EXHIBIT 10.2
CREDIT AGREEMENT
(LINE OF CREDIT)
(FOREIGN EXCHANGE)
(LETTER OF CREDIT SUB-FACILITY)
This Agreement (the "Agreement") is made and entered into as of August 12,
2003 , by and between BANK OF THE WEST (the "Bank") and STONE BOARDWEAR, INC.
(the "Borrower"), on the terms and conditions that follow:
SECTION
1
DEFINITIONS
1.1 CERTAIN DEFINED TERMS: Unless elsewhere defined in this Agreement, the
following terms shall have the following meanings (such meanings to be
generally applicable to the singular and plural forms of the terms
defined):
1.1.1 "ADVANCE": shall mean an advance to the Borrower under the credit
facility (ies) described in Section 2.
1.1.2 "BUSINESS DAY": shall mean a day, other than a Saturday or Sunday,
on which commercial banks are open for business in California.
1.1.3 "CLOSE-OUT DATE": shall mean the Business Day on which the Bank
closes out and liquidates an FX Transaction.
1.1.4 "CLOSING VALUE": has the meaning given to it in Section 8.5(i)
hereof.
1.1.5 "CLOSING GAIN" AND "CLOSING LOSS" :shall mean the amount determined
in accordance with Section 8.5(ii) hereof.
1.1.6 "COLLATERAL": shall mean the property described in Section 3,
together with any other personal or real property in which the Bank
may be granted a lien or security interest to secure payment of
the Obligations.
1.1.7 "CREDIT PERCENTAGE": shall mean 10%.
1.1.8 "CURRENT LIABILITIES": shall mean current liabilities as determined
in accordance with generally accepted accounting principles,
including any negative cash balance on the Borrower's financial
statement and Indebtedness for borrowed money under lines of credit
with the Bank used by the Borrower for working capital purposes.
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1.1.9 "EFFECTIVE TANGIBLE NET WORTH": shall mean the Borrower's stated
net worth plus Subordinated Debt but less all intangible assets of
the Borrower (i.e., goodwill, trademarks, patents, copyrights,
organization expense, and similar intangible items including, but
not limited to, investments in and all amounts due from affiliates,
officers or employees).
1.1.10 "ENVIRONMENTAL CLAIMS": shall mean all claims, however asserted, by
any governmental authority or other person alleging potential
liability or responsibility for violation of any Environmental Law
or for Discharge or injury to the environment or threat to public
health, personal injury (including sickness, disease or death),
property damage, natural resources damage, or otherwise alleging
liability or responsibility for damages (punitive or otherwise),
cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief,
resulting from or based upon (a) the presence, placement,
discharge, emission or release (including intentional and
unintentional, negligent and non-negligent, sudden or non-sudden,
accidental or non-accidental placement, spills, leaks, Discharges,
emissions or releases) of any Hazardous Material at, in, or from
property, whether or not owned by the Borrower, or (b) any other
circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
1.1.11 "ENVIRONMENTAL LAWS": shall mean all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and
codes, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements
with, any governmental authorities, in each case relating to
environmental, health, safety and land use matters; including the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), the Clean Air Act, the Federal Water
Pollution Control Act of 1972, the Solid Waste Disposal Act, the
Federal Resource Conservation and Recovery Act, the Toxic
Substances Control Act, the Emergency Planning and Community
Right-to-Know Act, the California Hazardous Waste Control Law, the
California Solid Waste Management, Resource, Recovery and Recycling
Act, the California Water Code and the California Health and Safety
Code.
1.1.12 "ENVIRONMENTAL PERMITS": shall have the meaning provided in Section
5.11 hereof.
1.1.13 "ERISA": shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, including (unless the context
otherwise requires) any rules or regulations promulgated
thereunder.
1.1.14 "EVENT OF DEFAULT": shall have the meaning set forth in Section 7.
1.1.15 "EXPIRATION DATE": shall mean May 31, 2005, or the date of
termination of the Bank's commitment to lend under this Agreement
pursuant to Section 8, whichever shall occur first.
1.1.16 "FOREIGN CURRENCY": shall mean any legally traded currency other
than US dollars and which may be transferred by paperless wire
transfer or cash and in which the Bank regularly trades.
1.1.17 "FOREIGN EXCHANGE FACILITY": shall mean the credit facility
described as such in Section 2.
1.1.18 "FX RISK LIABILITY": shall mean the product of (a) the Credit
Percentage, times (b) the aggregate of the Notional Values of all
FX Transactions outstanding, net of any Offsetting Transactions.
1.1.19 "FX LIMIT": shall mean $500,000.00.
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1.1.20 "FX TRANSACTION": shall mean any transaction between the Bank and
the Borrower pursuant to which the Bank has agreed to sell to or to
purchase from the Borrower a Foreign Currency of an agreed amount
at an agreed price in US dollars or such other agreed upon Foreign
Currency, deliverable and payable on an agreed date.
1.1.21 "HAZARDOUS MATERIALS": shall mean all those substances which are
regulated by, or which may form the basis of liability under, any
Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste,
hazardous constituent, special waste, hazardous substance,
hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.
1.1.22 "INDEBTEDNESS": shall mean, with respect to the Borrower, (i) all
indebtedness for borrowed money or for the deferred purchase price
of property or services in respect of which the Borrower is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or
in respect of which the Borrower otherwise assures a creditor
against loss and (ii) obligations under leases which shall have
been or should be, in accordance with generally accepted accounting
principles, reported as capital leases in respect of which the
Borrower is liable, contingently or otherwise, or in respect of
which the Borrower otherwise assures a creditor against loss.
1.1.23 "LETTER OF CREDIT FACILITY": shall mean the credit facility
described as such in Section 2.
1.1.24 "LIBOR ADVANCE": shall have the respective meaning as it is defined
for each facility under Section 2, hereof.
1.1.25 "LIBOR INTEREST PERIOD": shall have the respective meaning as it is
defined for each facility under Section 2, hereof.
1.1.26 "LIBOR RATE": shall have the respective meaning as it is defined
for each facility under Section 2, hereof.
1.1.27 "LINE ACCOUNT": shall have the meaning provided in Section 2.4
hereof.
1.1.28 "LINE OF CREDIT": shall mean the credit facility described as such
in Section 2.
1.1.29 "NOTIONAL VALUE": shall mean the US Dollar equivalent of the price
at which the Bank agreed to purchase or sell to the Borrower a
Foreign Currency.
1.1.30 "OBLIGATIONS": shall mean all amounts owing by the Borrower to the
Bank pursuant to this Agreement including, but not limited to, the
unpaid principal amount of any loans or advances.
1.1.31 "OFFSETTING TRANSACTION": shall mean a FX Transaction to purchase a
Foreign Currency and a FX Transaction to sell the same Foreign
Currency , each with the same Settlement Date and designated as an
Offsetting Transaction at the time of entering into the FX
Transaction.
1.1.32 "ORDINARY COURSE OF BUSINESS": shall mean, with respect to any
transaction involving the Borrower or any of its subsidiaries or
affiliates, the ordinary course of the Borrower's business, as
conducted by the Borrower in accordance with past practice and
undertaken by the Borrower in good faith and not for the purpose of
evading any covenant or restriction in this Agreement or in any
other document, instrument or agreement executed in connection
herewith.
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1.1.33 "PERMITTED LIENS": shall mean: (i) liens and security interests
securing indebtedness owed by the Borrower to the Bank; (ii) liens
for taxes, assessments or similar charges not yet due; (iii) liens
of materialmen, mechanics, warehousemen, or carriers or other like
liens arising in the Ordinary Course of Business and securing
obligations which are not yet delinquent; (iv) purchase money liens
or purchase money security interests upon or in any property
acquired or held by the Borrower in the Ordinary Course of Business
to secure Indebtedness outstanding on the date hereof or permitted
to be incurred herein; (v) liens and security interests which, as
of the date hereof, have been disclosed to and approved by the Bank
in writing; and (vi) those liens and security interests which in
the aggregate constitute an immaterial and insignificant monetary
amount with respect to the net value of the Borrower's assets.
