Collateral except as
expressly permitted by this Agreement; and Borrower shall not secrete or abandon
any of the Collateral, or remove or permit removal of any of the Collateral from
any of the locations listed on Exhibit A or in any written notice to LaSalle
pursuant to paragraph 13(c) hereof, except for the removal of Inventory sold in
the ordinary course of Borrower's business as permitted herein;
(f) all monies and other property obtained by Borrower from LaSalle
pursuant to this Agreement will be used solely for business purposes of
Borrower;
(g) Borrower shall, at the request of LaSalle, indicate on its records
concerning the Collateral a notation, in form satisfactory to LaSalle, of the
security interest of LaSalle hereunder, and Borrower shall not maintain
duplicates or copies of such records at any address other than Borrower's
principal place of business set forth on the first page of this Agreement;
provided, however, that Borrower, in the ordinary course of its business, may
furnish copies of such records to its accountants, attorneys and other agents or
advisors as it may determine to be necessary or desirable, in the exercise of
its commercially reasonable judgment;
(h) Borrower shall file all required tax returns and pay all of its taxes
when due, including, without limitation, taxes imposed by federal, state or
municipal agencies, and shall cause any liens for taxes to be promptly released;
provided, that Borrower shall have the right to contest the payment of such
taxes in good faith by appropriate proceedings so long as (i) the amount so
contested is shown on Borrower's financial statements, (ii) the contesting of
any such payment does not give rise to a lien for taxes, (iii) upon the
occurrence of an Event of Default, Borrower keeps on deposit with LaSalle (such
deposit to be held without interest) an amount of money which, in the sole
judgment of LaSalle, is sufficient to pay such taxes and any interest or
penalties that may accrue thereon, and (iv) if Borrower fails to prosecute such
contest with reasonable diligence, LaSalle may apply the money so deposited in
payment of such taxes. If Borrower fails to pay any such taxes and in the
absence of any such contest by Borrower, LaSalle may (but shall be under no
obligation to) advance and pay any sums required to pay any such taxes and/or to
secure the release of any lien therefor, and any sums so advanced by LaSalle
shall constitute Revolving Loans hereunder, shall be payable by Borrower to
LaSalle on demand, and, until paid, shall bear interest at the highest rate then
applicable to Revolving Loans hereunder;
Page 33
(i) Borrower shall not, with the exception of Permitted Liens, (i) incur,
create, assume or suffer to exist any indebtedness other than (A) indebtedness
arising under this Agreement, (B) unsecured indebtedness owing in the ordinary
course of business to trade suppliers, and (C) any other indebtedness described
in paragraph 13(q)(ii) hereof; or (ii) assume, guarantee or endorse, or
otherwise become liable in connection with, the obligations of any Person,
except by endorsement of instruments for deposit or collection or similar
transactions in the ordinary course of business;
(j) Borrower shall not enter into any merger or consolidation, or sell,
lease or otherwise dispose of all or substantially all of its assets; Borrower
shall not create any new Subsidiary or Affiliate or issue any shares of, or
warrants or other rights to receive or purchase any shares of, any class of its
stock; Borrower shall not enter into any transaction outside the ordinary course
of Borrower's business;
(k) Borrower shall not (i) declare or pay any dividend or other
distribution (whether in cash or in kind) on, purchase, redeem or retire any
shares of any class of its stock, or make any payment on account of, or set
apart assets for the repurchase, redemption, defeasance or retirement of, any
class of its stock; or (ii) make any optional payment or prepayment on or
redemption (including without limitation by making payments to a sinking fund or
analogous fund) or repurchase of any indebtedness for borrowed money other than
indebtedness pursuant to this Agreement, provided, however, that notwithstanding
the foregoing Borrower shall be entitled to repurchase shares of any class of
its stock in the aggregate amount of $250,000 during any calendar year;
(l) Borrower shall not make any loans to, or investment in, any Person,
whether in cash, securities or other property of any kind, other than
investments that are direct obligations of the United States;
(m) Borrower shall not amend its organizational documents or change its
fiscal year;
(n) Borrower shall maintain and keep in full force and effect each of the
financial covenants set forth below. The calculation and determination of each
such financial covenant, and all accounting terms contained therein, shall be so
calculated and construed in accordance with GAAP, applied on a basis consistent
with the financial statements of Borrower delivered on or before the Closing
Date:
(i) Net Worth. Borrower and its Subsidiaries shall maintain as of the
end of each monthly fiscal period a net worth of not less than:
(i) $27,600,000 for the periods ending in December, 1997; (ii)
$25,900,000 for the periods ending in January through March,
1998; (iii) $24,800,000 for the periods ending in April through
August, 1998; (iv) $28,300,000 for the periods ending in
September through November, 1998; (v) $29,400,000 for the periods
ending in
Page 34
December, 1998; and (vi) as of each fiscal year end thereafter,
an amount equal to the amount in effect from the end of the
preceding fiscal year plus 75% of any consolidated net profit
earned for the current fiscal year then ended (such aggregate
amount shall not be reduced by the amount of any net loss after
taxes of Borrower for any period) provided, however, that each
amount shown in (i) through (v) above will be increased or
decreased to the extent that the new shares of Borrower's stock
issued in connection with the Acquisition are valued on the
Borrower's books above or below $2,336,960;
(ii) Consolidated Interest Coverage Ratio. Borrower and its
Subsidiaries, on a consolidated basis, shall have as of the end
of Borrower's 1998 fiscal year a ratio of EBITDA for fiscal year
1998 to interest expense for fiscal year 1998 of not less than
1.0 to 1.0 and shall maintain as of the end of each fiscal
quarter, commencing with the fiscal quarter ending in March,
1999, a ratio of (A) EBITDA for the twelve months ending with
such quarter to (B) interest expense for the twelve months
ending with such quarter, of not less than 1.25 to 1.00;
(iii) Consolidated Debt Service Coverage Ratio. Borrower and its
Subsidiaries, on a consolidated basis, shall have as of the end
of Borrower's 1998 fiscal year a Debt Service Coverage Ratio for
fiscal year 1998 of not less than 1.00 to 1.00 and shall
maintain a Debt Service Coverage Ratio, as of the end of each
twelve-month period ending on the last day of a fiscal quarter,
commencing with the fiscal quarter ending in March, 1999, of not
less than 1.25 to 1.00; and
(iv) Consolidated Capital Expenditures. Borrower and its
Subsidiaries, on a consolidated basis, shall not make Capital
Expenditures of an aggregate amount of more than $3,300,000
during 1997 and $2,500,000 during any consecutive twelve-month
period beginning on or after January 1, 1998.