1.1.34 "PRIME RATE": shall mean an index for a variable interest rate
which is quoted, published or announced by Bank as its prime rate
and as to which loans may be made by Bank at, above or below such
rate.
1.1.35 "SETTLEMENT DATE": shall mean the Business Day on which the
Borrower has agreed to (a) deliver the required amount of Foreign
Currency, or (b) pay in US dollars the agreed upon purchase price
of the Foreign Currency.
1.1.36 "SUBORDINATED DEBT": shall mean such liabilities of the Borrower
which have been subordinated to those owed to the Bank in a manner
acceptable to the Bank.
1.1.37 "VARIABLE RATE ADVANCE": shall have the respective meaning as it is
defined for each facility under Section 2, hereof.
1.1.38 "VARIABLE RATE": shall have the respective meaning as it is defined
for each facility under Section 2, hereof.
1.2 ACCOUNTING TERMS: All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein
shall mean such financial statements or such items prepared or determined
in accordance with generally accepted accounting principles consistently
applied and, except where otherwise specified, all financial data
submitted pursuant to this Agreement shall be prepared in accordance with
such principles.
1.3 OTHER TERMS: Other terms not otherwise defined shall have the meanings
attributed to such terms in the California Uniform Commercial Code as in
effect on July 1, 2001 and from time to time thereafter.
SECTION
2
CREDIT FACILITIES
2.1 THE LINE OF CREDIT
2.1.1 THE LINE OF CREDIT: On terms and conditions as set forth herein, the
Bank agrees to make Advances to the Borrower from time to time from
the date hereof to the Expiration Date, provided the aggregate
amount of such Advances outstanding at any time does not exceed
$8,000,000.00 (the "Line of Credit"). Within the foregoing limits,
the Borrower may borrow, partially or wholly prepay, and reborrow
under this Section 2.1. Proceeds of the Line of Credit shall be used
for working capital needs; provided, however, that not more than an
aggregate amount of $2,500,000 of the credit facilities provided
pursuant to this Agreement shall be used for the acquisition of new
business(es).
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2.1.2 MAKING LINE ADVANCES: Each Advance shall be conclusively deemed to
have been made at the request of and for the benefit of the Borrower
(i) when credited to any deposit account of the Borrower maintained
with the Bank or (ii) when paid in accordance with the Borrower's
written instructions. Subject to the requirements of Section 4 and
provided such request is made in a timely manner as provided in
Section 2.1.5 below, Advances shall be made by the Bank under the
Line of Credit.
2.1.3 REPAYMENT: On the Expiration Date, the Borrower hereby promises and
agrees to pay to the Bank in full the aggregate unpaid principal
amount of all Advances then outstanding, together with all accrued
and unpaid interest thereon.
2.1.4 INTEREST ON ADVANCES: Interest shall accrue from the date of each
Advance under the Line of Credit at one of the following rates, as
quoted by the Bank and as elected by the Borrower below:
(i) Variable Rate Advances: A variable rate per annum equivalent
to the Prime Rate (the "Variable Rate"). Interest shall be
adjusted concurrently with any change in the Prime Rate. An
Advance based upon the Variable Rate is hereinafter referred
to as a "Variable Rate Advance".
(ii) LIBOR Advances: A fixed rate quoted by the Bank for 1 to 6
months or for such other period of time that the Bank may
quote and offer (provided that any such period of time does
not extend beyond the Expiration Date) (the "LIBOR Interest
Period") for Advances in the minimum amount of $100,000.00.
Such interest rate shall be a percentage approximately
equivalent to 1.50% in excess of the Bank's LIBOR Rate which
is that rate determined by the Bank's Treasury Desk as being
the arithmetic mean (rounded upwards, if necessary, to the
nearest whole multiple of one-sixteenth of one percent
(1/16%)) of the U. S. dollar London Interbank Offered Rates
for such period appearing on page 3750 (or such other page as
may replace page 3750) of the Telerate screen at or about
11:00 a.m. (London time) on the second Business Day prior to
the first days of such period (adjusted for any and all
assessments, surcharges and reserve requirements) (the "LIBOR
Rate"). An Advance based upon the LIBOR Rate is hereinafter
referred to as a "LIBOR Advance".
Interest on any Advance shall be computed on the basis of 360
days per year, but charged on the actual number of days
elapsed.
The Borrower hereby promises and agrees to pay interest in
arrears on Variable Rate Advances and LIBOR Advances on the
last day of each month commencing August 31, 2003.
If interest is not paid as and when it is due, it shall be
added to the principal, become and be treated as a part
thereof, and shall thereafter bear like interest
2.1.5 NOTICE OF BORROWING: Upon written or telephonic notice which shall
be received by the Bank at or before 2:00 p.m. (California time) on
a Business Day, the Borrower may borrow under the Line of Credit by
requesting:
(i) A Variable Rate Advance. A Variable Rate Advance may be made
on the day notice is received by the Bank; provided, however,
that if the Bank shall not have received notice at or before
2:00 p.m. on the day such Advance is requested to be
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made, such Variable Rate Advance may, at the Bank's option, be
made on the next Business Day.
(ii) A LIBOR Advance. Notice of any LIBOR Advance shall be received
by the Bank no later than two Business Days prior to the day
(which shall be a Business Day) on which the Borrower requests
such LIBOR Advance to be made.
2.1.6 NOTICE OF ELECTION TO ADJUST INTEREST RATE: The Borrower may elect:
(i) That interest on a Variable Rate Advance shall be adjusted to
accrue at the LIBOR Rate; provided, however, that such notice
shall be received by the Bank no later than two Business Days
prior to the day (which shall be a Business Day) on which the
Borrower requests that interest be adjusted to accrue at the
LIBOR Rate.
(ii) That interest on a LIBOR Advance shall continue to accrue at a
newly quoted LIBOR Rate or shall be adjusted to commence to
accrue at the Variable Rate; provided, however, that such
notice shall be received by the Bank no later than two
Business Days prior to the last day of the LIBOR Interest
Period pertaining to such LIBOR Advance. If the Bank shall not
have received notice (as prescribed herein) of the Borrower's
election that interest on any LIBOR Advance shall continue to
accrue at the newly quoted LIBOR Rate, the Borrower shall be
deemed to have elected that interest thereon shall be adjusted
to accrue at the Variable Rate upon the expiration of the
LIBOR Interest Period pertaining to such Advance.
2.1.7 PREPAYMENT: The Borrower may prepay any Advance in whole or in part,
at any time and without penalty, provided, however, that: (i) any
partial prepayment shall first be applied, at the Bank's option, to
accrued and unpaid interest and next to the outstanding principal
balance; and (ii) during any period of time in which interest is
accruing on any Advance on the basis of the LIBOR Rate, no
prepayment shall be made except on a day which is the last day of
the LIBOR Interest Period pertaining thereto. If the whole or any
part of any LIBOR Advance is prepaid by reason of acceleration or
otherwise, the Borrower shall, upon the Bank's request, promptly pay
to and indemnify the Bank for all costs and expenses actually
incurred by the Bank and any loss (including loss of profit
resulting from the re-employment of funds) deemed sustained by the
Bank as a consequence of such prepayment.
The Bank shall be entitled to fund all or any portion of its
Advances in any manner it may determine in its sole discretion, but
all calculations and transactions hereunder shall be conducted as
though the Bank actually funded all Advances through the purchase of
dollar deposits bearing interest at the same rate as U.S. Treasury
securities in the amount of the relevant Advance and in maturities
corresponding to the date of such purchase to the Expiration Date
hereunder.
2.1.8 INDEMNIFICATION FOR LIBOR RATE COSTS: During any period of time in
which interest on any Advance is accruing on the basis of the LIBOR
Rate, the Borrower shall, upon the Bank's request, promptly pay to
and reimburse the Bank for all costs incurred and payments made by
the Bank by reason of any future assessment, reserve, deposit or
similar requirement or any surcharge, tax or fee imposed upon the
Bank or as a result of the Bank's compliance with any directive or
requirement of any regulatory authority pertaining or relating to
funds used by the Bank in quoting and determining the LIBOR Rate.
2.1.9 CONVERSION FROM LIBOR RATE TO VARIABLE RATE: In the event that the
Bank shall at any time determine that the accrual of interest on the
basis of the LIBOR Rate (i) is infeasible because the Bank is unable
to determine the LIBOR Rate due to the unavailability of U.S.
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dollar deposits, contracts or certificates of deposit in an amount
approximately equal to the amount of the relevant Advance and for a
period of time approximately equal to relevant LIBOR Interest Period
or (ii) is or has become unlawful or infeasible by reason of the
Bank's compliance with any new law, rule, regulation, guideline or
order, or any new interpretation of any present law, rule,
regulation, guideline or order, then the Bank shall give telephonic
notice thereof (confirmed in writing) to the Borrower, in which
event any Advance bearing interest at the LIBOR Rate shall be deemed
to be a Variable Rate Advance and interest shall thereupon
immediately accrue at the Variable Rate.
2.2 LETTER OF CREDIT SUB-FACILITY
2.2.1 LETTER OF CREDIT SUB-FACILITY: The Bank agrees to issue commercial
and/or standby letters of credit (each a "Letter of Credit") on
behalf of the Borrower of up to $4,000,000.00. At no time, however,
shall the total principal amount of all Advances outstanding under
the Line of Credit, together with the total face amount of all
Letters of Credit outstanding, less any partial draws paid by the
Bank, exceed the Line of Credit.
(i) Upon the Bank's request, the Borrower shall promptly pay to
the Bank issuance fees and such other fees, commissions, costs
and any out-of-pocket expenses charged or incurred by the Bank
with respect to any Letter of Credit.
(ii) The commitment by the Bank to issue Letters of Credit shall,
unless earlier terminated in accordance with the terms of the
Agreement, automatically terminate on the Expiration Date of
the Line of Credit and no Letter of Credit shall expire on a
date which is more than 90 days after the Expiration Date.
(iii) Each Letter of Credit shall be in form and substance
satisfactory to the Bank and in favor of beneficiaries
satisfactory to the Bank, provided that the Bank may refuse to
issue a Letter of Credit due to the nature of the transaction
or its terms or in connection with any transaction where the
Bank, due to the beneficiary or the nationality or residence
of the beneficiary, would be prohibited by any applicable law,
regulation or order from issuing such Letter of Credit.
(iv) Prior to the issuance of each Letter of Credit, but in no
event later than 10:00 a.m. (California time) on the day such
Letter of Credit is to be issued (which shall be a Business
Day), the Borrower shall deliver to the Bank a duly executed
form of the Bank's standard form of application for issuance
of a Letter of Credit with proper insertions.
(v) The Borrower shall, upon the Bank's request, promptly pay to
and reimburse the Bank for all costs incurred and payments
made by the Bank by reason of any future assessment, reserve,
deposit or similar requirement or any surcharge, tax or fee
imposed upon the Bank or as a result of the Bank's compliance
with any directive or requirement of any regulatory authority
pertaining or relating to any Letter of Credit.
In the event that the Borrower fails to pay any drawing under any Letter
of Credit or the balances in the depository account or accounts maintained
by the Borrower with Bank are insufficient to pay such drawing, without
limiting the rights of Bank hereunder or waiving any Event of Default
caused thereby, Bank may, and Borrower hereby authorizes Bank to create an
Advance bearing interest at the rate or rates provided in Section 9.2
hereof to pay such drawing.
2.3 FOREIGN EXCHANGE FACILITY
2.3.1 FOREIGN EXCHANGE FACILITY: The Bank agrees to enter into FX
Transactions with the
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Borrower, at the Borrower's request therefor made prior to the
Expiration Date, provided however, that at no time shall the
aggregate FX Risk Liability of the Borrower exceed the FX Limit.
Each FX Transaction shall be used to hedge the Borrower's foreign
exchange exposure.
(i) REQUESTS. Each request for a FX Transaction shall be made by
telephone to the Bank's Treasury Department ("Request"), shall
specify the Foreign Currency to be purchased or sold, the
amount of such Foreign Currency and the Settlement Date. Each
Request shall be communicated to the Bank no later than 3:00
p.m. California time on the Business Day on which the FX
Transaction is requested.
(ii) TENOR. No FX Transaction shall have a Settlement Date which is
more than 365 days after the date of entry into such FX
Transaction, and provided further, no FX Transaction shall
expire on a date which is more than 90 days after the
Expiration Date.
(iii) AVAILABILITY. Bank may refuse to enter into a FX Transaction
with the Borrower where the Bank, at its sole discretion,
determines that (1) the requested Foreign Currency is
unavailable, or (2) the Bank is not then dealing in the
requested Foreign Currency, or (3) the Bank would be
prohibited by any applicable law, rule, regulation or order
from purchasing such Foreign Currency.
(iv) PAYMENT. Payment is due on the Settlement Date of the relevant
FX Transaction. The Bank is hereby authorized by the Borrower
to charge the full settlement price of any FX Transaction
against the depository account or accounts maintained by the
Borrower with the Bank on the Settlement Date. In the event
that the Borrower fails to pay the settlement price of any FX
Transaction on the Settlement Date or the balances in the
depository account or accounts maintained with Bank are
insufficient to pay the settlement price, without limiting the
rights of Bank hereunder or waiving any Event of Default
caused thereby, Bank may , and Borrower hereby authorizes Bank
to, create an Advance bearing interest at the Variable Rate to
pay the settlement price on the Settlement Date.
(v) INCREASED COSTS. Borrower shall promptly pay to and reimburse
the Bank for all costs incurred and payments made by the Bank
by reason of any assessment, reserve, deposit, capital
maintenance or similar requirement or any surcharge, tax or
fee imposed upon the Bank or as a result of the Bank's
compliance with any directive or requirement of any regulatory
authority pertaining or relating to any FX Transaction.
(vi) IMPOSSIBILITY OF PERFORMANCE. In the event that the Borrower
or the Bank cannot perform under a FX Transaction due to force
majeure or an act of State or it becomes unlawful or
impossible to perform, all in the good faith judgement of the
Borrower or the Bank, then upon notice to the other party, the
Borrower or the Bank may require the close-out and liquidation
of the affected FX Transaction in accordance with the
provisions of this Agreement.
2.4 LINE ACCOUNT: The Bank shall maintain on its books a record of account in
which the Bank shall make entries for each Advance and such other debits
and credits as shall be appropriate in connection with the credit
facilities granted hereunder (the "Line Account"). The Bank shall provide
the Borrower with a statement of the Borrower's Line Account, which
statement shall be considered to be correct and conclusively binding on
the Borrower unless the Borrower notifies the Bank to the contrary within
60 days after the Borrower's receipt of any such statement which it deems
to be incorrect.