(o) LaSalle acknowledges receipt of $25,000 from Borrower pursuant to that
certain commitment letter dated October 3, 1997, which amount will be applied to
costs and expenses. Borrower shall reimburse LaSalle for all costs and expenses
incurred by LaSalle in connection with the documentation and consummation of
this transaction and the Term Loan, amendments to or modifications of this
Agreement, any Other Agreements, and any other transactions between Borrower and
LaSalle, in seeking to collect, protect or enforce any rights in or to the
Collateral or in seeking to collect any Liabilities and to administer and
enforce any of LaSalle's rights under this Agreement,
Page 35
including, without limitation, Uniform Commercial Code and other public record
searches, lien filings, Federal Express or similar express or messenger
delivery, appraisal costs, surveys, title insurance and environmental audit or
review costs, and any legal expenses and reasonable attorneys' fees (both in-
house and outside counsel), whether incurred at arbitration, trial, on appeal,
in a bankruptcy proceeding or otherwise), and at all times during the
continuation of a Default, an examination fee per diem, per examiner equal to
LaSalle's standard per diem fee for such work (which standard per diem fee as of
the Closing Date is $600) for each examination prepared by or at LaSalle's
direction of Borrower's books and records and Collateral and such other matters
as LaSalle shall deem appropriate together with all out-of-pocket expenses of
such examiners. Borrower shall also pay all normal service charges with respect
to accounts maintained by LaSalle for the benefit of Borrower. All such costs,
expenses and charges shall constitute Revolving Loans hereunder, shall be
payable by Borrower to LaSalle on demand, and, until paid, shall bear interest
at the highest rate then applicable to Revolving Loans hereunder;
(p) Borrower shall not enter into or be a party to, or permit any
Subsidiary to enter into or be a party to, any transaction with any Affiliate of
Borrower except in the ordinary course of business in a manner and to an extent
consistent with past practices of Borrower and necessary or desirable for the
prudent operation of its business, for fair consideration and on terms no less
favorable to Borrower or such Subsidiary as are available from unaffiliated
third parties;
(q) Borrower shall promptly advise LaSalle in writing of any Material
Adverse Effect or the occurrence of any Default;
(r) Borrower shall not open any new location unless (i) Borrower gives
LaSalle 30 days prior written notice of the intended opening of such new
location, and (ii) Borrower executes and delivers to LaSalle such agreements,
document, and instruments as LaSalle deems necessary or desirable to protect
LaSalle's interest in the Collateral at such new location, including, without
limitation, UCC-1 financing statements; or
(s) Borrower shall notify LaSalle at least 60 days in advance of any
action Borrower intends to take to change its fiscal year, and at least 30 days
in advance of any action Borrower intends to take to change its method of
accounting, or any accounting practice used by it, or the application of any
generally accepted accounting principal in a manner inconsistent with the
financial statements previously delivered by Borrower to LaSalle.
15. CONDITIONS PRECEDENT
(a) The obligation of LaSalle to fund the Term Loan, to fund the initial
Revolving Loan, and to co-sign as applicant for the initial Letter of Credit, is
subject to
Page 36
the satisfaction or waiver on or before the Closing Date of the following
conditions precedent:
(i) LaSalle shall have received each of the agreements, opinions,
reports, approvals, consents, certificates and other documents
set forth on the closing document list attached hereto as
Schedule 15(i) ("Closing Document List");
(ii) Since December 31, 1997, no event shall have occurred which has
had or could reasonably be expected to have a Material Adverse
Effect, as determined by LaSalle in its sole discretion;
(iii) LaSalle shall have received payment in full of all fees and
expenses payable to it by Borrower on or before the Closing
Date; and
(iv) The Obligors shall have executed and delivered to LaSalle all
agreements and documents which LaSalle determines are reasonably
necessary to consummate the transactions contemplated hereby.
(b) After the Closing Date, the obligation of LaSalle to make any
requested Revolving Loan or to co-sign as applicant for any requested Letter of
Credit is subject to the satisfaction of the conditions precedent set forth
below. Each such request shall constitute a representation and warranty that
such conditions are satisfied:
(i) All representations and warranties contained in this Agreement
and the Other Agreements shall be true and correct on and as of
the date of such request, as if then made, other than
representations and warranties that relate solely to an earlier
date;
(ii) No Default shall have occurred, or would result from the making
of the requested Revolving Loan or the issuance of the requested
Letter of Credit, which has not been waived; and
(iii) No event has occurred which has had or could reasonably be
expected to have a Material Adverse Effect.
16. DEFAULT
The occurrence of any one or more of the following events shall constitute
an "EVENT OF DEFAULT" hereunder:
(a) the failure of any Obligor to pay when due, declared due, or demanded
by LaSalle in accordance with the terms hereof, any of the Liabilities;
Page 37
(b) the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
this Agreement or any of the Other Agreements other than the obligations set
forth in subsection (a) above; provided, however, so long as such failure or
neglect was not the result of intentional action by any Obligor and may be
cured, such failure or neglect shall not constitute an Event of Default if cured
within ten (10) days after its occurrence;
(c) the making or furnishing by any Obligor to LaSalle of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between such Obligor and LaSalle, which is
untrue or misleading in any respect, or the failure of any Obligor to perform,
keep or observe any of the covenants, conditions, promises, agreement of such
Obligor under any other agreement with any Person if such failure has or is
reasonably likely to have a Material Adverse Effect;
(d) the creation (whether voluntary or involuntary) of, or any attempt to
create, any lien or other encumbrance upon any of the Collateral, other than the
Permitted Liens, or the making or any attempt to make any levy, seizure or
attachment thereof;
(e) the commencement of any proceedings (i) in bankruptcy by or against
any Obligor, (ii) for the liquidation or reorganization of any Obligor, (iii)
alleging that such Obligor is insolvent or unable to pay its debts as they
mature, or (iv) for the readjustment or arrangement of any Obligor's debts,
whether under the United States Bankruptcy Code or under any other law, whether
state or federal, now or hereafter existing for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings involving
any Obligor; provided, however, that if such commencement of proceedings against
such Obligor is involuntary, such action shall not constitute an Event of
Default unless such proceedings are not dismissed within ninety (90) days after
the commencement of such proceedings;
(f) the appointment of a receiver or trustee for any Obligor, for any of
the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation or a partnership; provided, however, that if such appointment or
commencement of proceedings against such Obligor is involuntary, such action
shall not constitute an Event of Default unless such appointment is not revoked
or such proceedings are not dismissed within thirty (30) days after the
commencement of such proceedings;
(g) the entry of any judgment or order in excess of $50,000 against any
Obligor which remains unsatisfied or undischarged and in effect for thirty (30)
days after such entry without a stay of enforcement or execution;
Page 38
(h) the occurrence of an event of default under, or the revocation or
termination of, any agreement, instrument or document executed and delivered by
any Person to LaSalle pursuant to which such Person has guaranteed to LaSalle
the payment of all or any of the Liabilities or has granted LaSalle a security
interest in or lien upon some or all of such Person's real and/or personal
property to secure the payment of all or any of the Liabilities;
(i) the occurrence of an event of default under any other agreement or
instrument evidencing indebtedness for borrowed money in excess of $50,000
executed or delivered by Borrower or pursuant to which agreement or instrument
Borrower or its properties is or may be bound;
(j) any one Person, directly or indirectly, acquires the power to direct
or cause the direction of the management or policies of Borrower;
(k) the occurrence of any event or condition which has or is reasonably
likely to have a Material Adverse Effect; or
(l) any Obligor revokes or terminates (or attempts or purports to revoke
or terminate) his/her/its guaranty, endorsement or other agreement in favor of
LaSalle.
Notwithstanding anything contained in this paragraph 16 or contained in any
other provision of this Agreement or Other Agreements to the contrary, in the
event of the institution of any proceedings described in paragraph 16(e) hereof
against Borrower, LaSalle shall not be obligated to make advances to Borrower
during the ninety (90) day grace period provided in paragraph 16(e).
17. REMEDIES UPON AN EVENT OF DEFAULT
(a) Upon the occurrence of an Event of Default described in paragraph
16(e) hereof, all of the Liabilities shall immediately and automatically become
due and payable, without notice of any kind. Upon the occurrence of any other
Event of Default, all of the Liabilities may, at the option of LaSalle, and
without demand, notice or legal process of any kind, be declared, and
immediately shall become, due and payable.
(b) Upon the occurrence of an Event of Default, LaSalle may exercise from
time to time any rights and remedies available to it under the Uniform
Commercial Code and any other applicable law in addition to, and not in lieu of,
any rights and remedies expressly granted in this Agreement or in any of the
Other Agreements and all of LaSalle's rights and remedies shall be cumulative
and non-exclusive to the extent permitted by law. In particular, but not by way
of limitation of the foregoing, LaSalle may, without notice, demand or legal
process of any kind, take possession of any or all of the Collateral (in
addition to Collateral of which it already has possession), wherever it may be
found, and for that purpose may pursue the same wherever it may be found, and
Page 39
may enter into any of Borrower's premises where any of the Collateral may be,
and search for, take possession of, remove, keep and store any of the Collateral
until the same shall be sold or otherwise disposed of, and LaSalle shall have
the right to store the same at any of Borrower's premises without cost to
LaSalle. At LaSalle's request, Borrower shall, at Borrower's expense, assemble
the Collateral and make it available to LaSalle at one or more places to be
designated by LaSalle and reasonably convenient to LaSalle and Borrower.
Borrower recognizes that if Borrower fails to perform, observe or discharge any
of its Liabilities under this Agreement or the Other Agreements, no remedy at
law will provide adequate relief to LaSalle, and Borrower agrees that LaSalle
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages. Any notification of intended
disposition of any of the Collateral required by law will be deemed reasonably
and properly given if given at least ten (10) calendar days before such
disposition. Any proceeds of any disposition by LaSalle of any of the
Collateral may be applied by LaSalle to the payment of expenses in connection
with the Collateral including, without limitation, legal expenses and reasonable
attorneys' fees (both in-house and outside counsel), whether incurred at
arbitration, trial, on appeal, in a bankruptcy proceeding or otherwise, and any
balance of such proceeds may be applied by LaSalle toward the payment of such of
the Liabilities, and in such order of application, as LaSalle may from time to
time elect.
18. INDEMNIFICATION
Borrower agrees to defend (with counsel reasonably satisfactory to
LaSalle), protect, indemnify and hold harmless LaSalle, each affiliate or
subsidiary of LaSalle, and each of their respective officers, directors,
employees, attorneys and agents (each an "INDEMNIFIED PARTY") from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature (including, without limitation, the disbursements and the reasonable fees
of counsel for each Indemnified Party in connection with any investigative,
administrative or judicial proceeding, whether incurred at arbitration, trial,
on appeal, in a bankruptcy proceeding or otherwise, whether or not the
Indemnified Party shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against, any Indemnified Party (whether direct,
indirect or consequential and whether based on any federal, state or local laws
or regulations including, without limitation, securities, environmental and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any Other Agreement, or any act, event or transaction related or
attendant thereto, the making and the management of the Loans or any Letter of
Credit or the use or intended use of the proceeds of the Loans or any Letter of
Credit; provided, however, that Borrower shall not have any obligation hereunder
to any Indemnified Party with respect to matters caused by or resulting from the
willful misconduct or gross negligence of such Indemnified Party. To the extent
that the undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it is violative of any law or public
Page 40
policy, Borrower shall satisfy such undertaking to the maximum extent permitted
by applicable law. Any liability, obligation, loss, damage, penalty, cost or
expense covered by this indemnity shall be paid to each Indemnified Party on
demand, and, failing prompt payment, shall, together with interest thereon at
the highest rate then applicable to Revolving Loans hereunder from the date
incurred by each Indemnified Party until paid by Borrower, be added to the
Liabilities of Borrower and be secured by the Collateral. The provisions of this
paragraph 18 shall survive the satisfaction and payment of the other Liabilities
and the termination of this Agreement.
19. NOTICES
All written notices and other written communications with respect to this
Agreement shall be sent by ordinary, certified or overnight mail, by telecopy
(provided that without LaSalle's written consent, none of the reports required
by paragraph 11(a) may be delivered by telecopy) or delivered in person, and in
the case of LaSalle shall be sent to it at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, and in the case of
Borrower shall be sent to Borrower at its principal place of business as set
forth on the first page of this Agreement; provided, however, that either party
may designate another address for itself from time to time by notice given as
provided in this paragraph.