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2.5 PAYMENTS: If any payment required to be made by the Borrower hereunder
becomes due and payable on a day other than a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and interest
thereon shall be payable at the then applicable rate during such
extension. All payments required to be made hereunder shall be made to the
office of the Bank designated for the receipt of notices herein or such
other office as Bank shall from time to time designate.
2.6 LATE PAYMENT: In addition to any other rights the Bank may have hereunder,
if any payment of principal or interest or any portion thereof, under this
Agreement is not paid within 5 days of when due, a late payment charge
equal to five percent (5%) of such past due payment may be assessed and
shall be immediately payable.
SECTION
3
COLLATERAL
3.1 THE COLLATERAL: To secure payment and performance of all the Borrower's
Obligations under this Agreement and all other liabilities, loans,
guarantees, covenants and duties owed by the Borrower to the Bank, whether
or not evidenced by this or by any other agreement, absolute or
contingent, due or to become due, now existing or hereafter and howsoever
created, the Borrower hereby grants the Bank a security interest in and to
all of the following property ("Collateral"):
(i) EQUIPMENT. All goods now owned or hereafter acquired by the
Borrower or in which the Borrower now has or may hereafter
acquire any interest, including, but not limited to, all
machinery, equipment, furniture, furnishings, fixtures, tools,
supplies and motor vehicles of every kind and description, and
all additions, accessions, improvements, replacements and
substitutions thereto and thereof (the "Equipment").
(ii) INVENTORY. All inventory now owned or hereafter acquired by
the Borrower, including, but not limited to, all raw
materials, work in process, finished goods, inventory leased
to others or held for lease, merchandise, parts and supplies
of every kind and description, including inventory temporarily
out of the Borrower's custody or possession, together with all
returns on accounts (the "Inventory").
(iii) ACCOUNTS. All accounts, letter of credit rights, commercial
tort claims, contract rights and general intangibles,
including software and payment intangibles, now owned or
hereafter created or acquired by the Borrower, including, but
not limited to, all receivables, including as-extracted
receivables, credit card receivables, health care receivables,
insurance receivables, software receivables and license fees,
goodwill, trademarks, trademark applications, trade styles,
trade names, patents, patent applications, copyrights and
copyright applications, customer lists, business, records and
computer programs, tapes, disks and related data processing
software that at any time evidence or contain information
relating to any of the Collateral.
(iv) DOCUMENTS. All documents, instruments and chattel paper,
whether electronic or tangible, now owned or hereafter
acquired by the Borrower, including, but not limited to,
warehouse and other receipts, bills of sale, promissory notes
and bills of lading.
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(v) MONIES. All monies, deposit accounts, certificates of deposit,
investment property and securities of the Borrower now or
hereafter in the Bank's or its agents' possession.
(vi) ASSETS. All assets of the Borrower, whether now existing or
hereafter acquired, and the products and proceeds thereof.
The Bank's security interest in the Collateral shall be a continuing lien and
shall include the proceeds and products of the Collateral including, but not
limited to, the proceeds of any insurance thereon.
Borrower hereby consents to and instructs Bank to file financing statements in
all locations deemed appropriate by the Bank from time to time.
The security interest granted to Bank in the Collateral shall not secure or be
deemed to secure any Indebtedness of the Borrower to the Bank which is, at the
time of its creation, subject to the provisions of any state or federal consumer
credit or truth-in-lending disclosure statutes.
SECTION
4
CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT: The obligation of
the Bank to make the initial Advance or the first extension of credit to
or on account of the Borrower hereunder is subject to the conditions
precedent that the Bank shall have received before the date of such
initial Advance or such first extension of credit all of the following, in
form and substance satisfactory to the Bank:
(i) AUTHORITY TO BORROW. Evidence that the execution, delivery and
performance by the Borrower of this Agreement and any
document, instrument or agreement required hereunder have been
duly authorized.
(ii) FEES. Payment of a documentation and examination fee in the
amount of $10,000.00 for all of the Bank's out-of-pocket
expenses and courtesy audit in connection with the preparation
and negotiation of this Agreement.
(iii) FINANCING STATEMENTS. UCC-1 financing statement(s) describing
the Collateral, which have been filed with the Secretary of
State or the county recorder as a lien of first priority.
(iv) MISCELLANEOUS. Such other evidence as the Bank may request to
establish the consummation of the transaction contemplated
hereunder and compliance with the conditions of this
Agreement.
4.2 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT: The obligation of the
Bank to make each Advance or each other extension of credit, as the case
may be, to or on account of the Borrower (including the initial Advance or
the first extension of credit) shall be subject to the further conditions
precedent that, on the date of each Advance or each extension of credit
and after the making of such Advance or extension of credit:
(i) REPORTING REQUIREMENTS. The Bank shall have received the
documents set forth in Section 6.1.
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(ii) SUBSEQUENT APPROVALS. The Bank shall have received such
supplemental approvals, opinions or documents as the Bank may
reasonably request.
(iii) REPRESENTATIONS AND WARRANTIES. The representations contained
in Section 5 and in any other document, instrument or
certificate delivered to the Bank hereunder are true, correct
and complete.
(iv) EVENT OF DEFAULT. No event has occurred and is continuing
which constitutes, or with the lapse of time or giving of
notice or both, would constitute an Event of Default.
(v) COLLATERAL. The security interest in the Collateral has been
duly authorized, created and perfected with first priority and
is in full force and effect.
The Borrower's acceptance of the proceeds of any loan, Advance or extension of
credit, or the Borrower's applying for any Letter of Credit, or the Borrower's
execution of any document or instrument evidencing or creating any Obligation
hereunder shall be deemed to constitute the Borrower's representation and
warranty that all of the above statements are true and correct.
SECTION
5
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:
5.1 STATUS: The Borrower's correct legal name is as stated in this Agreement
and the Borrower is a corporation duly organized and validly existing
under the laws of the state of California and with its chief executive
office in the state of California and is properly licensed and is
qualified to do business and in good standing in, and, where necessary to
maintain the Borrower's rights and privileges, has complied with the
fictitious name statute of every jurisdiction in which the Borrower is
doing business.
5.2 AUTHORITY: The execution, delivery and performance by the Borrower of this
Agreement and any instrument, document or agreement required hereunder
have been duly authorized and do not and will not: (i) violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having application to
the Borrower; (ii) result in a breach of or constitute a default under any
material indenture or loan or credit agreement or other material
agreement, lease or instrument to which the Borrower is a party or by
which it or its properties may be bound or affected; or (iii) require any
consent or approval of its stockholders or violate any provision of its
articles of incorporation or by-laws.
5.3 LEGAL EFFECT: This Agreement constitutes, and any instrument, document or
agreement required hereunder when delivered hereunder will constitute,
legal, valid and binding obligations of the Borrower enforceable against
the Borrower in accordance with their respective terms.
5.4 FICTITIOUS TRADE STYLES: All fictitious trade styles used by the Borrower
in connection with its business operations and each state in which each
such fictitious trade style is used are listed below. The Borrower shall
notify the Bank not less than 30 days prior to effecting any change in the
matters described below or prior to using any other fictitious trade style
at any future date, indicating the trade style and state(s) of its use.
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TRADE STYLE STATE OF USE
Volcom California
Veeco Productions California
Volcom Entertainment California
5.5 FINANCIAL STATEMENTS: All financial statements, information and other data
which may have been or which may hereafter be submitted by the Borrower to
the Bank are true, accurate and correct and have been or will be prepared
in accordance with generally accepted accounting principles consistently
applied and accurately represent the financial condition or, as
applicable, the other information disclosed therein. Since the most recent
submission of such financial information or data to the Bank, the Borrower
represents and warrants that no material adverse change in the Borrower's
financial condition or operations has occurred which has not been fully
disclosed to the Bank in writing.