20. CHOICE OF GOVERNING LAW AND CONSTRUCTION
This Agreement and the Other Agreements shall be governed by and construed
in accordance with the laws of the State of Oregon. If any provision of this
Agreement shall be held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or remaining
provisions of this Agreement.
21. FORUM SELECTION
To induce LaSalle to accept this Agreement, Borrower irrevocably agrees
that, subject to LaSalle's sole and absolute election, ALL ACTIONS OR
PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO
THIS AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN
COURTS HAVING SITUS WITHIN ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇. BORROWER
HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL
COURTS LOCATED WITHIN SAID CITY AND STATE. BORROWER HEREBY WAIVES ANY RIGHT IT
MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST
BORROWER BY LaSALLE IN ACCORDANCE WITH THIS PARAGRAPH.
Page 41
22. MODIFICATION AND BENEFIT OF AGREEMENT
This Agreement and the Other Agreements may not be modified, altered or
amended except by an agreement in writing signed by Borrower and LaSalle.
Borrower may not sell, assign or transfer this Agreement, or the Other
Agreements or any portion thereof including, without limitation, Borrower's
rights, titles, interest, remedies, powers or duties thereunder. Borrower
hereby consents to LaSalle's sale, assignment, transfer or other disposition, at
any time and from time to time hereafter, of this Agreement, or the Other
Agreements, or of any portion thereof, or participations therein including,
without limitation, any of LaSalle's rights, titles, interest, remedies, powers
and/or duties thereunder. Borrower agrees that it shall execute and deliver
such documents as LaSalle may request in connection with any such sale,
assignment, transfer or other disposition.
23. HEADINGS OF SUBDIVISIONS
The headings of subdivisions in this Agreement are for convenience of
reference only, and shall not govern the interpretation of any of the provisions
of this Agreement.
24. POWER OF ATTORNEY
Borrower acknowledges and agrees that its appointment of LaSalle as its
attorney and agent-in-fact for the purposes specified in this Agreement is an
appointment coupled with an interest and shall be irrevocable until all of the
Liabilities are paid in full and this Agreement is terminated.
25. ADVERTISING
Borrower hereby authorizes LaSalle to use Borrower's name and trade name,
together with variants of such name and related logotypes in advertising
promoting LaSalle and the business transaction between LaSalle and Borrower
through the use of so-called "tombstones" and similar publicity. Borrower
hereby releases LaSalle and its subsidiaries, affiliates, officers, employees
and advertising agents, from any and all liability to Borrower arising out of or
related to the exercise of the rights granted to LaSalle in this section.
26. WAIVER OF JURY TRIAL; OTHER WAIVERS; CONFIDENTIALITY
(a) LaSALLE AND BORROWER HEREBY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT,
ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED
TORTIOUS CONDUCT OF BORROWER OR LaSALLE OR WHICH, IN ANY WAY, DIRECTLY OR
INDIRECTLY, ARISES OUT OF OR RELATES TO THE
Page 42
RELATIONSHIP BETWEEN BORROWER AND LaSALLE. IN NO EVENT SHALL LaSALLE BE LIABLE
FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
(b) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY LaSALLE OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF
BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
(c) Borrower hereby waives demand, presentment, protest and notice of
nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
(d) LaSalle's failure, at any time or times hereafter, to require strict
performance by Borrower of any provision of this Agreement or any of the Other
Agreements shall not waive, affect or diminish any right of LaSalle thereafter
to demand strict compliance and performance therewith. Any suspension or waiver
by LaSalle of an Event of Default under this Agreement or any default under any
of the Other Agreements shall not suspend, waive or affect any other Event of
Default under this Agreement or any other default under any of the Other
Agreements, whether the same is prior or subsequent thereto and whether of the
same or of a different kind or character. No delay on the part of LaSalle in
the exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by LaSalle
unless such suspension or waiver is in writing, signed by a duly authorized
officer of LaSalle and directed to Borrower specifying such suspension or
waiver.
27. OREGON STATUTORY NOTICE
(a) UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY
LASALLE AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS
WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY
THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED
BY LASALLE TO BE ENFORCEABLE.
(b) Borrower hereby represents to LaSalle that the credit provided
hereunder is not for personal family or household purposes and is not secured by
any residence.
Page 43
[This space intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have duly executed this Loan and
Security Agreement as of the date first above written.
LaSALLE BUSINESS CREDIT, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Title: Vice President
▇▇▇▇▇▇ SNOWBOARDS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Title: CEO
Page 44
EXHIBIT A
TO
LOAN AND SECURITY AGREEMENT
BUSINESS AND COLLATERAL LOCATIONS
1. Borrower's Chief Executive Office:
----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
2. Other Locations:
----------------
See attached
Page 1
▇▇▇▇▇▇ Snowboards, Inc
Business & Collateral Locations
LOCATION CONTACT PURPOSE RELATIONSHIP
-------- ------- ------- ------------
Creative Edge ▇▇▇▇ ▇▇▇▇▇ images & raw topsheet materials Public Warehouse
▇▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ topsheet materials Public Warehouse
▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇
Crown Plastics ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ images Public Warehouse
▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Plasticos Duramos ▇▇▇▇▇ ▇▇▇▇▇▇ boot material Public Warehouse
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇
S&J Sales ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ finished goods Public Warehouse
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
West Beach apparel fabric Public Warehouse
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇
Target Plastics ▇▇▇▇▇ ▇▇▇▇▇▇ plastic for sidewalls Public Warehouse
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇, ▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇, ▇▇ Marketing Studio additional office space
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇, ▇▇ Corporate Headquarters Executive offices
▇▇▇▇▇▇ International, Inc
▇▇ ▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Foreign Sales Corporation
Exhibit A
Page 1 of 2
POST OFFICE BOXES
General - ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Canadian Cash Receipts - ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇*
* used in prior year in order to separate foreign currency
no longer used since new software system allows for foreign currency
transactions
Exhibit A
Page 2 of 2
EXHIBIT B
INSTRUCTIONS FOR THE HANDLING OF YOUR ACCOUNT
WITH LASALLE BUSINESS CREDIT, INC. (LENDER)
I. SUBMITTING ASSIGNMENTS
1 Each Accounts Receivable Daily Loan Report must have attached a
legible copy of an Invoice Register/Sales Journal showing a
breakdown of invoices by account debtor, invoice number, invoice
date, and dollar amounts.