5.6 LITIGATION: Except as have been disclosed to the Bank in writing, there
are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Borrower's
properties before any court or administrative agency which, if determined
adversely to the Borrower, would have a material adverse effect on the
Borrower's financial condition or operations or on the Collateral.
5.7 TITLE TO ASSETS: The Borrower has good and marketable title to all of its
assets (including, but not limited to, the Collateral) and the same are
not subject to any security interest, encumbrance, lien or claim of any
third person except for Permitted Liens.
5.8 ERISA: If the Borrower has a pension, profit sharing or retirement plan
subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to
comply with the requirements of ERISA.
5.9 TAXES: The Borrower has filed all tax returns required to be filed and
paid all taxes shown thereon to be due, including interest and penalties,
other than such taxes which are currently payable without penalty or
interest or those which are being duly contested in good faith.
5.10 MARGIN STOCK. The proceeds of any loan or advance hereunder will not be
used to purchase or carry margin stock as such term is defined under
Regulation U of the Board of Governors of the Federal Reserve System.
5.11 ENVIRONMENTAL COMPLIANCE. The operations of the Borrower comply, and
during the term of this Agreement will at all times comply, in all
respects with all Environmental Laws; the Borrower has obtained all
licenses, permits, authorizations and registrations required under any
Environmental Law ("Environmental Permits") and necessary for its ordinary
course operations, all such Environmental Permits are in good standing,
and the Borrower is in compliance with all material terms and conditions
of such Environmental Permits; neither the Borrower nor any of its present
property or operations is subject to any outstanding written order from or
agreement with any governmental authority nor subject to any judicial or
docketed administrative proceeding, respecting any Environmental Law,
Environmental Claim or Hazardous Material; there are no Hazardous
Materials or other conditions or circumstances existing, or arising from
operations prior to the date of this Agreement, with respect to any
property of the Borrower that would reasonably be expected to give rise to
Environmental Claims; provided, however, that with respect to property
leased from an unrelated third party, the foregoing representation is made
to the best knowledge of the Borrower. In addition, (i) the Borrower does
not have any underground storage tanks that are not properly registered or
permitted under applicable Environmental Laws, or that are leaking or
disposing of Hazardous Materials off-site, and (ii) the Borrower has
notified all of their employees of the existence, if any, of any health
hazard arising from the conditions of their employment and have met all
notification requirements under Title III of CERCLA and all other
Environmental Laws.
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5.12 INVENTORY:
(i) The Borrower keeps correct and accurate records, (itemizing
and describing the kind, type, quality and quantity of
inventory, the Borrower's cost therefor and selling price
thereof, and the daily withdrawals therefrom and additions
thereto).
(ii) All inventory is of good and merchantable quality, free from
defects.
(iii) The inventory is not stored with a bailee, warehouseman or
similar party.
SECTION
6
COVENANTS
The Borrower covenants and agrees that, during the term of this Agreement, and
so long thereafter as the Borrower is indebted to the Bank under this Agreement,
the Borrower will, unless the Bank shall otherwise consent in writing:
6.1 REPORTING AND CERTIFICATION REQUIREMENTS: Deliver or cause to be delivered
to the Bank in form and detail satisfactory to the Bank:
(i) Not later than 120 days after the end of each of the
Borrower's fiscal years, a copy of the annual audited
financial report of the Borrower for such year, prepared by a
firm of certified public accountants acceptable to Bank and
accompanied by an unqualified opinion of such firm.
(ii) Not later than 30 days after filing with the appropriate
Federal agency, a copy of the Borrower's federal income tax
returns.
(iii) Not later than 30 days after the end of each quarter, a copy
of the Borrower's financial statement as of the end of such
period.
(iv) Not later than 15 days after the end of each quarter, an aging
of accounts payable and accounts receivable.
(v) Not later than 15 days after the end of each quarter, a
schedule of inventory specifying the value, cost and quantity
thereof and such other information as the Bank may reasonably
request.
(vi) Promptly upon the Bank's request, such other information
pertaining to the Borrower, the Collateral or any guarantor
hereunder as the Bank may reasonably request.
6.2 FINANCIAL CONDITION: The Borrower promises and agrees, during the term of
this Agreement and until payment in full of all of the Borrower's
Obligations, the Borrower will maintain at all times, to be measured on a
quarterly basis:
(i) A minimum Effective Tangible Net Worth of at least
$8,000,000.00.
(ii) A ratio of the sum of cash, cash equivalents and accounts
receivable to Current Liabilities of not less than 1 to 1.
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(iii) A minimum net profit after tax (and after deduction of
Borrower's distributions to shareholders) of at least
$500,000.00 at each fiscal quarter end on a rolling four
quarter basis.
6.3 PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS: Maintain and
preserve its existence and all rights and privileges now enjoyed; and
conduct its business and operations in accordance with all applicable
laws, rules and regulations.
6.4 MERGE OR CONSOLIDATE: Not liquidate or dissolve, merge or consolidate with
or into, or acquire any other business organization; provided however,
that this Section 6.4 shall not apply to transactions in which Borrower is
the surviving entity, and provided further, that Borrower may make
business acquisitions of up to $4,000,000.00 in the aggregate.
6.5 MAINTENANCE OF INSURANCE: Keep and maintain the Collateral insured for not
less than its full replacement value against all risks of loss and damage
and maintain insurance in such amounts and covering such risks as is
usually carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Borrower
operates and maintain such other insurance and coverages as may be
required by the Bank. All such insurance shall be in form and amount and
with companies satisfactory to the Bank.
With respect to insurance covering properties in which the Bank maintains
a security interest or lien, such insurance shall name the Bank as loss
payee pursuant to a loss payable endorsement satisfactory to the Bank and
shall not be altered or canceled except upon 10 days' prior written notice
to the Bank. Upon the Bank's request, the Borrower shall furnish the Bank
with the original policy or binder of all such insurance.
6.6 MAINTENANCE OF COLLATERAL AND OTHER PROPERTIES: Except for Permitted
Liens, keep and maintain the Collateral free and clear of all levies,
liens, encumbrances and security interests (including, but not limited to,
any lien of attachment, judgment or execution) and defend the Collateral
against any such levy, lien, encumbrance or security interest; comply with
all laws, statutes and regulations pertaining to the Collateral and its
use and operation; execute, file and record such statements, notices and
agreements, take such actions and obtain such certificates and other
documents as necessary to perfect, evidence and continue the Bank's
security interest in the Collateral and the priority thereof; maintain
accurate and complete records of the Collateral which show all sales,
claims and allowances; and properly care for, house, store and maintain
the Collateral in good condition, free of misuse, abuse and deterioration,
other than normal wear and tear. The Borrower shall also maintain and
preserve all its properties in good working order and condition in
accordance with the general practice of other businesses of similar
character and size, ordinary wear and tear excepted.
6.7 PAYMENT OF OBLIGATIONS AND TAXES: Make timely payment of all assessments
and taxes and all of its liabilities and obligations including, but not
limited to, trade payables, unless the same are being contested in good
faith by appropriate proceedings with the appropriate court or regulatory
agency. For purposes hereof, the Borrower's issuance of a check, draft or
similar instrument without delivery to the intended payee shall not
constitute payment.
6.8 DEPOSITORY RELATIONSHIPS: Maintain its primary business depository
relationship with Bank, including general, operating and administrative
deposit accounts and cash management services.
6.9 INSPECTION RIGHTS AND ACCOUNTING RECORDS: The Borrower will maintain
adequate books and records in accordance with generally accepted
accounting principles consistently applied and in a manner otherwise
acceptable to Bank, and, at any reasonable time and from time to time,
permit the Bank or any representative thereof to examine and make copies
of the records and visit the properties of the Borrower and discuss the
business and operations of the Borrower with any employee or
representative thereof. If the Borrower shall maintain any records
(including, but not
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limited to, computer generated records or computer programs for the
generation of such records) in the possession of a third party, the
Borrower hereby agrees to notify such third party to permit the Bank free
access to such records at all reasonable times and to provide the Bank
with copies of any records which it may request, all at the Borrower's
expense, the amount of which shall be payable immediately upon demand.
6.10 REDEMPTION OR REPURCHASE OF STOCK: Not redeem or repurchase any class of
the Borrower's stock now or hereafter outstanding, except stock limited to
10% of outstanding stock in any one year.
6.11 ADDITIONAL INDEBTEDNESS: Not, after the date hereof, create, incur or
assume, directly or indirectly, any additional Indebtedness other than (i)
Indebtedness owed or to be owed to the Bank or (ii) Indebtedness to trade
creditors incurred in the Ordinary Course of Business or (iii)
Indebtedness of up to $500,000.00 in any one fiscal year.
6.12 LOANS: Not make any loans or advances or extend credit to any third
person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities and subsidiaries of the Borrower,
except for credit extended in the Ordinary Course of Business as presently
conducted and except up to $500,000.00 in any one fiscal year.
6.13 LIENS AND ENCUMBRANCES: Not create, assume or permit to exist any security
interest, encumbrance, mortgage, deed of trust, or other lien (including,
but not limited to, a lien of attachment, judgment or execution) affecting
any of the Borrower's properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any of such
properties, except for Permitted Liens or as otherwise provided in this
Agreement, and except liens and security interests associated with
Indebtedness of up to $500,000.00 in any one fiscal year.
6.14 TRANSFER ASSETS: Not, after the date hereof, sell, contract for sale,
convey, transfer, assign, lease or sublet, any of its assets (including,
but not limited to, the Collateral) except in the Ordinary Course of
Business and, then, only for full, fair and reasonable consideration.
6.15 CHANGE IN NATURE OF BUSINESS: Not make any material change in its
financial structure or the nature of its business as existing or conducted
as of the date hereof.
6.16 MAINTENANCE OF JURISDICTION: Borrower shall maintain the jurisdiction of
its organization and chief executive office, or if applicable, principal
residence, as set forth herein and not change such jurisdiction name or
form of organization without 30 days prior written notice to Bank.
6.17 COMPENSATION OF EMPLOYEES: Compensate its employees for services rendered
at an hourly rate at least equal to the minimum hourly rate prescribed by
any applicable federal or state law or regulation.
6.18 Notice: Give the Bank prompt written notice of any and all (i) Events of
Default; (ii) litigation, arbitration or administrative proceedings to
which the Borrower is a party and in which the claim or liability exceeds
$200,000.00 or which affects the Collateral; (iii) other matters which
have resulted in, or might result in a material adverse change in the
Collateral or the financial condition or business operations of the
Borrower, and (iv) any enforcement, cleanup, removal or other governmental
or regulatory actions instituted, completed or threatened against the
Borrower or any of its properties.
6.19 ENVIRONMENTAL COMPLIANCE: The Borrower shall conduct its operations and
keep and maintain all of its property in compliance with all Environmental
Laws and, upon the written request of the Bank, the Borrower shall submit
to the Bank, at the Borrower's sole cost and expense, at reasonable
intervals, a report providing the status of any environmental, health or
safety compliance, hazard or liability.
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6.20 INVENTORY:
(i) Except as provided herein below, the Borrower's inventory
shall, at all times, be in the Borrower's physical possession,
shall not be held by others on consignment, sale on approval,
or sale or return and shall be kept only at: 0000 Xxxxxxxx
Xxxxxx, Xxxxx Xxxx, XX; Volcom Retail Store, 000 Xx Xxxx, Xxx
Xxxxxxx, XX; Massive, 0000 X. Xxxxxx Xxxxxx, Xxxx Xxxxx, XX,
and NRI Distribution, 0000 Xxxxxx Xxxxx Xxxx, Xxxxxxxx,
Xxxxxxx Xxxxxxxx, X0X0X0.
(ii) The Borrower shall keep correct and accurate records.
(iii) All inventory shall be of good and merchantable quality, free
from defects.
(iv) The inventory shall not at any time or times hereafter be
stored with a bailee, warehouseman or similar party without
the Bank's prior written consent and, in such event, the
Borrower will concurrently therewith cause any such bailee,
warehouseman or similar party to issue and deliver to the
Bank, in form acceptable to the Bank, warehouse receipts in
the Bank's name evidencing the storage of inventory.
(v) At any reasonable time and from time to time, allow Bank to
have the right, upon demand, to inspect and examine inventory
and to check and test the same as to quality, quantity, value
and condition and the Borrower agrees to reimburse the Bank
for the Bank's reasonable costs and expenses in so doing.
6.21 LOCATION AND MAINTENANCE OF EQUIPMENT.:
(i) The Equipment shall at all times be in the Borrower's physical
possession, shall not be held for sale or lease, and shall be
kept only at the following location(s): 0000 Xxxxxxxx Xxxxxx,
Xxxxx Xxxx, XX.
The Borrower shall not secrete, abandon or remove, or permit
the removal of, the Equipment, or any part thereof, from the
location(s) shown above or remove or permit to be removed any
accessories now or hereafter placed upon the Equipment.
(ii) Upon the Bank's demand, the Borrower shall immediately provide
the Bank with a complete and accurate description of the
Equipment including, as applicable, the make, model,
identification number and serial number of each item of
Equipment. In addition, the Borrower shall immediately notify
the Bank of the acquisition of any new or additional Equipment
or the replacement of any existing Equipment and shall supply
the Bank with a complete description of any such additional or
replacement Equipment.
(iii) The Borrower shall, at the Borrower's sole cost and expense,
keep and maintain the Equipment in a good state of repair and
shall not destroy, misuse, abuse, illegally use or be
negligent in the care of the Equipment or any part thereof.
The Borrower shall not remove, destroy, obliterate, change,
cover, paint, deface or alter the name plates, serial numbers,
labels or other distinguishing numbers or identification marks
placed upon the Equipment or any part thereof by or on behalf
of the manufacturer, any dealer or rebuilder thereof, or the
Bank. The Borrower shall not be released from any liability to
the Bank hereunder because of any injury to or loss or
destruction of the Equipment. The Borrower shall allow the
Bank and its representatives free access to and the right to
inspect the Equipment at all times and shall comply with the
terms and conditions of any leases covering the real
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property on which the Equipment is located and any orders,
ordinances, laws, regulations or rules of any federal, state
or municipal agency or authority having jurisdiction of such
real property or the conduct of the business of the persons
having control or possession of the Equipment.
(iv) The Equipment is not now and shall not at any time hereafter
be so affixed to the real property on which it is located as
to become a fixture or a part thereof. The Equipment is now
and shall at all times hereafter be and remain personal
property of the Borrower.
SECTION
7
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an
event of default (an "Event of Default") under this Agreement:
7.1 NON-PAYMENT: Any Borrower shall fail to pay the principal amount of any
Obligations when due or interest on the Obligations within 5 days of when
due.
7.2 PERFORMANCE UNDER THIS AGREEMENT: The Borrowers shall fail in any material
respect to perform or observe any term, covenant or agreement contained in
this Agreement or in any document, instrument or agreement relating to
this Agreement or any other document or agreement executed by the
Borrowers with or in favor of Bank and any such failure shall continue
unremedied for more than 30 days after written notice from the Bank to the
Borrowers of the existence and character of such Event of Default.
7.3 REPRESENTATIONS AND WARRANTIES; FINANCIAL STATEMENTS: Any representation
or warranty made by the Borrower under or in connection with this
Agreement or any financial statement given by the Borrower or any
guarantor shall prove to have been incorrect in any material respect when
made or given or when deemed to have been made or given.