2 Proof of delivery such as bills of lading or signed delivery receipts
must be maintained in your files and be available for Lender's
auditors.
3 ALL ACCOUNTS AND INVOICES ARE TO BE ASSIGNED TO LENDER.
4 DO NOT ASSIGN PART OF AN ACCOUNT. Each account will be assigned in
full no matter how large or small the amount of any specific
invoice.
5 Each Assignment should be prepared in duplicate, sending the original
to Lender and retaining a copy for your records.
6 All Assignments are to be signed by the President or a properly
designated employee. Be sure to date and number the Daily Report.
To number the reports, use the number of the month plus the sequence
of the report. For example: If it is the third report for August, the
report number would be 8-03.
7 Assignments should be submitted daily.
8 IMPORTANT. Prepare an Assignment covering sales for the last day of
each month end and have it marked FINAL for the month. DO NOT combine
sales of two different months on one Assignment.
9 All merchandise returned on invoices assigned to Lender is still under
the security interest of Lender. Such merchandise must be immediately
reported as "credits." All credit memos should be properly reported to
Lender as they are issued, and reporting should comply with the same
procedures as for invoices. In addition, all credits such as
write-offs, adjustments, and journal entries affecting the accounts
receivable assigned to Lender should also be reported on a timely
basis.
II. SUBMITTING COLLECTIONS
1 Any checks received directly by ▇▇▇▇▇▇ Snowboards, Inc. (including
non-accounts receivable checks) must be deposited in the original form
with proper endorsement to the special depository account. NO CHECK
MAY BE DEPOSITED TO THE GENERAL BANK ACCOUNT.
2 Each Accounts Receivable Daily Loan Report is required to have
attached to it a listing of each check individually by customer name
with totals. This list may be a copy of your Cash Receipts Journal.
This listing must show the individual invoices the payments are being
applied to and all discounts, allowances, and adjustments must be
reflected on this list. All columns must also be totaled.
3 The Collection Report should be prepared in duplicate, sending the
original to Lender and retaining a copy for your records.
4 Collections must be submitted every day checks are received in a
lockbox or directly by ▇▇▇▇▇▇ Snowboards, Inc.
5 IMPORTANT. On the Collection Report covering remittances for the last
day of each month end, ▇▇▇▇ FINAL for the month.
6 Notwithstanding the above, so long as there are no Events of Default
and there is Excess Availability of $3,000,000 or more, the Accounts
Receivable Daily Loan Reports will only be required weekly.
III. REPORTING
For the end of EACH MONTH the following reports are to be submitted to
Lender per schedule below:
a DETAILED ACCOUNTS RECEIVABLE AGING -- due by the 10th of the
following month.
b ACCOUNTS RECEIVABLE RECONCILIATION -- due by the 10th of the
following month. This report will reconcile the A/R aging to the
Final Daily Loan Report for the month.
c DETAILED ACCOUNTS PAYABLE AGING -- due by the 10th of the
following month (including any accrued vendor payables or held
checks if possible).
d INVENTORY REPORT(S) AND AGING -- due by the 10th of the following
month.
e CUSTOMER NAME AND ADDRESS LISTING -- to be submitted on a
quarterly basis.
f BALANCE SHEET AND PROFIT AND LOSS STATEMENT -- due within 30 days
of the month end. Including consolidated and consolidating
statements.
g CPA - AUDITED STATEMENT -- at fiscal year-end (due within 90 days
of fiscal year end).
h COMPLIANCE CERTIFICATE -- to be completed and submitted with each
financial statement and signed by the chief financial officer.
The
Compliance Certificate is to be submitted in a format consistent with
Exhibit C of the Loan and Security Agreement.
IV. AUDITS
From time to time, an auditor employed by Lender will call at your office
for the purpose of checking our records against your books, and reviewing
and updating all necessary credit and financial data. Please cooperate
with our auditors by making available to them any information they may
request.
V. VERIFICATION OF ACCOUNT DEBTORS
Periodically, on a random basis, a sampling of your customers' accounts
receivable balances taken from your Aging are verified by Lender for
collateral control purposes. This procedure is handled on a "non-
notification" basis under the name of "▇▇▇▇▇▇▇ and Company" to protect the
integrity of your financing program with Lender.
VI. ACCOUNTS RECEIVABLE INELIGIBLE
On a monthly basis, you will receive from Lender a list of all items on
your A/R Aging that are not eligible for advance purposes. This list will
be updated upon receipt of each Aging.
VII. MISCELLANEOUS FEES
The following fees will be charged for these services provided by Lender:
a Outgoing Fed Wires -- $15 per wire.
b Automated Funds Transfer Fee (ACH) -- $50 per month.
VIII. OTHER
Request for advances must be telephoned to our office by no later than
10:30 a.m. PST to receive the wire that day. The deposit(s) for each day
must be telephoned or faxed to our office by no later than 1:30 p.m. PST
to receive credit for the deposit on the following day. Your primary
contact regarding advances and reporting will be ▇▇▇▇▇ ▇▇▇▇▇, our
Operations Manager. Her telephone number is (▇▇▇) ▇▇▇-▇▇▇▇ and her fax
number is (▇▇▇) ▇▇▇-▇▇▇▇. Please feel free to call ▇▇▇▇▇ with any
questions you should have.
EXHIBIT C
▇▇▇▇▇▇ SNOWBOARDS, INC.
COMPLIANCE CERTIFICATE
▇▇▇▇▇▇ Snowboards, Inc., ("Borrower"), gives this certificate ("Compliance
Certificate") to LaSalle Business Credit, Inc. ("Lender") on and as of the date
hereof and in compliance with the Loan and Security Agreement, dated November
__, 1997 by and among Lender and Borrower (the "Loan Agreement"). Capitalized
terms used in this Compliance Certificate, unless otherwise defined herein,
shall have the meanings ascribed to them in the Loan Agreement.