7.4 OTHER AGREEMENTS: If there is a default under any agreement to which
Borrower is a party with Bank or with a third party or parties resulting
in a right by the Bank or by such third party or parties, whether or not
exercised, to accelerate the maturity of any Indebtedness.
7.5 INSOLVENCY: The Borrower or any guarantor shall: (i) become insolvent or
be unable to pay its debts as they mature; (ii) make an assignment for the
benefit of creditors or to an agent authorized to liquidate any
substantial amount of its properties and assets; (iii) file a voluntary
petition in bankruptcy or seeking reorganization or to effect a plan or
other arrangement with creditors; (iv) file an answer admitting the
material allegations of an involuntary petition relating to bankruptcy or
reorganization or join in any such petition; (v) become or be adjudicated
a bankrupt; (vi) apply for or consent to the appointment of, or consent
that an order be made, appointing any receiver, custodian or trustee, for
itself or any of its properties, assets or businesses; or (vii) in an
involuntary proceeding, any receiver, custodian or trustee shall have been
appointed for all or substantial part of the Borrower's or guarantor's
properties, assets or businesses and shall not be discharged within 30
days after the date of such appointment.
7.6 EXECUTION: Any writ of execution or attachment or any judgment lien shall
be issued against any property of the Borrower and shall not be discharged
or bonded against or released within 30 days after the issuance or
attachment of such writ or lien.
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7.7 SUSPENSION: The Borrower shall voluntarily suspend the transaction of
business or allow to be suspended, terminated, revoked or expired any
permit, license or approval of any governmental body necessary to conduct
the Borrower's business as now conducted.
7.8 MATERIAL ADVERSE CHANGE: If there occurs a material adverse change in the
Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations
or there is a material impairment of the value or priority of the Bank's
security interest in the Collateral, or if a Borrower who is a natural
person shall die.
7.9 CHANGE IN OWNERSHIP: There shall occur a sale, transfer, disposition or
encumbrance (whether voluntary or involuntary), or an agreement shall be
entered into to do so, with respect to more than 10% of the issued and
outstanding capital stock of the Borrower.
7.10 IMPAIRMENT OF COLLATERAL. There shall occur any material injury or damage
to all or any part of the Collateral or all or any part of the Collateral
shall be lost, stolen or destroyed.
SECTION
8
REMEDIES ON DEFAULT
Upon the occurrence of any Event of Default, the Bank may, at its sole and
absolute election, without demand and only upon such notice as may be required
by law:
8.1 ACCELERATION: Declare any or all of the Borrower's indebtedness owing to
the Bank, whether under this Agreement or any other document, instrument
or agreement, immediately due and payable, whether or not otherwise due
and payable.
8.2 CEASE EXTENDING CREDIT: Cease making Advances or otherwise extending
credit to or for the account of the Borrower under this Agreement or under
any other agreement now existing or hereafter entered into between the
Borrower and the Bank.
8.3 TERMINATION: Terminate this Agreement as to any future obligation of the
Bank without affecting the Borrower's obligations to the Bank or the
Bank's rights and remedies under this Agreement or under any other
document, instrument or agreement.
8.4 LETTERS OF CREDIT: Require the Borrower to pay immediately to the Bank,
for application against drawings under any outstanding Letters of Credit,
the outstanding principal amount of any such Letters of Credit which have
not expired. Any portion of the amount so paid to the Bank which is not
applied to satisfy draws under any such Letters of Credit or any other
obligations of the Borrower to the Bank shall be repaid to the Borrower
without interest.
8.5 CLOSE-OUT AND LIQUIDATION: Close-out and liquidate each outstanding FX
Transaction so that each FX Transaction is canceled in accordance with the
following:
(i) CLOSING VALUE. The Bank shall calculate value of such canceled
FX Transaction by converting (1) in the case of a FX
Transaction whose Settlement Date is the same as or later than
the Close-Out Date, the amount of Foreign Currency into US
dollars at a rate of exchange at which the Bank can buy or
sell US dollars with or against the Foreign Currency for
delivery on the Settlement Date of the relevant FX
Transaction; or (2) in the case of a FX Transaction whose
Settlement Date precedes the Close-Out Date, the amount of the
Foreign Currency adjusted by adding interest with respect
thereto at the Variable Rate from the Settlement Date to the
Close-Out Date, into US Dollars at a rate of exchange at which
the Bank can
-18-
buy or sell US dollars with or against the Foreign Currency
for delivery on the Close-Out Date.
(ii) CLOSING GAIN OR LOSS. (1) For a FX Transaction for which the
Bank agreed to purchase a Foreign Currency, the amount by
which the Closing Value exceeds the Notional Value shall be a
Closing Loss and the amount by which the Closing Value is less
than the Notional Value shall be a Closing Gain; and (2) For a
FX Transaction for which the Bank agreed to sell a Foreign
Currency, the amount by which the Closing Value exceeds the
Notional Value shall be a Closing Gain and the amount by which
the Closing Value is less than the Notional Value shall be a
Closing Loss.
(iii) NET PRESENT VALUE. The Closing Gain or Closing Loss for each
Settlement Date falling after the Close-out Date will be
discounted by the Bank to it net present value.
(iv) PAYMENT. To the extent that the net amount of the aggregate
Closing Gains exceeds the Closing Losses, such amount shall
be payable by the Bank to the Borrower. To the extent that the
aggregate net amount of the Closing Losses exceeds the Closing
Gains, such amount shall be payable by the Borrower to the
Bank.
8.6 PROTECTION OF SECURITY INTEREST: Make such payments and do such acts as
the Bank, in its sole judgment, considers necessary and reasonable to
protect its security interest or lien in the Collateral. The Borrower
hereby irrevocably authorizes the Bank to pay, purchase, contest or
compromise any encumbrance, lien or claim which the Bank, in its sole
judgment, deems to be prior or superior to its security interest. Further,
the Borrower hereby agrees to pay to the Bank, upon demand therefor, all
expenses and expenditures (including attorneys' fees) incurred in
connection with the foregoing.
8.7 USE OF TRADEMARKS AND INTELLECTUAL PROPERTY. Bank is hereby granted a
license or other right to use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names,
trademarks and advertising matte, or any property of a similar nature, as
it pertains to the Collateral, in completing production, of advertising
for sale and selling any Collateral, and Borrower's rights under all
licenses and all franchise agreements shall inure to the Bank's benefit.
8.8 FORECLOSURE: Enforce any security interest or lien given or provided for
under this Agreement or under any security agreement, mortgage, deed of
trust or other document, in such manner and such order, as to all or any
part of the properties subject to such security interest or lien, as the
Bank, in its sole judgment, deems to be necessary or appropriate and the
Borrower hereby waives any and all rights, obligations or defenses now or
hereafter established by law relating to the foregoing. In the enforcement
of its security interest or lien, the Bank is authorized to enter upon the
premises where any Collateral is located and take possession of the
Collateral or any part thereof, together with the Borrower's records
pertaining thereto, or the Bank may require the Borrower to assemble the
Collateral and records pertaining thereto and make such Collateral and
records available to the Bank at a place designated by the Bank. The Bank
may sell the Collateral or any portions thereof, together with all
additions, accessions and accessories thereto, giving only such notices
and following only such procedures as are required by law, at either a
public or private sale, or both, with or without having the Collateral
present at the time of the sale, which sale shall be on such terms and
conditions and conducted in such manner as the Bank determines in its sole
judgment to be commercially reasonable. The Collateral may be disposed of
in its then condition without any preparation or processing. In connection
with any disposition of the Collateral, the Bank may disclaim any warranty
relating to title, possession or quiet enjoyment. Any deficiency which
-19-
exists after the disposition or liquidation of the Collateral shall be a
continuing liability of the Borrower to the Bank and shall be immediately
paid by the Borrower to the Bank.