The Borrower hereby certifies that:
1. No potential Default or Event of Default exists under the Loan
Agreement;
2. No Material Adverse Effect or change in the condition, financial or
otherwise, business, property, including, without limitation, with respect to
environmental laws, or the result of operation of Borrower has occurred since
the date of the last compliance certificate delivered in accordance with SECTION
11 of the Loan Agreement;
3. All insurance premiums due and payable by Borrower have been fully
paid;
4. All taxes due and payable by Borrower have been fully paid;
5. No litigation, investigation or proceeding, or injunction, writ or
restraining order of the type described in SECTION 13(i), 13(v) or any other
section of the Loan Agreement is pending or threatened as of the date hereof;
6. The financial statements and supporting documents appended hereto and
delivered in accordance with SECTION 11 of the Loan Agreement (the "Financial
Documents") are complete, correct and thoroughly present the financial condition
of the Borrower;
7. Based upon my review of the financial information provided pursuant to
SECTION 14(b) of the Loan Agreement which are attached hereto for the period
ending __________________, 1997:
a. Borrower's computed Tangible Net worth was ____________________;
the minimum Tangible Net Worth required on that date was ____________________.
b. Borrower's Interest Coverage Ratio was ________________________
(to be completed quarterly); the minimum ratio required on that date was
________. [NOT APPLICABLE UNTIL 12/31/98]
COMPLIANCE CERTIFICATE
PAGE 2
c. Borrower's Debt Service Coverage Ratio was ___________ (to
be completed quarterly); the minimum ratio required on that date was ______.
[NOT APPLICABLE UNTIL 12/31/98]
d. Borrower's Capital Expenditures for the current fiscal year
have aggregated $_____________ ($__________ maximum allowed);
e. Distributions pursuant to SECTION 14(k) of the Loan Agreement
for the period were $_____________ ($____________ year to date).
8. Borrower, as of the date hereof, is in full compliance with the
representations, warranties, and covenants set forth in the Loan Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Compliance
Certificate as of ____________ ________, 1997.
▇▇▇▇▇▇ SNOWBOARDS, INC.
By ___________________________________
, Chief Financial Officer
▇▇▇▇▇▇ Snowboards, Inc
Loan and Security Agreement
Permitted Liens
Description of
File Date Type of Collateral/Effect of
Number Filed Filing Secured Party Amendment
------ ----- ------- ------------- --------------------
238676 9/29/94 UCC Lien AT&T Credit Corp phone system
244007 11/16/94 UCC Lien Norwest Financial Leasing grindrite
202547 12/22/93 UCC Lien AT&T Credit Corp phone system
243630 11/14/94 UCC Lien Norwest Financial Leasing wide belt waxer/grindrite
243911 11/15/94 UCC ▇▇▇▇ ▇▇▇▇▇ Rental System forklift
250858 1/20/95 UCC Lien Commercial Equipment Lease structural blaster
260084 3/30/95 UCC Lien Colonial Pacific Leasing high pressure foam machine
262870 4/19/95 UCC Lien AT&T Capital Leasing sharp 9800 copier
274164 7/13/95 UCC Lien Colonial Pacific Leasing grindrites, stonegrinder
280878 8/29/95 UCC Lien Celtic Leasing Corp silkscreen machine
280879 8/29/95 UCC Lien Celtic Leasing Corp 10 Dell computers
280880 8/29/95 UCC Lien Celtic Leasing Corp UV Systems, conveyor
241649 10/25/94 UCC Lien Kenco Equipment Lease Milling machine
Schedule 1
SCHEDULE 13(I)
TO
LOAN AND SECURITY AGREEMENT
PENDING LITIGATION
The Company is not currently involved in any material litigation or legal
proceedings and is not aware of any potentially material litigation or
proceeding threatened against it other than as described below.
In June 1995, the Company received notice from a German company alleging
that the Company's M-1 bindings sold prior to 1995 infringe on a patent held by
that company, which notice requests certain royalties based on M-1 binding
sales. Based on a review of the infringement claims and discussions with
counsel, the Company believes that it has defenses to such claims. No contact
has been made by the German company since this initial notice.
In early January 1996, the Company terminated its distribution arrangement
with its German distributor and appointed another company as its German
distributor. In late January 1996, the Commune received notice from the
terminated German distributor alleging that the Company has exclusive
distribution agreement and that such distributor is entitled to certain royalty
payments and other rights. There has been no contact from the German
distributor since that time.
Page 1
SCHEDULE 13(m)
TO
LOAN AND SECURITY AGREEMENT
OTHER NAMES
DESCRIPTION PATENT # APPL DATE STATUS
----------- -------- --------- ------
Patents:
Attachment system
for Snowboards 08/514,122 8/11/95 due to issue in next 3 or 4 months
Double-barrel or
triple-barrel construction 08/533,917 9/26/95
Step-in Binding system not yet filed (▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Docket M-225)
Snowboard Production process
for the formation of cores not yet filed (▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Docket M-239)
Trademarks:
Trademarks - please see attached document
Other Names:
There are no other trade names other than listed under Patents and Trademarks.
TRADEMARKS STATUS REPORT
APPLICATIONS/REGISTRATIONS IN THE NAME OF ▇▇▇▇▇▇ SNOWBOARDS, INC.
13401-032
In-house counsel receives int'l watch service
COUNTRY ▇▇▇▇ APPL. NO. APPL. DATE REG. NO. REG. DATE CLASS STATUS/NOTES
------------------------------------------------------------------------------------------------------------------------------------
Argentina ▇▇▇▇▇▇ INQUIRED ABOUT THIS
COUNTRY, BUT NO APPLICATION FILED.
------------------------------------------------------------------------------------------------------------------------------------
Chile ▇▇▇▇▇▇ 340.561 25 "▇▇▇▇▇▇" ▇▇▇▇ FILED BY
SOCIEDAD COMERCIAL G'▇▇▇▇▇▇ LTDA.
6/24/96 Published for Opposition.
8/5/96 Opposition filed by ▇▇▇▇▇▇.
------------------------------------------------------------------------------------------------------------------------------------
European ▇▇▇▇▇▇/1/ 161018 04/01/96 18,25,28 PENDING
Community Filed via Jacobacci & Perani;
(CTM) Pre-examination
Use due 5 years from registration.
------------------------------------------------------------------------------------------------------------------------------------
European M and Half-Moon 160960 04/01/96 18,25,28 PENDING
Community DESIGN/2/ Filed via Jacobacci & Perani;
(CTM) Pre-examination
Use due 5 years from registration.
------------------------------------------------------------------------------------------------------------------------------------
Japan ▇▇▇▇▇▇/3/ 115249/▇▇▇▇ ▇▇▇▇▇▇▇ 11/30/95 28 REGISTERED to ▇▇ ▇▇▇▇▇▇ Japan
9/30/97 completed: assignment of
registration from ▇.▇. ▇▇▇▇▇▇
Japan, license and recordation of
license back to ▇.▇. ▇▇▇▇▇▇ Japan
------------------------------------------------------------------------------------------------------------------------------------
Japan ▇▇▇▇▇▇/4/ 98361/1995 09/26/95 25 4/23/97 application suspended
pending resolution of the
negotiations with ▇▇ ▇▇▇▇▇▇ Japan.
9/30/97 agent notified that
negotiations were resolved.
------------------------------------------------------------------------------------------------------------------------------------
Japan M and Half-Moon 98362/1995 09/26/95 28 Awaiting Trademark Office response
DESIGN/5/
------------------------------------------------------------------------------------------------------------------------------------
Peru ▇▇▇▇▇▇/6/ 287457 12/18/95 25 02/03/96: Published for opposition.
------------------------------------------------------------------------------------------------------------------------------------
TRADEMARKS STATUS REPORT
APPLICATIONS/REGISTRATIONS IN THE NAME OF ▇▇▇▇▇▇ SNOWBOARDS, INC.
13401-032
In-house counsel receives int'l watch service
COUNTRY ▇▇▇▇ APPL. NO. APPL. DATE REG. NO. REG. DATE CLASS STATUS/NOTES
------------------------------------------------------------------------------------------------------------------------------------
Peru ▇▇▇▇▇▇/7/ 287458 12/18/95 024915 04/08/96 28 REGISTERED
Renewal: 04/08/2006
Use: 04/08/99 (every 3 years)
------------------------------------------------------------------------------------------------------------------------------------
United States DOUBLE-BARREL/8/ 74/620,227 01/10/95 28 Maintained by ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇.
(itu*) 9/27/97 Response to Office
Action regarding the Statement
of Use entered
------------------------------------------------------------------------------------------------------------------------------------
United States ▇▇▇▇▇▇/9/ (use) 74/596,786 11/08/94 2,022,859 12/17/96 25, 28 Maintained by ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇.
REGISTERED
------------------------------------------------------------------------------------------------------------------------------------
United States ▇▇▇▇▇▇ 74/596,419 11/08/94 1,983,504 07/02/96 25, 28 Maintained by ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇.
SNOWBOARDS and REGISTERED
Design/10/ (use)
------------------------------------------------------------------------------------------------------------------------------------
United States ▇▇▇▇▇▇ A NEW 74/596,822 11/08/94 1,994,516 08/20/96 25, 28 Maintained by ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇.
SYMBOL OF REGISTERED
STRENGTH and
Design/11/ (use)
---------------- -------------------------------------------------------------------------------------------------------------------
United States M and Half-Moon 74,735,743 09/29/95 2,086,873 08/12/97 25, 28 Maintained by ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇.
DESIGN/12/ REGISTERED
-----------------------------------------------------------------------------------------------------------------------------------
-------------------
/1/ Class 18: Leather and imitations of leather and goods made of these
materials and not included in other classes; trunks and traveling bags;
backpacks, rucksacks, all-purpose sport bags; Class 25: Clothing, headgear; snow
and skiwear and accessories; boots for sports; boot liners; beanies, caps and
hats; gloves and mittens; jackets; parkas; pants; jerseys; sweatshirts;
T-shirts; snow suits; socks; Class 28: Sporting articles not included in other
classes; snowboard and ski equipment and accessories; snowboard bindings, parts
and hardware therefor; snowboards; snowboard carrying cases; snowboard leashes;
snowboard stomp pads; ski wax.
-------------------
* Application filed based on Intent to Use
-2-
TRADEMARKS STATUS REPORT
APPLICATIONS/REGISTRATIONS IN THE NAME OF ▇▇▇▇▇▇ SNOWBOARDS, INC.
13401-032
------------------------------------------------------------------------------
/2/ Class 18: Leather and imitations of leather and goods made of these
materials and not included in other classes; trunks and traveling bags;
backpacks; rucksacks; all-purpose sport bags; Class 25: Clothing, footwear,
headgear; snow and skiwear and accessories; boots for sports; boot liners;
beanies, caps and hats; gloves and mittens; jackets; parkas; pants; jerseys;
sweatshirts; T-shirts; snow suits; socks; Class 28: Sporting articles not
included in other classes; snowboard and ski equipment and accessories;
snowboard bindings, parts and hardware therefor; snowboards; snowboard carrying
cases; snowboard leashes; snowboard stomp pads; ski wax.
/3/
/4/ Clothing (excluding Japanese style clothing), garters, stocking suspenders,
braces, waistbands, belts, special sporting/gymnastic wear, special
sporting/gymnastic footwear
/5/ Snowboard, skiing implements, sporting & gymnastic implements, toys, wax
for skis
/6/ Clothing, shoes, hats, special clothing for snow and ski sports, including
parkas, ski jackets, snow suits, ski pants, gloves, mittens, and socks
/7/ Snowboard and ski equipment; and, in general, all the products in the
class.
/8/ Snowboards
/9/ Snow and ski wear and accessories; Snowboard and ski equipment
/10/ Snow and ski wear and accessories; Snowboard and ski equipment
/11/ Snow and ski wear and accessories; Snowboard and ski equipment
/12/ Class 25: Ski wear, boots, boot liners, sweatshirts, T-shirts, jackets,
pants and hats; Class 28: Snowboards, snowboard gear bags fitted for holding
snowboards and snowboarding accessories, snowboard bindings and parts therefor,
snowboard stomp pads, snowboard bags and snowboard leashes
-3-
▇▇▇▇▇▇ Snowboards, Inc
Schedule of Long-Term Leases Payable
September 27, 1997
Leasing Equipment Balance
Company Under Lease 9/27/97
------- ----------- -------
Celtic UV Systems, Conveyor 23,785.80
Celtic Silk Screen Machine 85,703.75
Kenco Milling Machine 3,077.50
Kenco Dell Computers (10 PC's) 3,223.56
Commercial Equipment Stamp, ▇▇▇▇▇▇ Dies 3,806.20
Commercial Equipment Structural Blaster 9,026.60
Northwest Financial Wide Belt Waxer/Grindrites 13,750.95
Northwest Financial Grindrite 5,679.73
▇▇▇▇▇ Credit Forklift 9,626.22
Colonial Pacific High Pressure Foam Machine 47,844.95
Colonial Pacific 2 Grindrite, Stonegrinder 45,336.27
AT&T Credit Phone System-Claxter 19,908.47
AT&T Credit Sharp 9800 Copier 1,485.06
AT&T Credit Phone System-▇▇▇▇▇▇▇ 25,317.90
Flow International Corp* Water Cutting System 142,942.00
----------
440,514.96
==========
*Lease entered into in August, 1997 - still waiting for acceptance of
equipment, expected during November, 1997
Schedule 13(q)
SCHEDULE 13(S)
TO
LOAN AND SECURITY AGREEMENT
LIST OF PARENTS AND SUBSIDIARIES
▇▇▇▇▇▇ Snowboards, Inc. (Borrower)
▇▇▇▇▇▇, LLC, an Oregon limited liability company wholly-owned by Borrower
▇▇▇▇▇▇ Snowboards, ULC, a Nova Scotia unlimited liability company, a wholly-
owned indirect subsidiary of Borrower
▇▇▇▇▇▇ International, Inc., a Guam corporation, a wholly-owned subsidiary of
Borrower
Page 1
SCHEDULE 14
TO
LOAN AND SECURITY AGREEMENT
COVENANT DISCLOSURES
THE COMPANIES
▇▇▇▇▇▇ Snowboards, Inc. ("▇▇▇▇▇▇"). ▇▇▇▇▇▇, formed in 1989 as an Oregon
corporation, is a leading designer, manufacturer and marketer of premium
snowboards, bindings, boots and related accessories under the ▇▇▇▇▇▇(R) brand.