8.9 NON-EXCLUSIVITY OF REMEDIES: Exercise one or more of the Bank's rights set
forth herein or seek such other rights or pursue such other remedies as
may be provided by law, in equity or in any other agreement now existing
or hereafter entered into between the Borrower and the Bank, or otherwise.
8.10 APPLICATION OF PROCEEDS: All amounts received by the Bank as proceeds from
the disposition or liquidation of the Collateral shall be applied to the
Borrower's indebtedness to the Bank as follows: first, to the costs and
expenses of collection, enforcement, protection and preservation of the
Bank's lien in the Collateral, including court costs and reasonable
attorneys' fees, whether or not suit is commenced by the Bank; next, to
those costs and expenses incurred by the Bank in protecting, preserving,
enforcing, collecting, liquidating, selling or disposing of the
Collateral; next, to the payment of accrued and unpaid interest on all of
the Obligations; next, to the payment of the outstanding principal balance
of the Obligations; and last, to the payment of any other indebtedness
owed by the Borrower to the Bank. Any excess Collateral or excess proceeds
existing after the disposition or liquidation of the Collateral will be
returned or paid by the Bank to the Borrower.
If any non-cash proceeds are received in connection with any sale of
Collateral, the Bank shall not apply such non-cash proceeds to the
Obligations unless and until such proceeds are converted to such;
provided, however, that if such non-cash proceeds are not expected on the
date of receipt thereof to be converted to cash within one year after such
date, the Bank shall use commercially reasonable efforts to convert such
non-cash proceeds to cash within such one year period.
SECTION
9
MISCELLANEOUS
9.1 AMOUNTS PAYABLE ON DEMAND: If the Borrower shall fail to pay on demand any
amount so payable under this Agreement, the Bank may, at its option and
without any obligation to do so and without waiving any default occasioned
by the Borrower having so failed to pay such amount, create an Advance
under this Agreement in an amount equal to the amount so payable, which
Advance shall thereafter bear interest as provided hereunder.
9.2 DEFAULT INTEREST RATE: If an Event of Default, or an event which, with
notice or passage of time could become an Event of Default, has occurred
or is continuing, the Borrower shall pay to the Bank interest on any
Indebtedness or amount payable under this Agreement at a rate which is 3%
in excess of the rate or rates then in effect under this Agreement.
9.3 RELIANCE AND FURTHER ASSURANCES: Each warranty, representation covenant,
obligation and agreement contained in this Agreement shall be conclusively
presumed to have been relied upon by the Bank regardless of any
investigation made or information possessed by the Bank and shall be
cumulative and in addition to any other warranties, representations,
covenants and agreements which the Borrower now or hereafter shall give,
or cause to be given, to the Bank. Borrower agrees to execute all
documents and instruments and to perform such acts as the Bank may
reasonably deem necessary to confirm and secure to the Bank all rights and
remedies conferred upon the Bank by this agreement and all other documents
related thereto.
9.4 ATTORNEYS' FEES: Borrower shall pay to the Bank all costs and expenses,
including but not limited to reasonable attorneys fees, incurred by Bank
in connection with the administration, enforcement, including any
bankruptcy, appeal or the enforcement of any judgment or any refinancing
or
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restructuring of this Agreement or any document, instrument or agreement
executed with respect to, evidencing or securing the indebtedness
hereunder.
9.5 NOTICES: All notices, payments, requests, information and demands which
either party hereto may desire, or may be required to give or make to the
other party hereto, shall be given or made to such party by hand delivery
or through deposit in the United States mail, postage prepaid, or by
facsimile delivery, or to such other address as may be specified from time
to time in writing by either party to the other.
TO THE BORROWER: TO THE BANK:
STONE BOARDWEAR, INC. BANK OF THE WEST
1740 Monrovia Avenue Newport Beach Office (CBC)
Xxxxx Xxxx, XX 00000 0000 XxxXxxxxx Xxxxxxxxx, Xxxxx 000
Xxxx: Xxxxxxx Xxxxxxx, CFO Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx
FAX: (000) 000-0000 Vice President
FAX: (000)000-0000
9.6 WAIVER: Neither the failure nor delay by the Bank in exercising any right
hereunder or under any document, instrument or agreement mentioned herein
shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder or under any other document, instrument or
agreement mentioned herein preclude other or further exercise thereof or
the exercise of any other right; nor shall any waiver of any right or
default hereunder, or under any other document, instrument or agreement
mentioned herein, constitute a waiver of any other right or default or
constitute a waiver of any other default of the same or any other term or
provision.
9.7 CONFLICTING PROVISIONS: To the extent the provisions contained in this
Agreement are inconsistent with those contained in any other document,
instrument or agreement executed pursuant hereto, the terms and provisions
contained herein shall control. Otherwise, such provisions shall be
considered cumulative.
9.8 BINDING EFFECT; ASSIGNMENT: This Agreement shall be binding upon and inure
to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right
to assign its rights hereunder or any interest herein without the prior
written consent of the Bank. The Bank may sell, assign or grant
participation in all or any portion of its rights and benefits hereunder.
The Borrower agrees that, in connection with any such sale, grant or
assignment, the Bank may deliver to the prospective buyer, participant or
assignee financial statements and other relevant information relating to
the Borrower and any guarantor.
9.9 JURISDICTION: This Agreement, any notes issued hereunder, the rights of
the parties hereunder to and concerning the Collateral, and any documents,
instruments or agreements mentioned or referred to herein shall be
governed by and construed according to the laws of the State of California
without regard to conflict of law principles, to the jurisdiction of whose
courts the parties hereby submit.
9.10 WAIVER OF JURY TRIAL: THE BORROWER AND THE BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER AND THE BANK EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE
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THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH
SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
9.11 TELEPHONE RECORDING: The Borrower agrees that the Bank may electronically
record all telephone conversations between the Borrower and the Bank with
respect to any FX Transaction and that any such recording may be submitted
in evidence in any arbitration or other legal proceeding. Such recording
shall be deemed to be conclusive evidence as to the terms of any FX
Transaction in the event of a dispute.
9.12 COUNTERPARTS: This Agreement may be executed in any number of counterparts
and all such counterparts taken together shall be deemed to constitute one
and the same instrument.
9.13 HEADINGS: The headings herein set forth are solely for the purpose of
identification and have no legal significance.
9.14 ENTIRE AGREEMENT AND AMENDMENTS: This Agreement and all documents,
instruments and agreements mentioned herein together with the letter
agreement dated on or about July 16, 2003, between Bank and Borrower
constitute the entire and complete understanding of the parties with
respect to the transactions contemplated hereunder. All previous
conversations, memoranda and writings between the parties pertaining to
the transactions contemplated hereunder not incorporated or referenced in
this Agreement or in such documents, instruments and agreements are
superseded hereby. This Agreement may be amended only by an instrument in
writing signed by the Borrower and the Bank.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first hereinabove written.
BANK: BORROWER:
BANK OF THE WEST STONE BOARDWEAR,INC.
BY: /s/ Xxxxxxx X. Xxxxxxxx, BY: /s/ Xxxxxxx X. Xxxxxxxx,
---------------------------- ----------------------------
NAME: Xxxxxxx X. Xxxxxxxx, Vice President NAME: Xxxxxxx X. Xxxxxxxx,
President and CEO
BY: /s/ Xxxxxxx Xxxxxxx;
----------------------------
NAME: Xxxxxxx Xxxxxxx; CFO and
Secretary
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