▇▇▇▇▇▇, to a lesser degree, provides snowboards and bindings for original
equipment manufacturers ("OEMs"). ▇▇▇▇▇▇ owns and operates a 106,000 square foot
administrative and manufacturing facility in Salem, Oregon. It employs
approximately 220 people. The principal executive offices and manufacturing
facilities of ▇▇▇▇▇▇ are located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇., ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇.
Westbeach Snowboard Canada Ltd. ("Westbeach"). Westbeach, formed in 1982 as
a Canadian federal corporation, and recently continued into British Columbia as
a British Columbia corporation, is a manufacturer, wholesaler and retailer of
snowboarding apparel and casual clothing. Westbeach also sells snowboards,
bindings, boots and a full line of accessories through its three retail stores
in Vancouver and Whistler, British Columbia and Bellevue, Washington, USA.
Besides its three retail stores, Westbeach operates four wholesale warehouses
(one in Vancouver, B.C., and, through its German sales representative, one in
Schwifting, Germany and warehouses at its Bellevue, Washington and Innsbruck,
Austria facility), has a sales office in Innsbruck, Austria and employs
approximately 55 people. The principal executive offices of Westbeach are
located at ▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇▇.
THE EXCHANGE PROPOSAL
The Boards of Directors of ▇▇▇▇▇▇ and Westbeach have approved a proposed
Securities Purchase Agreement ("Purchase Agreement") among those companies,
Westbeach security holders and certain ▇▇▇▇▇▇ affiliates under which ▇▇▇▇▇▇
Westbeach Canada, Ltd. (name may be changed), a British Columbia company,
through an exchange of ▇▇▇▇▇▇ Common Stock and cash with Westbeach security
holders for their Westbeach securities (the "Exchange" or "Acquisition") would
acquire up to all of the outstanding securities of Westbeach and Westbeach would
become a partially or wholly owned subsidiary of ▇▇▇▇▇▇ Westbeach Canada, Ltd.
In the Exchange, the outstanding Westbeach securities, after the call of
Westbeach's callable Class A Common, will be transferred to ▇▇▇▇▇▇ Westbeach
Canada, Ltd. in exchange for ▇▇▇▇▇▇ Common Stock and cash. ▇▇▇▇▇▇ Westbeach
Canada, Ltd. is a wholly owned subsidiary of ▇▇▇▇▇▇ Snowboards, ULC, a Nova
Scotia limited liability company ("▇▇▇▇▇▇ ▇▇"). ▇▇▇▇▇▇ ▇▇ is a wholly owned
subsidiary of ▇▇▇▇▇▇, LLC ("▇▇▇▇▇▇ LLC"), an Oregon limited liability company
which is a wholly owned subsidiary of ▇▇▇▇▇▇ Snowboards, Inc. ▇▇▇▇▇▇ ▇▇ and
▇▇▇▇▇▇ LLC are referred to herein as the "▇▇▇▇▇▇ Affiliates."
Under the Purchase Agreement, the Westbeach security holders would
collectively receive up to $3,170,000 CN cash ("Cash Consideration"), reduced by
certain amounts noted herein (including $240,000 for repurchase of the callable
Class A Common Stock, a $60,000 prepayment penalty and estimated legal fees and
investment banking fees), and 584,240 shares of ▇▇▇▇▇▇ Common Stock ("Stock
Consideration"), distributed among them as set forth in Schedule A of the
Purchase Agreement. The number of shares of ▇▇▇▇▇▇ Common Stock to be issued is
fixed, subject to adjustment to reflect stock splits, stock dividends,
subdivisions, reclassifications, combinations, exchanges, reorganizations,
recapitalizations and similar transactions affecting the ▇▇▇▇▇▇ stock. Following
the Exchange, through one or more of several British Columbia corporate law
procedures, Westbeach will be wound up and the interests of the Class A Common
and warrant holders who do not accept this offer (including holders who
exercised their warrants and acquired Class A Common Stock) will be extinguished
or converted to securities or rights to acquire interests in ▇▇▇▇▇▇ ▇▇, a
company whose members have unlimited liability.
SCHEDULE 15(I)
TO
LOAN AND SECURITY AGREEMENT
CLOSING DOCUMENT LIST
1. Loan and Security Agreement
2. Promissory Note-Revolving Loans
3. UCC Financing Statements
- UCC-1, - Oregon Secretary of State
- UCC-1A - ▇▇▇▇▇▇ County
4. UCC Searches
5. UCC Termination Statements
6. Deed of Trust
7. Title Insurance
8. Patent Assignment and Security Agreement
9. Trademark Security Agreement
10. Good Standing Certificate - Oregon Secretary of State
11. Borrower's Secretary's Certificate
12. Evidence of Insurance
- flood insurance
- property casualty insurance
- liability insurance
13. Accountants Access Letter
14. Disbursement Direction Letter
15. Signature Authorization Letter
Page 1
16. Continuing Unconditional Guaranty and Security Agreement
- Oregon LLC
- Nova Scotia ULC.
- ▇▇▇▇▇▇ Int'l Inc.
17. Special Depository Account Agreement
18. Borrower's and Guarantor's Counsel's Opinion Letter
Page 2